[Federal Register Volume 69, Number 133 (Tuesday, July 13, 2004)]
[Proposed Rules]
[Pages 42010-42022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-15693]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 30

RIN 0991-AB18


Claims Collection

AGENCY: Department of Health and Human Services.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department of Health and Human Services (HHS) proposes to 
amend its regulations to implement the provisions of the Debt 
Collection Improvement Act of 1996 (DCIA), as implemented by the 
Department of Justice (Justice) and the Department of the Treasury 
(Treasury) as the Federal Claims Collection Standards (FCCS). The 
proposed rule implements the final rule promulgated by Justice and 
Treasury, and would amend the process by which HHS can administratively 
collect, offset, compromise, suspend and terminate collection activity 
for civil claims for money, funds, or property, and the rules and 
process by which HHS can refer civil claims to Treasury, Treasury-
designated debt collection centers, or Justice for collection by 
further administrative action or litigation, as applicable.

DATES: Submit comments on or before September 13, 2004.

ADDRESSES: Comments concerning this proposed rule can be mailed to: 
Jeffrey Davis, Acting Associate General Counsel, General Law Division, 
Office of the General Counsel, Department of Health and Human Services, 
Room 4760 Cohen Building, 330 Independence Avenue SW., Washington, DC 
20201.

FOR FURTHER INFORMATION CONTACT: Jeffrey Davis, Acting Associate 
General Counsel; his telephone number is 202-619-0153.

SUPPLEMENTARY INFORMATION:

Background

    The Debt Collection Act of 1982 (DCA), Pub. L. 97-365, was 
implemented on a government-wide basis by the FCCS, set forth at 4 CFR 
part 101 et seq. issued by Justice and the General Accounting Office on 
March 9, 1984. See 49 FR 8889 (1984). HHS implemented the FCCS at 45 
CFR part 30. As mandated by the DCIA, Justice and Treasury jointly 
promulgated the revised FCCS at 31 CFR parts 900-904 to reflect the 
legislative changes to the Federal debt collection procedures enacted 
by the DCIA. The revised FCCS supercede the current FCCS, and removed 
the Comptroller General as promulgator of the FCCS. HHS is required to 
implement regulations, consistent with the DCIA and the regulations 
promulgated by Justice and Treasury. To the extent any provision of 
this rule is inconsistent with a more specific provision of parts 31, 
32 or 33 of this Title, the more specific provision shall apply.

Basic Provisions

    In accordance with the requirements of the DCIA and the 
implementing regulations promulgated by Justice and Treasury at 31 CFR 
parts 900-904, the proposed regulation establishes the rules and 
procedures for the

[[Page 42011]]

administrative collection, offset, compromise, suspension and 
termination of collection activity for civil claims for money, funds, 
or property, as defined by 31 U.S.C. 3701 (b), and the process by which 
HHS can refer civil claims to Treasury, Treasury-designated debt 
collection centers, or Justice for collection by further administrative 
action or litigation, as applicable. The proposed regulation does not 
apply to claims between federal agencies. The proposed rule affects 
HHS' debtors.
    This proposed rule would revise the current Department regulation 
in accordance with the substantive and procedural requirements of the 
DCIA and the implementing final rule. The various provisions of the 
Department's regulation have been redrafted for clarity but do not 
substantively change the debt collection regulation and are not 
discussed herein. The following changes to the Department's current 
debt collection regulation are incorporated in the proposed regulation 
to reflect the DCIA and the implementing final rule:
    1. Demand Letter. One demand should be sufficient. It will include 
the applicable standards for imposing any interest, penalties, or 
administrative costs; use of collection agencies, federal salary 
offset, tax refund offset, administrative offset, and litigation; any 
rights the debtor may have to seek review of the Department's 
determination of the debt and to enter into a reasonable repayment 
agreement; and information regarding the Department's remedies to 
enforce payment of the debt.
    2. Mutual Releases. HHS and debtors will exchange mutual releases 
of non-tax liabilities, in all appropriate instances, when a claim is 
compromised.
    3. Increase in Amounts. The principal claim amount that HHS is 
authorized to compromise or to suspend or terminate collection activity 
thereon, without concurrence by Justice, is increased from $20,000 to 
$100,000. In addition, the minimum amount of a claim that may be 
referred to the Justice for litigation is increased from $600 to 
$2,500.
    4. Transferring or Referring Delinquent Debt. There are new debt 
collection procedures for transferring or referring delinquent debt to 
Treasury or a Treasury-designated debt collection center for 
collection.
    5. Centralized Administrative Offset. There are new debt collection 
procedures for mandatory, centralized administrative offset by 
disbursing officials.
    6. Mandatory Credit Bureau Reporting. There are new debt collection 
procedures for mandatory credit bureau reporting.
    7. Prohibition Against Federal Financial Assistance. There are new 
debt collection procedures prohibiting federal financial assistance in 
the form of loans, loan guarantees, or loan insurance to debtors, 
unless waived by the Secretary. Disaster loans are exempt from this 
prohibition.
    8. Army Hold-up List. The use of the Army hold-up list to report 
indebted contractors to the Department of the Army has been 
discontinued.

    Authority: 31 U.S.C. 3711.

Request for Comments

    Comments are requested and must be received at the above address, 
by the above date.

Reporting and Recordkeeping Requirements

    For purposes of the Paperwork Reduction Act, 44 U.S.C. chapter 35, 
this proposed rule will impose no new reporting or record-keeping 
requirements on any member of the public.

Economic Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), as 
amended by Executive Order 13258 (February 2002, Amending Executive 
Order 12866 on Regulatory Planning and Review); the Regulatory 
Flexibility Act (RFA) (September 19, 1980; Pub. L. 96-354); the 
Unfunded Mandated Reform Act of 1995 (UMRA, Pub. L. 104-4); and 
Executive Order 13132 (August 1999, Federalism). Executive Order 12866 
(the Order), as amended by Executive Order 13258, directs agencies to 
assess all costs and benefits of available regulatory alternatives and, 
if regulation is necessary, to select regulatory approaches that 
maximize the benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in 1 year). We 
have determined that the proposed rule is consistent with the 
principals set forth in the Order, and we find that the proposed rule 
would not have an effect on the economy that exceeds $100 million in 
any one year. In addition, this rule is not a major rule as defined at 
5 U.S.C. 804(2). In accordance with the provisions of the Order, the 
rule was reviewed by the Office of Management and Budget.
    Under the RFA, 5 U.S.C. 605(b), if a rule has a significant impact 
on a substantial number of small entities, an agency must analyze 
regulatory options that would minimize any significant impact of the 
rule on small entities. The agency has considered the effect that this 
rule would have on small entities. I hereby certify, under 5 U.S.C. 
605(b), that the proposed rule will not have a significant economic 
impact on a substantial number of small entities, including small 
businesses, small organizations and small local governments. Therefore, 
a regulatory flexibility analysis is not required by 5 U.S.C. 603.
    Section 202 of the UMRA also requires that agencies assess 
anticipated costs and benefits before issuing any rule that may result 
in expenditure in any one year by State, local, or tribunal 
governments, in the aggregate, or by the private sector, of $100 
million. As noted above, we find that the proposed rule would not have 
an effect of this magnitude on the economy. Therefore, no further 
analysis is required under the UMRA.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed the proposed rule under the threshold 
criteria of Executive Order 13132 and have determined that this 
proposed rule would not have substantial direct impact on States, or on 
the distribution of power and responsibilities among the various levels 
of government. As there are no federalism implications, a federalism 
impact statement is not required.

Alternatives Considered

    The Department seeks to promulgate the proposed rule consistent 
with the requirements of the DCIA, as implemented at 31 CFR parts 900-
904. There is little room for us to consider alternatives. Where the 
Department has discretion (e.g. in section 30.17, whether to require 
installment agreements to be in writing and in section 30.11 regarding 
the demand letter), we drafted the proposed rule to be as strong as 
possible to maximize the Department's debt collection ability and to 
make the demand letter to be informative as possible.

[[Page 42012]]

List of Subjects in 45 CFR Part 30

    Administrative practice and procedure, Claims, Debts, Appeals, 
Government employees, Privacy.
    For the reasons set forth in the preamble, HHS proposes to revise 
45 CFR part 30 to read as follows:

PART 30--CLAIMS COLLECTION

Subpart A--General Provisions
Sec.
30.1 Purpose, authority, and scope.
30.2 Definitions.
30.3 Antitrust, fraud, exception in the account of an accountable 
official, and interagency claims excluded.
30.4 Compromise, waiver, or disposition under other statutes not 
precluded.
30.5 Other administrative remedies.
30.6 Form of payment.
30.7 Subdivision of claims.
30.8 Required administrative proceedings.
30.9 No private rights created.
Subpart B--Standards for the Administrative Collection of Debts
30.10 Collection activities.
30.11 Demand for payment.
30.12 Administrative offset.
30.13 Debt reporting and the use of credit reporting agencies.
30.14 Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets.
30.15 Suspension or revocation of eligibility for loans and loan 
guarantees, licenses, permits or privileges.
30.16 Liquidation of collateral.
30.17 Collection in installments.
30.18 Interest, penalties, and administrative costs.
30.19 Review of cost effectiveness of collection.
30.20 Taxpayer information.
Subpart C--Debt Compromise
30.21 Scope and application.
30.22 Basis for compromise.
30.23 Enforcement policy.
30.24 Joint and several liability.
30.25 Further review of compromise offers.
30.26 Consideration of tax consequences to the Government.
30.27 Mutual release of the debtor and the Government.
Subpart D--Suspending and Terminating Collection Activities
30.28 Scope and application.
30.29 Suspension of collection activity.
30.30 Termination of collection activity.
30.31 Exception to termination.
30.32 Discharge of indebtedness; reporting requirements.
Subpart E--Referrals to the Department of Justice
30.33 Prompt referral.
30.34 Claims Collection Litigation Report.
30.35 Preservation of evidence.
30.36 Minimum amount of referrals.

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

Subpart A--General Provisions


Sec.  30.1  Purpose, authority, and scope.

    (a) Purpose. This part prescribes the standards and procedures for 
the Department's use in the administrative collection, offset, 
compromise, and suspension or termination of collection activity for 
civil claims for money, funds, or property, as defined by 31 U.S.C. 
3701 (b) and this part. Covered activities include the collection of 
debts in any amount; the compromise and suspension or termination of 
collection activity of debts that do not exceed $100,000, or such 
higher amount as the Attorney General may prescribe, exclusive of 
interest, penalties, and administrative costs; and the referral of 
debts to the Department of the Treasury, Department of the Treasury-
designated debt collection centers, or the Department of Justice for 
collection by further administrative action or litigation, as 
applicable.
    (b) Authority. The Secretary is issuing the regulations in this 
part under the authority contained in 31 U.S.C. 3711(d). The standards 
and procedures prescribed in this part are authorized under the Federal 
Claims Collection Act, as amended, Public Law 89-508, 80 Stat. 308 
(July 19, 1966), the Debt Collection Act of 1982, Public Law 97-365, 96 
Stat. 1749 (October 25, 1982), the Debt Collection Improvement Act of 
1996, Public Law 104-134, 110 Stat. 1321, 1358 (April 26, 1996) and the 
Federal Claims Collection Standards at 31 CFR parts 900 through 904.
    (c) Scope. (1) The standards and procedures prescribed in this part 
apply to all officers and employees of the Department, including 
officers and employees of the various Operating Divisions and Regional 
Offices of the Department, charged with the collection and disposition 
of debts owed to the United States.
    (2) The standards and procedures set forth in this part will be 
applied except where specifically excluded herein or where a statute, 
regulation or contract prescribes different standards or procedures.
    (3) Regulations governing the use of certain debt collection 
procedures created under the Debt Collection Improvement Act of 1996, 
including tax refund offset, administrative wage garnishment, and 
federal salary offset, are contained in parts 31 through 33 of this 
chapter.
    (4) Further guidance may be found in the Departmental General 
Administration Manual, Accounting Manual, Personnel Manual, Grants 
Program Directives, and any other supplemental manual issued by an 
Operating Division, Office or Program within the Department. In case of 
conflict or inconsistencies, this regulation takes precedence except as 
provided by paragraph (c)(2) of this section.


Sec.  30.2.  Definitions.

    In this part--
    Administrative offset means withholding funds payable by the United 
States to, or held by the United States for, a person to satisfy a debt 
owed by the payee.
    Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of the Government, including Government corporations.
    Appropriate official means the Department official who, by statute 
or delegation of authority, determines the existence and amount of 
debt.
    Business day means Monday through Friday. For purposes of 
computation, the last day of the period will be included unless it is a 
federal legal holiday, in which case the next business day following 
the holiday will be considered the last day of the period.
    Claim see the definition for the term ``debt.'' The terms claim and 
debt are synonymous and interchangeable.
    Creditor agency means an agency to which a debt is owed, including 
a debt collection center acting on behalf of a creditor agency.
    Day means calendar day. For purposes of computation, the last day 
of the period will be included unless it is a Saturday, Sunday, or a 
federal legal holiday, in which case the next business day will be 
considered the last day of the period.
    Debt or claim means an amount of money, funds, or other property 
determined by an appropriate official of the federal Government to be 
owed to the United States from any person, organization, or entity, 
except another federal agency. For the purpose of administrative 
offset, the term includes an amount owed by an individual to a State, 
the District of Columbia, American Samoa, Guam, the United States 
Virgin Islands, the Commonwealth of the Northern Mariana Islands, or 
the Commonwealth of Puerto Rico. Debts include, but are not limited to, 
amounts owed pursuant to: loans insured or guaranteed by the United 
States; fees; leases; rents; royalties; services; sales of real or 
personal property; federal salary overpayments; overpayments to program 
beneficiaries, contractors, providers, suppliers, and grantees; audit 
disallowance determinations; civil penalties and

[[Page 42013]]

assessments; theft or loss; interest; fines and forfeitures (except 
those arising under the Uniform Code of Military Justice); and, all 
other similar sources.
    Debt collection center means the Department of the Treasury, or 
other federal agency, subagency, unit, or division designated by the 
Secretary of the Treasury to collect debts owed to the United States.
    Debtor means an individual, organization, association, partnership, 
corporation, or State or local government or subdivision indebted to 
the Government, or the person or entity with legal responsibility for 
assuming the debtor's obligation.
    Debts arising under the Social Security Act are overpayments to, or 
contributions, reimbursements, penalties or assessments owed by, any 
entity, individual, or State under the Social Security Act. Such 
amounts include amounts owed to the Medicare program under section 
1862(b) of the Social Security Act. Salary overpayments and other debts 
that result from the administration of the provisions of the Social 
Security Act are not deemed to ``arise under'' the Social Security Act 
for purposes of this part.
    Delinquent debt means a debt which the debtor does not pay or 
otherwise resolve by the date specified in the initial demand for 
payment, or in an applicable written repayment agreement or other 
instrument, including a post-delinquency repayment agreement.
    Department means the Department of Health and Human Services, and 
its Operating Divisions and Regional Offices.
    Disbursing official means an officer or employee who has authority 
to disburse public money pursuant to 31 U.S.C. 3321 or another law.
    Disposable pay means that part of the debtor's current basic, 
special, incentive, retired, and retainer pay, or other authorized pay, 
remaining after deduction of amounts required by law to be withheld. 
For purposes of calculating disposable pay, legally required deductions 
that must be applied first include: tax levies pursuant to the Internal 
Revenue Code (title 26, United States Code); properly withheld taxes, 
FICA, Medicare; health and life insurance premiums; and retirement 
contributions. Amounts deducted under garnishment orders, including 
child support garnishment orders, are not legally required deductions 
for calculating disposable pay.
    Evidence of service means information retained by the Department 
indicating the nature of the document to which it pertains, the date of 
mailing of the document, and the address and name of the debtor to whom 
it is being sent. A copy of the dated and signed written notice 
provided to the debtor pursuant to this part may be considered evidence 
of service for purposes of this part. Evidence of service may be 
retained electronically so long as the manner of retention is 
sufficient for evidentiary purposes.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Hearing means a review of the documentary evidence to confirm the 
existence or amount of a debt or the terms of a repayment schedule. If 
the Secretary determines that the issues in dispute cannot be resolved 
by such a review, such as when the validity of the claim turns on the 
issue of credibility or veracity, the Secretary may provide an oral 
hearing.
    IRS means the Internal Revenue Service, a bureau of the Department 
of the Treasury.
    Late charges means interest, penalties, and administrative costs 
required or permitted to be assessed on delinquent debts.
    Legally enforceable means that there has been a final agency 
determination that the debt, in the amount stated, is due and there are 
no legal bars to collection action.
    Local government means a political subdivision, instrumentality, or 
authority of any State, the District of Columbia, American Samoa, Guam, 
the United States Virgin Islands, the Commonwealth of the Northern 
Mariana Islands, or the Commonwealth of Puerto Rico, or an Indian 
tribe, band or nation.
    Operating Division means each separate component, agency, 
subagency, and unit within the Department of Health and Human Services, 
including, but not limited to, the Administration for Children and 
Families, the Administration on Aging, the Centers for Disease Control 
and Prevention, the Centers for Medicare & Medicaid Services, the Food 
and Drug Administration, the National Institutes of Health, Substance 
Abuse and Mental Health Services Administration, Indian Health Service, 
Health Resources and Services Administration, Agency for Toxic 
Substances and Disease Registry, Agency for Healthcare Research and 
Quality, and the Office of the Secretary.
    OPM means the Office of Personnel Management.
    Payment authorizing agency means an agency that transmits a voucher 
to a disbursing official for the disbursement of public money.
    Payments made under the Social Security Act means payments by the 
Department to beneficiaries, providers, intermediaries, physicians, 
suppliers, carriers, States, or other contractors or grantees under a 
Social Security Act program, including: Title I (Grants to States for 
Old-Age Assistance for the Aged); Title II (Federal Old-Age, Survivors, 
and Disability Insurance Benefits); Title III (Grants to States for 
Unemployment Compensation Administration); Title IV (Grants to States 
for Aid and Services to Needy Families with Children and for Child-
Welfare Services); Title V (Maternal and Child Health Services Block 
Grant); Title IX (Miscellaneous Provisions Relating to Employment 
Security); Title X (Grants to States for Aid to the Blind); Title XI, 
Part B (Peer Review of the Utilization and Quality of Health Care 
Services); Title XII (Advances to State Unemployment Funds); Title XIV 
(Grants to States for Aid to Permanently and Totally Disabled); Title 
XVI (Grants to States for Aid to the Aged, Blind, and Disabled); Title 
XVII (Grants for Planning Comprehensive Action to Combat Mental 
Retardation); Title XVIII (Health Insurance for the Aged and Disabled); 
Title XIX (Grants to States for Medical Assistance Programs); Title XX 
(Block Grants to States for Social Services); and, Title XXI (State 
Children's Health Insurance Program). Federal employee salaries and 
other payments made by the Department in the course of administering 
the provisions of the Social Security Act are not deemed to be 
``payable under'' the Social Security Act for purposes of this part.
    Private collection contractors means private debt collection under 
contract with the Department to collect a nontax debt or claim owed to 
the Department. The term includes private debt collectors, collection 
agencies, and commercial attorneys.
    Salary offset means an administrative offset to collect a debt owed 
by a federal employee through deductions at one or more officially 
established pay intervals from the current pay account of the employee 
without his or her consent.
    Secretary means the Secretary of Health and Human Services, or the 
Secretary's designee within any Operating Division or Regional Office.
    Taxpayer identification number means the identifying number 
described under section 6109 of the Internal Revenue Code of 1986 (26 
U.S.C. 6109). For an individual, the taxpayer identifying number is the 
individual's social security number.
    Tax refund offset means withholding or reducing a tax refund 
payment by an amount necessary to satisfy a debt owed by the payee(s) 
of a tax refund payment.

[[Page 42014]]

Sec.  30.3  Antitrust, fraud, exception in the account of an 
accountable official, and interagency claims excluded.

    (a) Claims involving antitrust violations or fraud. (1) The 
standards in this part 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 antitrust laws or to any 
debt involving fraud, presentation of a false claim, or 
misrepresentation on the part of the debtor or any party having an 
interest in the claim. Unless the Department of Justice returns a 
referred claim to the Department for further handling in accordance 
with parts 31 CFR 900 through 904 and this part, only the Department of 
Justice has the authority to compromise, suspend, or terminate 
collection activity on such claims.
    (2) The standards in this part relating to the administrative 
collection of claims apply to the extent authorized by the Department 
of Justice in a particular case.
    (3) Upon identification of a debt suspected of involving an 
antitrust violation or fraud, a false claim, misrepresentation, or 
other criminal activity or misconduct, the Secretary shall refer the 
debt to the Office of the Inspector General for review.
    (4) Upon the determination of the Office of the Inspector General 
that a claim is based in whole or in part on conduct in violation of 
the antitrust laws, or involves fraud, the presentation of a false 
claim, or misrepresentation on the part of the debtor or any party 
having an interest in the claim, the Secretary shall promptly refer the 
case to the Department of Justice for action.
    (5) At its discretion, the Department of Justice may return the 
claim to the Secretary for further handling in accordance with the 
standards in 31 CFR parts 900 through 904 and this part.
    (b) Exception in the account of an accountable official. The 
standards in this part do not apply to compromise of an exception in 
the account of an accountable official. Only the Comptroller General 
may compromise such a claim.
    (c) Interagency claims. This part does not apply to claims between 
federal agencies. The Department will attempt to resolve interagency 
claims by negotiation in accordance with Executive Order 12146.


Sec.  30.4  Compromise, waiver, or disposition under other statutes not 
precluded.

    Nothing in this part precludes the Department from disposing of any 
claim under statutes and implementing regulations other than subchapter 
II of chapter 37 of Title 31 of the United States Code and the Federal 
Claims Collection Standards, 31 CFR parts 900 through 904. Any statute 
and implementing regulation specifically applicable to the claims 
collection activities of the Department will take precedence over this 
part.


Sec.  30.5  Other administrative remedies.

    The remedies and sanctions available under this part for collecting 
debts are not intended to be exclusive. Nothing contained in this part 
precludes using any other administrative remedy which may be available 
for collecting debts owed to the Department, such as converting the 
method of payment under a grant from an advancement to a reimbursement 
method or revoking a grantee's letter-of-credit.


Sec.  30.6  Form of payment.

    Claims may be paid in the form of money or, when a contractual 
basis exists, the Department may demand the return of specific property 
or the performance of specific services.


Sec.  30.7  Subdivision of claims.

    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 a single debt 
in determining whether the debt, exclusive of interest, penalties and 
administrative costs, exceeds $100,000, or such higher amount as 
prescribed by the Attorney General for purposes of compromise, or 
suspension or termination of collection activity.


Sec.  30.8  Required administrative proceedings.

    This part does not supersede, or require omission or duplication of 
administrative proceedings required by contract, or other laws or 
regulations. See for example, 42 CFR part 50 (Public Health Service), 
45 CFR part 16 (Departmental Grant Appeals Board), and 48 CFR part 33 
(Federal Acquisition Regulation) and part 333 (Health and Human 
Services Acquisition Regulation).


Sec.  30.9  No private rights created.

    The standards in this part do not create any right or benefit, 
substantive or procedural, enforceable at law or in equity by a party 
against the United States, the Department, its officers, or any other 
person, nor shall the failure of the Department to comply with any of 
the provisions of this part be available to any debtor as a defense.

Subpart B--Standards for the Administrative Collection of Debts


Sec.  30.10  Collection activities.

    (a) General rule. The Secretary shall aggressively and timely 
collect all debts arising out of activities of, or referred or 
transferred for collection actions to, the Department. The collection 
activities provided under this part shall be undertaken promptly with 
follow-up action taken as necessary. Normally, the initial written 
demand for payment shall be made no later than 30 days after a 
determination by an appropriate official that a debt exists.
    (b) Cooperation with other agencies. The Department shall cooperate 
with other agencies in their debt collection activities.
    (c) Transfer of delinquent debts. (1) Mandatory transfer. The 
Secretary shall transfer debts 180 days or more delinquent to the 
Department of the Treasury in accordance with the requirements of 31 
CFR 285.12. This requirement does not apply to any debt that:
    (i) Is in litigation or foreclosure;
    (ii) Will be disposed of under an approved asset sale program 
within one year of becoming eligible for sale;
    (iii) Has been referred to a private collection contractor for a 
period of time acceptable to the Secretary of the Treasury;
    (iv) Is at a debt collection center for a period of time acceptable 
to the Secretary of the Treasury (see paragraph (c) (2) of this 
section);
    (v) Will be collected under internal offset procedures within three 
years after the debt first became delinquent; or
    (vi) 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.
    (2) Permissive transfer. The Secretary may refer a debt less than 
180 days delinquent, including debts referred to the Department by 
another agency, to the Department of the Treasury, or with the consent 
of the Department of the Treasury, to a Treasury-designated debt 
collection center to accomplish efficient, cost effective debt 
collection. Referrals to debt collection centers shall be at the 
discretion of, and for a time period acceptable to, the Secretary of 
the Treasury. Referrals may be for servicing, collection, compromise, 
suspension, or termination of collection action.


Sec.  30.11  Demand for payment.

    (a) Written demand for payment. (1) Written demand, as described in 
paragraph (b) of this section, shall be

[[Page 42015]]

made promptly upon a debtor in terms that inform the debtor of the 
consequences of failing to cooperate with the Department to resolve the 
debt.
    (2) Normally, the demand letter will be sent no later than 30 days 
after the appropriate official determines that the debt exists. The 
demand letter shall be sent by first class mail to the debtor's last 
known address.
    (3) When necessary to protect the Government's interest, for 
example to prevent the running of a statute of limitations, the written 
demand for payment may be preceded by other appropriate action under 
this part, including immediate referral to the Department of Justice 
for litigation.
    (b) Demand letters. The specific content, timing, and number of 
demand letters shall depend upon the type and amount of the debt and 
the debtor's response, if any, to the Department's letters or telephone 
calls. Generally, one demand letter should suffice; however, more may 
be used.
    (1) The written demand for payment shall include the following 
information:
    (i) The nature and amount of the debt, including the basis for the 
indebtedness;
    (ii) The date by which payment should be made to avoid late charges 
and enforced collection, which generally shall be no later than 30 days 
from the date the demand letter is mailed;
    (iii) The applicable standards for imposing any interest, 
penalties, or administrative costs (see Sec.  30.18);
    (iv) The rights, if any, the debtor may have to:
    (A) Seek review of the Department's determination of the debt, and 
for purposes of administrative wage garnishment or salary offset, to 
request a hearing (see 45 CFR parts 32 and 33); and
    (B) Enter into a reasonable repayment agreement.
    (v) An explanation of how the debtor may exercise any of the rights 
described in paragraph (b)(1)(iv) of this section;
    (vi) The name, address, and phone number of a contact person or 
office within the Department to address any debt-related matters; and
    (vii) The Department's remedies to enforce payment of the debt, 
which may include:
    (A) Garnishing the debtor's wages through administrative wage 
garnishment;
    (B) Offsetting any federal payments due the debtor, including 
income tax refunds, salary, certain benefit payments such as Social 
Security, retirement, and travel reimbursements and advances;
    (C) Referring the debt to a private collection contractor;
    (D) Reporting the debt to a credit bureau or other automated 
database;
    (E) Referring the debt to the Department of Justice for litigation; 
and
    (F) Referring the debt to the Department of the Treasury for any of 
the collection actions described in paragraphs (b)(1)(vii)(A) through 
(E) of this section, advising the debtor that such referral is 
mandatory if the debt is 180 days delinquent.
    (2) The written demand for payment should also include the 
following information:
    (i) The debtor's right to inspect and copy all records of the 
Department pertaining to the debt, or if the debtor or the debtor's 
representative cannot personally inspect the records, to request and 
receive copies of such records;
    (ii) The Department's willingness to discuss with the debtor 
alternative methods of payment;
    (iii) A debtor delinquent on a debt is ineligible for Government 
loans, loan guarantees, or loan insurance until the debtor resolves the 
debt;
    (iv) When seeking to collect statutory penalties, forfeiture or 
other similar types of claim, the debtor's licenses, permits, or other 
privileges may be suspended or revoked if failure to pay the debt is 
inexcusable or willful. Such suspension or revocation shall extend to 
programs or activities administered by the States on behalf of the 
Federal Government, to the extent that they affect the Federal 
Government's ability to collect money or funds owed by debtors;
    (v) Knowingly making false statements or bringing frivolous actions 
may subject the debtor to civil or criminal penalties under 31 U.S.C. 
3729-3731, 18 U.S.C. 286, 287, 1001, and 1002, or any other applicable 
statutory authority, and, if the debtor is a federal employee, to 
disciplinary action under 5 CFR part 752 or other applicable authority;
    (vi) Any amounts collected and ultimately found not to have been 
owed by the debtor will be refunded;
    (vii) For salary offset, up to 15% of the debtor's current 
disposable pay may be deducted every pay period until the debt is paid 
in full; and
    (viii) Dependent upon applicable statutory authority, the debtor 
may be entitled to consideration for a waiver.
    (c) The Secretary will retain evidence of service indicating the 
date of mailing of the demand letter. The evidence of service, which 
may include a certificate of service, may be retained electronically so 
long as the manner of retention is sufficient for evidentiary purposes.
    (d) Prior to, during, or after the completion of the demand 
process, if the Secretary determines to pursue, or is required to 
pursue offset, the procedures applicable to offset should be followed 
(see Sec.  30.12). The availability of funds or money for debt 
satisfaction by offset and the Secretary's determination to pursue 
collection by offset shall release the Secretary from the necessity of 
further compliance with paragraphs (a), (b), and (c) of this section.
    (e) Finding debtors. The Secretary will exhaust every reasonable 
effort to locate debtors, using such sources as telephone directories, 
city directories, postmasters, driving license records, automobile 
title and license records in State and local government agencies, the 
IRS, credit reporting agencies and skip locator services. Referral of a 
confess-judgment note to the appropriate United States Attorney's 
Office for entry of judgment will not be delayed because the debtor 
cannot be located.
    (f) Exception. This section does not require duplication of any 
notice already contained in a written agreement, letter or other 
document signed by, or provided to, the debtor.


Sec.  30.12  Administrative offset.

    (a) Scope. (1) Administrative offset is the withholding of funds 
payable by the United States to, or held by the United States for, a 
person to satisfy a debt owed by the payee.
    (2) This section does not apply to:
    (i) Debts arising under the Social Security Act, except as provided 
in 42 U.S.C. 404;
    (ii) Payments made under the Social Security Act, except as 
provided for in 31 U.S.C. 3716 (c), and implementing regulation at 31 
CFR 285.4;
    (iii) Debts arising under, or payments made under, the Internal 
Revenue Code or the tariff laws of the United States;
    (iv) Offsets against federal salaries to the extent these standards 
are inconsistent with regulations published to implement such offsets 
under 5 U.S.C. 5514 and 31 U.S.C. 3716 (see 5 CFR part 550, subpart K; 
31CFR 285.7; and part 33 of this chapter);
    (v) Offsets under 31 U.S.C. 3728 against a judgment obtained by a 
debtor against the United States;
    (vi) Offsets or recoupments under common law, state law, or federal 
statutes specifically prohibiting offsets or recoupments for particular 
types of debts; or
    (vii) Offsets in the course of judicial proceedings, including 
bankruptcy.
    (3) Unless otherwise provided for by contract or law, debts or 
payments that are not subject to administrative offset under 31 U.S.C. 
3716 may be collected

[[Page 42016]]

by administrative offset under the common law or other applicable 
statutory authority.
    (4) Unless otherwise provided by law, collection by administrative 
offset under the authority of 31 U.S.C. 3716 may not be conducted more 
than 10 years after the Department's right to collect the debt first 
accrued, unless facts material to the Department's right to collect the 
debt were not known and could not reasonably have been known by the 
Secretary. This limitation does not apply to debts reduced to judgment.
    (5) Where there is reason to believe that a bankruptcy petition has 
been filed with respect to a debtor, the Office of the General Counsel 
should be contacted for legal advice concerning the impact of the 
Bankruptcy Code, particularly 11 U.S.C. 106, 362 and 553, on pending or 
contemplated collections by offset.
    (b) Centralized administrative offset. (1) Except as provided in 
the exceptions listed in Sec.  30.10(c)(1), legally enforceable debts 
which are 180 days delinquent shall be referred to the Secretary of the 
Treasury for collection by centralized administrative offset pursuant 
to and in accordance with 31 CFR 901.3(b). Debts which are less than 
180 days delinquent, including debts referred to the Department by 
another agency, also may be referred to the Secretary of the Treasury 
for collection by centralized administrative offset.
    (2) When referring delinquent debts to the Secretary of the 
Treasury for centralized administrative offset, the Department must 
certify, in a form acceptable to the Secretary of the Treasury, that:
    (i) The debt is past due and legally enforceable; and
    (ii) The Department has complied with all due process requirements 
under 31 U.S.C. 3716(a) and paragraph (c)(2) of this section.
    (3) Payments that are prohibited by law from being offset are 
exempt from centralized administrative offset. The Secretary of the 
Treasury shall exempt payments under means-tested programs from 
centralized administrative offset when requested in writing by the head 
of the payment certifying or authorizing agency. Also, the Secretary of 
the Treasury may exempt other classes of payments from centralized 
offset upon the written request of the head of the payment certifying 
or authorizing agency.
    (c) Non-centralized administrative offset. (1) Unless otherwise 
prohibited by law, when centralized administrative offset under 
paragraph (b) of this section is not available or appropriate, the 
Secretary may collect a delinquent debt by conducting non-centralized 
administrative offset internally or in cooperation with the agency 
certifying or authorizing payments to the debtor.
    (2) Except as provided in paragraph (c)(3) of this section, 
administrative offset may be initiated only after:
    (i) The debtor has been sent written notice of the type and amount 
of the debt, the intention of the Department to initiate administrative 
offset to collect the debt, and an explanation of the debtor's rights 
under 31 U.S.C. 3716; and
    (ii) The debtor has been given:
    (A) The opportunity to inspect and copy Department records related 
to the debt;
    (B) The opportunity for a review within the Department of the 
determination of indebtedness; and
    (C) The opportunity to make a written agreement to repay the debt.
    (3) The due process requirements under paragraph (c)(2) of this 
section may be omitted when:
    (i) Offset is in the nature of a recoupment, i.e., the debt and the 
payment to be offset arise out of the same transaction or occurrence;
    (ii) The debt arises under a contract as set forth in Cecile 
Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (notice and 
other procedural protections set forth in 31 U.S.C. 3716(a) do not 
supplant or restrict established procedures for contractual offsets 
covered by the Contracts Disputes Act); or
    (iii) In the case of non-centralized administrative offset 
conducted under paragraph (c)(1) of this section, the Department first 
learns of the existence of the amount owed by the debtor when there is 
insufficient time before payment would be made to the debtor/payee to 
allow for prior notice and an opportunity for review. When prior notice 
and an opportunity for review are omitted, the Secretary shall give the 
debtor such notice and an opportunity for review as soon as practical 
and shall promptly refund any money ultimately found not to have been 
owed to the Government.
    (4) When the debtor previously has been given any of the required 
notice and review opportunities with respect to a particular debt, such 
as under Sec.  30.11 of this part, the Department need not duplicate 
such notice and review opportunities before administrative offset may 
be initiated.
    (5) Before requesting that a payment authorizing agency conduct 
non-centralized administrative offset, the Department shall:
    (i) Provide the debtor with due process as set forth in paragraph 
(c)(2) of this section; and
    (ii) Provide the payment authorizing agency written certification 
that the debtor owes the past due, legally enforceable delinquent debt 
in the amount stated, and that the Department has fully complied with 
this section.
    (6) When a creditor agency requests that the Department, as the 
payment authorizing agency, conduct non-centralized administrative 
offset, the Secretary shall comply with the request, unless the offset 
would not be in the best interest of the United States with respect to 
the program of the Department, or would otherwise be contrary to law. 
Appropriate use should be made of the cooperative efforts of other 
agencies in effecting collection by administrative offset, including 
salary offset.
    (7) When collecting multiple debts by non-centralized 
administrative offset, the Department will 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, particularly the applicable statute of limitations.
    (d) Requests to OPM to offset a debtor's anticipated or future 
benefit payments under the Civil Service Retirement and Disability Fund 
and the Federal Employee Retirement System. Upon providing OPM written 
certification that a debtor has been afforded the procedures provided 
in paragraph (c)(2) of this section, the Department may request OPM to 
offset a debtor's anticipated or future benefit payments under the 
Civil Service Retirement and Disability Fund (Fund) in accordance with 
5 CFR part 831, subpart R, or under the Federal Employee Retirement 
System (FERS) in accordance with 5 CFR part 845, subpart D. Upon 
receipt of such a request, OPM will identify and ``flag'' a debtor's 
account in anticipation of the time when the debtor requests, or 
becomes eligible to receive, payments from the Fund or under FERS. This 
will satisfy any requirement that offset be initiated prior to the 
expiration of the time limitations referenced in 31 CFR 901.3(b)(4).
    (e) Review requirements. (1) For purposes of this section, whenever 
the Secretary is required to afford a debtor a review within the 
Department, the debtor shall be provided with a reasonable opportunity 
for an oral hearing when the debtor requests reconsideration of the 
debt and the Secretary determines that the question of the indebtedness 
cannot be resolved

[[Page 42017]]

by review of the documentary evidence, for example, when the validity 
of the debt turns on an issue of credibility or veracity.
    (2) Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although 
the Department will carefully document all significant matters 
discussed at the hearing.
    (3) An oral hearing is not required with respect to debt collection 
systems where determinations of indebtedness rarely involve issues of 
credibility or veracity, and the Secretary has determined that a review 
of the written record is adequate to correct prior mistakes.
    (4) In those cases when an oral hearing is not required by this 
section, the Secretary shall accord the debtor a ``paper hearing,'' 
that is, a determination of the request for reconsideration based upon 
a review of the written record.


Sec.  30.13  Debt reporting and use of credit reporting agencies.

    (a) Reporting delinquent debts. (1) The Secretary will report 
delinquent debts over $100 to credit bureaus or other automated 
databases. Debts arising under the Social Security Act are excluded 
from this paragraph (a).
    (2) Debts owed by individuals will be reported to consumer 
reporting agencies pursuant to 5 U.S.C. 552a(b)(12).
    (3) Once a debt has been referred to the Department of the Treasury 
for collection, any subsequent reporting to or updating of a credit 
bureau or other automated database may be handled by the Department of 
the Treasury.
    (4) Where there is reason to believe that a bankruptcy petition has 
been filed with respect to a debtor, the Office of the General Counsel 
should be contacted for legal advice concerning the impact of the 
Bankruptcy Code, particularly with respect to the applicability of the 
automatic stay, 11 U.S.C. 362, and the procedures for obtaining relief 
from such stay prior to proceeding under paragraph (a) of this section.
    (5) If the debtor has not received prior written notice under Sec.  
30.11(b), before reporting a delinquent debt under this section, the 
Secretary shall provide the debtor at least 60 days written notice of 
the amount and nature of the debt; that the debt is delinquent and the 
Department intends to report the debt to a credit bureau (including the 
specific information that will be disclosed); that the debtor has the 
right to dispute the accuracy and validity of the information being 
disclosed; and, if a previous opportunity was not provided, that the 
debtor may request review within the Department of the debt or 
rescheduling of payment. The Secretary may disclose only the 
individual's name, address, and social security number and the nature, 
amount, status and history of the debt.
    (b) Use of credit reporting agencies. The Secretary may also use 
credit reporting agencies to obtain credit reports to evaluate the 
financial status of loan applicants, potential contractors and 
grantees; to determine a debtor's ability to repay a debt; and to 
locate debtors. In the case of an individual, the Secretary may 
disclose, as a routine use under 5 U.S.C. 552a(b)(3), only the 
individual's name, address, and Social Security number and the purpose 
for which the information will be used.


Sec.  30.14  Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets.

    (a) Subject to the provisions of paragraph (b) of this section, the 
Secretary may contract with private collection contractors to recover 
delinquent debts, provided that:
    (1) The Secretary retains the authority to resolve disputes, 
compromise debts, suspend or terminate collection action, and refer 
debts to the Department of Justice for litigation;
    (2) The private collection contractor is not allowed to offer the 
debtor, as an incentive for payment, the opportunity to pay the debt 
less the private collection contractor's fee unless the Secretary has 
granted such authority prior to the offer;
    (3) The contract provides that the private collection contractor is 
subject to the Privacy Act of 1974 to the extent specified in 5 U.S.C. 
552a(m), and to applicable Federal and state laws and regulations 
pertaining to debt collection practices, including but not limited to 
the Fair Debt Collection Practices Act, 15 U.S.C. 1692; and
    (4) The private collection contractor is required to account for 
all amounts collected.
    (b) The Secretary shall use government-wide debt collection 
contracts to obtain debt collection services provided by private 
collection contractors. However, the Secretary may refer debts to 
private collection contractors pursuant to a contract between the 
Department and the private collection contractor only if such debts are 
not subject to the requirement to transfer debts to the Department of 
the Treasury for debt collection under 31 U.S.C. 3711 (g) and 31 CFR 
285.12(e).
    (c) Debts arising under the Social Security Act (which can be 
collected by private collection contractors only by the Department of 
Treasury after the debt has been referred to that Department for 
collection) are excluded from this section.
    (d) The Secretary may fund private collection contractor contracts 
in accordance with 31 U.S.C. 3718(d), or as otherwise permitted by law. 
A contract under paragraph (a) of this section may provide that the fee 
a private collection contractor charges the Department for collecting 
the debt is payable from the amounts collected.
    (e) The Department may enter into contracts for locating and 
recovering assets of the United States including unclaimed assets. 
However, before entering into a contract to recover assets of the 
United States that may be held by a state government or financial 
institution, the Department must establish procedures that are 
acceptable to the Secretary of Treasury.
    (f) The Secretary 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 Department 
for such services may be payable from the amounts recovered, unless 
otherwise prohibited by statute.


Sec.  30.15  Suspension or revocation of eligibility for loans and loan 
guarantees, licenses, permits, or privileges.

    (a)(1) Unless waived by the Secretary, financial assistance in the 
form of loans, loan guarantees, or loan insurance shall not be extended 
to any person delinquent on a debt owed to the United States. This 
prohibition does not apply to disaster loans. Grants, cooperative 
agreements, and contracts are not considered to be loans.
    (2) The authority to waive the application of this section may be 
delegated to the Chief Financial Officer and re-delegated only to the 
Deputy Chief Financial Officer.
    (3) States that manage federal activities, pursuant to approval 
from the Secretary, should ensure that appropriate steps are taken to 
safeguard against issuing licences, permits, or other privileges to 
debtors who fail to pay their debts to the Federal Government.
    (b) The Secretary will report to the Department of the Treasury any 
surety that fails to honor its obligations under 31 U.S.C. 9305.
    (c) In non-bankruptcy cases, when seeking to collect statutory 
penalties, forfeitures, or other types of claims, the Secretary may 
suspend or revoke licenses, permits, or other privileges of a 
delinquent debtor if the failure to pay the debt is found to be 
inexcusable or willful. Such suspension or revocation will extend to 
programs or activities

[[Page 42018]]

administered by the States on behalf of the Federal Government, to the 
extent that they affect the Federal Government's ability to collect 
money or funds owed by debtors.
    (d) Where there is reason to believe that a bankruptcy petition has 
been filed with respect to a debtor, before taking any action to 
suspend or revoke under paragraph (c) of this section, the Office of 
the General Counsel should be contacted for legal advice concerning the 
impact of the Bankruptcy Code, particularly 11 U.S.C. 362 and 525, 
which may restrict such action.


Sec.  30.16  Liquidation of collateral.

    (a)(1) The Secretary will liquidate security or collateral through 
the exercise of a power of sale in the security instrument or a non-
judicial foreclosure, and apply the proceeds to the applicable debt(s), 
if the debtor fails to pay the debt(s) within a reasonable time after 
demand and if such action is in the best interests of the United 
States.
    (2) 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.
    (3) The Secretary will give the debtor reasonable notice of the 
sale and an accounting of any surplus proceeds and will comply with 
other requirements under law or contract.
    (b) Where there is reason to believe that a bankruptcy petition has 
been filed with respect to a debtor, the Office of the General Counsel 
should be contacted for legal advice concerning the impact of the 
Bankruptcy Code, particularly with respect to the applicability of the 
automatic stay, 11 U.S.C. 362, and the procedures for obtaining relief 
from such stay prior to proceeding under paragraph (a) of this section.


Sec.  30.17  Collection in installments.

    (a) Whenever feasible, the total amount of a debt shall be 
collected in one lump sum payment. If a debtor is financially unable to 
pay a debt in one lump sum, either by cash or administrative offset, 
the Secretary may accept payment in regular installments. The Secretary 
will obtain financial statements from debtors who represent that they 
are unable to pay in one lump sum and independently verify such 
representations as described in Sec.  30.22 (a)(1).
    (b) Installment payment agreements. (1) When the Secretary agrees 
to accept payments in regular installments, a legally enforceable 
written agreement should be obtained from the debtor that specifies all 
the terms and conditions of the agreement, and that includes a 
provision accelerating the debt in the event of a default.
    (2) The size and frequency of the payments should reasonably relate 
to the size of the debt and the debtor's ability to pay. Whenever 
feasible, the installment agreement will provide for full payment of 
the debt, including interest and charges, in three years or less.
    (3) In appropriate cases, the agreement should include a provision 
identifying security obtained from the debtor for the deferred 
payments.


Sec.  30.18  Interest, penalties, and administrative costs.

    (a) Except as provided in paragraphs (g), (h) and (i) of this 
section, the Department shall charge interest, penalties, and 
administrative costs on delinquent debts owed to the United States. 
These charges shall continue to accrue until the debt is paid in full 
or otherwise resolved through compromise, termination, or waiver of the 
charges.
    (b) Interest. The Department shall charge interest on delinquent 
debts owed the United States as follows:
    (1) Interest shall accrue from the date of delinquency, or as 
otherwise provided by law. For debts not paid by the date specified in 
the written demand for payment made under Sec.  30.11, the date of 
delinquency is the date of mailing of the notice. The date of 
delinquency for an installment payment is the due date specified in the 
payment agreement.
    (2) Unless a different rate is prescribed by statute, contract, or 
a repayment agreement, the rate of interest charged shall be the rate 
established annually by the Secretary of the Treasury pursuant to 31 
U.S.C. 3717. The Department may charge a higher rate if necessary to 
protect the rights of the United States but must document in writing 
the reasons for charging the higher rate.
    (3) Unless prescribed by statute or contract, the rate of interest, 
as initially charged, shall remain fixed for the duration of the 
indebtedness. When a debtor defaults on a repayment agreement and seeks 
to enter into a new agreement, the Department may require payment of 
interest at a new rate that reflects the Department of the Treasury 
rate in effect at the time the new agreement is executed. Interest 
shall not be compounded, that is, interest shall not be charged on 
interest, penalties, or administrative costs required by this section, 
unless prescribed by statute or contract. If, however, the debtor 
defaults on a previous repayment agreement, charges that accrued but 
were not collected under the defaulted agreement shall be added to the 
principal under the new repayment agreement.
    (c) Administrative costs. The Department shall assess 
administrative costs incurred for processing and handling delinquent 
debts. The calculation of administrative costs should be based on 
actual costs incurred or a valid estimate of the actual costs. 
Calculation of administrative costs shall include all direct 
(personnel, supplies, etc.) and indirect collection costs, including 
the cost of providing a hearing or any other form of administrative 
review requested by a debtor, and any costs charged by a collection 
agency under Sec.  30.14. These charges will be assessed monthly, or 
per payment period, throughout the period that the debt is overdue. 
Such costs may also be in addition to other administrative costs if 
collection is being made for another federal agency or unit.
    (d) Penalty. Unless otherwise established by contract, repayment 
agreement, or statute, the Secretary will charge a penalty of six 
percent a year on the amount due on a debt that is delinquent for more 
than 90 days. This charge shall accrue from the date of delinquency.
    (e) When there is a legitimate reason to do so, such as when 
calculating interest and penalties on a debt would be extremely 
difficult because of the age of the debt, an administrative debt may be 
increased by the cost of living adjustment in lieu of charging interest 
and penalties under this section. Administrative debt includes, but is 
not limited to, a debt based on fines, penalties, and overpayments, but 
does not include a debt based on the extension of Government credit, 
such as those arising from loans and loan guaranties. The cost of 
living adjustment is the percentage by which the Consumer Price Index 
for the month of June of the calendar year preceding the adjustment 
exceeds the Consumer Price Index for the month of June of the calendar 
year in which the debt was determined or last adjusted. Such increases 
to administrative debts shall be computed annually.
    (f) Priority. When a debt is paid in partial or installment 
payments, amounts received shall be applied first to outstanding 
penalties, second to administrative charges, third to interest, and 
last to principal.
    (g) Waiver. (1) The Secretary shall waive the collection of 
interest and administrative charges imposed

[[Page 42019]]

pursuant to this section on the portion of the debt that is paid within 
30 days after the date on which interest began to accrue. The Secretary 
may extend this 30-day period on a case-by-case basis if the Secretary 
determines that such action is in the best interest of the Government, 
or otherwise warranted by equity and good conscience.
    (2) The Secretary also may waive interest, penalties, and 
administrative charges charged under this section, in whole or in part, 
without regard to the amount of the debt, based on:
    (i) The criteria set forth at Sec.  30.22 (a)(1) through (4) for 
the compromise of debts; or
    (ii) A determination by the Secretary that collection of these 
charges is:
    (A) Against equity and good conscience; or
    (B) Not in the best interest of the United States.
    (h) Review. (1) Except as provided in paragraph (h)(2) of this 
section, administrative review of a debt will not suspend the 
assessment of interest, penalties, and administrative costs. While 
agency review of a debt is pending, the debtor either may pay the debt 
or be liable for interest and related charges on the uncollected debt. 
When agency review results in a final determination that any amount was 
properly a debt and the debtor chose to retain the amount in dispute, 
the Secretary shall collect from the debtor the amount determined to be 
due, plus interest, penalties and administrative costs on such debt 
amount, as calculated under this section, starting from the date the 
debtor was first made aware of the debt and ending when the debt is 
repaid. The Department may impose and waive interest and related 
charges on debts not subject to 31 U.S.C. 3717 in accordance with the 
common law or other statutory authority.
    (2) Exception. Interest, penalties, and administrative cost charges 
will not be imposed on a debt for periods during which collection 
activity has been suspended under Sec.  30.29(c)(1) pending agency 
review or consideration of waiver if statute prohibits collection of 
the debt during this period.


Sec.  30.19  Review of cost effectiveness of collection.

    Periodically, the Secretary will compare costs incurred and amounts 
collected. Data on costs and corresponding recovery rates for debts of 
different types and in various dollar ranges will 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.  30.20  Taxpayer information.

    (a) When attempting to locate a debtor in order to collect or 
compromise a debt under this part or any other authority, the Secretary 
may send a request to the Department of the Treasury in accordance with 
31 CFR 901.11 to obtain a debtor's mailing address from the records of 
the IRS.
    (b) Mailing addresses obtained under paragraph (a) of this section 
may be used to enforce collection of a delinquent debt and may be 
disclosed to other agencies and to collection agencies for collection 
purposes.

Subpart C--Debt Compromise


Sec.  30.21  Scope and application.

    (a) Scope. The standards set forth in this subpart apply to the 
compromise of debts pursuant to 31 U.S.C. 3711. The Secretary may 
exercise such compromise authority for debts arising out of activities 
of, or referred or transferred for collection services to, the 
Department when the amount of the debt then due, exclusive of interest, 
penalties, and administrative costs, does not exceed $100,000, or any 
higher amount authorized by the Attorney General.
    (b) Application. 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 a compromise rests 
with the Department of Justice. The Secretary shall evaluate the 
compromise offer, using the factors set forth in this subpart. If an 
offer to compromise any debt in excess of $100,000 is acceptable to the 
Department, the Secretary shall refer the debt to the Civil Division or 
other appropriate litigating division in the Department of Justice 
using a Claims Collection Litigation Report (CCLR), which may be 
obtained from the Department of Justice's National Central Intake 
Facility. The referral shall include appropriate financial information 
and a recommendation for the acceptance of the compromise offer. 
Department of Justice approval is not required if the Secretary rejects 
a compromise offer.


Sec.  30.22  Bases for compromise.

    (a) The Secretary may compromise a debt if the full amount cannot 
be collected based upon inability to pay, inability to collect the full 
debt, cost of collection, or doubt debt can be proven in court.
    (1) Inability to pay. The debtor is unable to pay the full amount 
in a reasonable time, as verified through credit reports or other 
financial information. In determining a debtor's inability to pay the 
full amount of the debt within a reasonable time, the Secretary will 
obtain and verify the debtor's claim of inability to pay by using 
credit reports or a current financial statement from the debtor, 
executed under penalty of perjury, showing the debtor's assets, 
liabilities, income, and expenses. The Secretary may use a Departmental 
financial information form or may request suitable forms from the 
Department of Justice or the local United States Attorney's Office. The 
Secretary also may consider other relevant factors such as:
    (i) Age and health of the debtor;
    (ii) Present and potential income;
    (iii) Inheritance prospects;
    (iv) The possibility that assets have been concealed or improperly 
transferred by the debtor; and
    (v) The availability of assets or income that may be realized by 
enforced collection proceedings.
    (2) Inability to collect full debt. The Government is unable to 
collect the debt in full within a reasonable time by enforced 
collection proceedings.
    (i) In determining the Government's ability to enforce collection, 
the Secretary will consider the applicable exemptions available to the 
debtor under state and federal law, and may also consider uncertainty 
as to the price the collateral or other property will bring at a forced 
sale.
    (ii) 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.
    (3) Cost of collection. The cost of collecting the debt does not 
justify the enforced collection of the full amount.
    (i) The Secretary 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 of such cases may reflect an 
appropriate discount for the administrative and litigation 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.
    (ii) In determining whether the costs of collection justify 
enforced collection of the full amount, the Secretary will

[[Page 42020]]

consider whether continued collection of the debt, regardless of cost, 
is necessary to further an enforcement principal, such as the 
Government's willingness to pursue aggressively defaulting and 
uncooperative debtors.
    (4) Doubt debt can be proven in court. There is significant doubt 
concerning the Government's ability to prove its case in court.
    (i) If there is significant doubt concerning the Government'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 to the availability of witnesses and other 
evidentiary support for the Government's claim.
    (ii) In determining the litigation risks involved, the Secretary 
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.
    (b) Installments. The Secretary generally will not accept 
compromises payable in installments. This is not an advantageous form 
of compromise in terms of time and administrative expense. If, however, 
payment of a compromise in installments is necessary, the Secretary 
shall, except in the case of compromises based on paragraph (a)(4) of 
this section, 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. 
The Office of the General Counsel should be consulted concerning the 
appropriateness of including such a requirement in the case of 
compromises based on paragraph (a)(4) of this section. Whenever 
possible, the Secretary will obtain security for repayment in the 
manner set forth in subpart B of this part.


Sec.  30.23  Enforcement policy.

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


Sec.  30.24  Joint and several liability.

    (a) When two or more debtors are jointly and severally liable, the 
Secretary will pursue collection against all debtors, as appropriate. 
The Secretary will not attempt to allocate the burden of payment 
between the debtors but will proceed to liquidate the indebtedness as 
quickly as possible.
    (b) The Secretary will ensure that a compromise agreement with one 
debtor does not release the Department'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.  30.25  Further review of compromise offers.

    If the Secretary is uncertain whether to accept a firm, written, 
substantive compromise offer on a debt that is within the Secretary's 
delegated compromise authority, the Secretary may refer the offer to 
the Civil Division or other appropriate litigating division in the 
Department of Justice, using a CCLR accompanied by supporting data and 
particulars concerning the debt. The Department of Justice may act upon 
such an offer or return it to the Secretary with instructions or 
advice.


Sec.  30.26  Consideration of tax consequences to the Government.

    In negotiating a compromise, the Secretary will consider the tax 
consequences to the Government. In particular, the Secretary will 
consider requiring a waiver of tax-loss-carry-forward and tax-loss-
carry-back rights of the debtor. For information on discharge of 
indebtedness reporting requirements see Sec.  30.32.


Sec.  30.27  Mutual release of the debtor and the Government.

    In all appropriate instances, a compromise that is accepted by the 
Secretary will be implemented by means of a mutual release. The terms 
of such mutual release shall provide that the debtor is released from 
further non-tax liability on the compromised debt in consideration of 
payment in full of the compromise amount and the Government 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 
the Government and its officials related to the transaction giving rise 
to the compromised debt.

Subpart D--Suspending and Terminating Collection Activities


Sec.  30.28  Scope and application.

    (a) Scope. The standards set forth in this subpart 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 the Department of 
Justice for litigation, the Secretary may suspend or terminate 
collection under this subpart with respect to debts arising out of 
activities of, or referred or transferred for collection services to, 
the Department.
    (b) Application. (1) If, after deducting the amount of partial 
payments or collections, the principal amount of the 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 the Department of 
Justice.
    (2) If the Secretary believes that suspension or termination of any 
debt in excess of $100,000 may be appropriate, the Secretary shall 
refer the debt to the Civil Division or other appropriate litigating 
division in the Department of Justice, using the CCLR. The referral 
will specify the reasons for the Secretary's recommendation. If prior 
to referral to the Department of Justice, the Secretary determines that 
a debt is plainly erroneous or clearly without merit, the Secretary may 
terminate collection activity regardless of the amount involved without 
obtaining Department of Justice concurrence.


Sec.  30.29  Suspension of collection activity.

    (a) The Secretary may suspend collection activity on a debt when:
    (1) The Department 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) Financial condition. Based on the current financial condition 
of a debtor, the Secretary 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;

[[Page 42021]]

    (2) Future collection can be effected by administrative offset, 
notwithstanding the expiration of the applicable statute of limitations 
for litigation of claims, 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) Waiver and review. (1) The Secretary shall suspend collection 
activity during the time required for consideration of the debtor's 
request for waiver or administrative review of the debt if the statute 
under which the request is sought prohibits the Secretary from 
collecting the debt during that time.
    (2) If the statute under which the waiver or administrative review 
request is sought does not prohibit collection activity pending 
consideration of the request, the Secretary may use discretion, on a 
case-by-case basis, to suspend collection. Collection action ordinarily 
will be suspended upon a request for waiver or review if the Secretary 
is prohibited by statute or regulation from issuing a refund of amounts 
collected prior to agency consideration of the debtor's request. 
However, collection will not be suspended when the Secretary determines 
that the request for waiver or review is frivolous or was made 
primarily to delay collection.
    (d) Upon learning that a bankruptcy petition has been filed with 
respect to a debtor, in most cases the Secretary must suspend 
collection activity on the debt, pursuant to the provisions of 11 
U.S.C. 362, 1201, and 1301, unless the Secretary can clearly establish 
that the automatic stay has been lifted or is no longer in effect. The 
Office of the General Counsel will be contacted immediately for legal 
advice, and the Secretary will take the necessary legal steps to ensure 
that no funds or money are paid by the Department to the debtor until 
relief from the automatic stay is obtained.


Sec.  30.30  Termination of collection activity.

    (a) The Secretary may terminate collection activity when:
    (1) The Department is unable to collect any substantial amount 
through its own efforts or through the efforts of others;
    (2) The Department is unable to locate the debtor;
    (3) Costs of collection are anticipated to exceed the amount 
recoverable;
    (4) The debt is legally without merit or enforcement of the debt is 
barred by any applicable statute of limitations;
    (5) The debt cannot be substantiated; or
    (6) The debt against the debtor has been discharged in bankruptcy.
    (b)(1) Collection activity will not be terminated before the 
Secretary has pursued all appropriate means of collection and 
determined, based upon the results of the collection activity, that the 
debt is uncollectible.
    (2) Termination of collection activity ceases active collection of 
the debt. The termination of collection activity does not preclude the 
Secretary from retaining a record of the account for purposes of:
    (i) Selling the debt, if the Secretary of the Treasury determines 
that such sale is in the best interest of the United States;
    (ii) 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;
    (iii) Offsetting against future income or assets not available at 
the time of termination of collection activity; or
    (iv) Screening future applicants for prior indebtedness.
    (c) Generally, the Secretary shall terminate collection activity on 
a debt that has been discharged in bankruptcy, regardless of the 
amount. The Secretary may continue collection activity, however, 
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. For example, when 
the Department is a known creditor of a debtor the claims of the 
Department may survive a discharge if the Department did not receive 
formal notice of the bankruptcy proceedings. When the Department 
believes that it has claims or offsets that may have survived the 
discharge of the debtor, the Office of the General Counsel should be 
contacted for legal advice.


Sec.  30.31  Exception to termination.

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


Sec.  30.32  Discharge of indebtedness; reporting requirements.

    (a) Discharge. (1) Before discharging a delinquent debt, also 
referred to as close out of the debt, the Secretary shall take all 
appropriate steps to collect the debt in accordance with 31 U.S.C. 3711 
(g)(9), and parts 30 through 33 of this chapter, including, as 
applicable, administrative offset; tax refund offset; federal salary 
offset; credit bureau reporting; administrative wage garnishment; 
litigation; foreclosure; and referral to the Department of the 
Treasury, Department of the Treasury-designated debt collection 
centers, or private collection contractors.
    (2) Discharge of indebtedness is distinct from termination or 
suspension of collection activity under this subpart, 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 this part and 31 CFR parts 900 through 904.
    (3) When the Department discharges a debt in full or in part, 
further collection action is prohibited. Therefore, before discharging 
a debt the Secretary must:
    (i) Make the determination that collection action is no longer 
warranted; and
    (ii) Terminate debt collection action.
    (b) In accordance with 31 U.S.C. 3711 (i), the Secretary shall use 
competitive procedures to sell a delinquent 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, the Secretary may not discharge a debt until the 
requirements of 31 U.S.C. 3711 (i) have been meet.
    (c) Upon discharge of an indebtedness, the Secretary must report 
the discharge to the IRS in accordance with the requirements of 26 
U.S.C. 6050P and 26 CFR 1.6050P-1. The Secretary may request that the 
Department of the Treasury or Department of the Treasury-designated 
debt collection centers file such a discharge report to the IRS on the 
Department's behalf.
    (d) When discharging a debt, the Secretary must request that 
litigation counsel release any liens of record securing the debt.

[[Page 42022]]

Subpart E--Referrals to the Department of Justice


Sec.  30.33  Prompt referral.

    (a)(1) The Secretary promptly shall refer to the Department of 
Justice for litigation debts on which aggressive collection activity 
has been taken in accordance with subpart B of this part, and that 
cannot be compromised, or on which collection activity cannot be 
suspended or terminated, in accordance with subpart D of this part.
    (2) The Secretary may refer to the Department of Justice for 
litigation those debts arising out of activities of, or referred or 
transferred for collection services to, the Department.
    (b)(1) Debts for which the principal amount is over $1,000,000, or 
such other amount as the Attorney General may direct, exclusive of 
interest, penalties, and administrative costs shall be referred to the 
Department of Justice Civil Division or other division responsible for 
litigating such debts at the Department of Justice, Washington D.C.
    (2) 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, penalties, and administrative costs shall be referred to the 
Nationwide Central Intake Facility of the Department of Justice as 
required by the CCLR instructions.
    (c)(1) Consistent with aggressive agency collection activity and 
the standards contained in this part and 31 CFR parts 900 through 904, 
debts shall be referred to the Department of Justice as early as 
possible, and, in any event, well within the period for initiating 
timely lawsuits against the debtors.
    (2) The Secretary shall make every effort to refer delinquent debts 
to the Department of Justice for litigation within one year of the date 
such debts last became delinquent. In the case of guaranteed or insured 
loans, the Secretary will make every effort to refer these delinquent 
debts to the Department of Justice for litigation within one year from 
the date the loan was presented to the Department for payment or re-
insurance.
    (d) The Department of Justice has exclusive jurisdiction over debts 
referred to it pursuant to this subpart. Upon referral of a debt to the 
Department of Justice, the Secretary shall:
    (1) Immediately terminate the use of any administrative collection 
activities to collect the debt;
    (2) Advise the Department of Justice of the collection activities 
utilized to date, and their result; and
    (3) Refrain from having any contact with the debtor and direct all 
debtor inquiries concerning the debt to the Department of Justice.
    (e) After referral of a debt under this subpart, the Secretary 
shall immediately notify the Department of Justice of any payments 
credited by the Department to the debtor's account. Pursuant to 31 CFR 
904.1 (b), after referral of the debt under this subpart, the 
Department of Justice shall notify the Secretary of any payment 
received from the debtor.


Sec.  30.34  Claims Collection Litigation Report.

    (a)(1) Unless excepted by the Department of Justice, the Secretary 
will complete the CCLR, accompanied by a signed Certificate of 
Indebtedness, to refer all administratively uncollectible claims to the 
Department of Justice for litigation.
    (2) The Secretary shall complete all of the sections of the CCLR 
appropriate to each debt as required by the CCLR instructions, and 
furnish such other information as may be required in specific cases.
    (b) The Secretary shall indicate clearly on the CCLR the actions 
that the Department wishes the Department of Justice to take with 
respect to the referred debt. The Secretary may indicate specifically 
any of a number of litigation activities which the Department of 
Justice may pursue, including enforced collection, judgement lien only, 
renew judgement lien only, renew judgement lien and enforced 
collection, program enforcement, foreclosure only, and foreclosure and 
deficiency judgment.
    (c) The Secretary also shall use the CCLR to refer a debt to the 
Department of Justice for the purpose of obtaining approval of a 
proposal to compromise the debt, or to suspend or terminate 
administrative collection activity of the debt.


Sec.  30.35  Preservation of evidence.

    The Secretary will maintain and preserve all files and records that 
may be needed by the Department of Justice to prove the Department's 
claim in court. When referring debts to the Department of Justice for 
litigation, certified copies of the documents that form the basis for 
the claim should be provided along with the CCLR. Upon its request, the 
original documents will be provided to the Department of Justice.


Sec.  30.36  Minimum amount of referrals.

    (a) Except as in paragraph (b) of this section, claims of less than 
$2,500 exclusive of interest, penalties, and administrative costs, or 
such other amount as the Attorney General may prescribe, shall not be 
referred for litigation.
    (b) The Secretary shall not refer claims of less than the minimum 
amount unless:
    (1) Litigation to collect such smaller amount is important to 
ensure compliance with the policies and programs of the Department;
    (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 the 
Department 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) The Secretary should consult with the Financial Litigation 
Staff of the Executive Office for United States Attorneys in the 
Department of Justice prior to referring claims valued at less than the 
minimum amount.

    Dated: April 1, 2004.
Tommy G. Thompson,
Secretary.
[FR Doc. 04-15693 Filed 7-12-04; 8:45 am]
BILLING CODE 4150-26-P