[Federal Register Volume 70, Number 66 (Thursday, April 7, 2005)]
[Rules and Regulations]
[Pages 17583-17590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6898]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 134 and 140

RIN 3245-AE50


Procedures for Office of Hearings and Appeals, Administrative 
Wage Garnishment

AGENCY: U.S. Small Business Administration (SBA).

ACTION: Direct final rule.

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SUMMARY: This direct final rule implements the administrative wage 
garnishment provisions contained in the Debt Collection Improvement Act 
of 1996 (DCIA) in accordance with the regulations issued by the 
Secretary of the Treasury. By implementing these provisions, SBA will 
be able to garnish the disposable wages of a person who is indebted to 
the United States for nontax debts, without first obtaining a court 
order. This rule also amends SBA's regulations on hearings and appeals 
in order to expand the scope of those regulations to hearings in 
administrative wage garnishment cases.

DATES: This rule is effective on June 6, 2005 without further action, 
unless adverse comment is received by May 9, 2005. If adverse comment 
is received, SBA will publish a timely withdrawal of the rule in the 
Federal Register.

ADDRESSES: You may submit comments, identified by RIN number 3245-AE50, 
by any of the following methods: (1) Federal rulemaking portal at 
http://www.regulations.gov; (2) e-mail: [email protected], 
include RIN number 3245-AE50 in the subject line of the message; (3) 
mail to: Walter C. Intlekofer, Director Portfolio Management Division, 
409 3rd Street, SW., Mail Code: 7021, Washington, DC 20416; and (4) 
Hand Delivery/Courier: 409 3rd Street, SW., Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT: Walter C. Intlekofer, Director 
Portfolio Management Division, (202) 205-7543.

SUPPLEMENTARY INFORMATION:

Background

    Section 31001(o) of the Debt Collection Improvement Act of 1996, 
which is codified at 31 U.S.C. 3720D, authorizes Federal agencies to 
use an administrative procedure to garnish the disposable pay of an 
individual to collect delinquent non-tax debt owed to the United States 
in accordance with regulations promulgated by the Secretary of the 
Treasury. Wage garnishment is a process whereby an employer withholds 
amounts from an employee's wages and pays those amounts to the 
employee's creditor pursuant to a withholding order. Under the DCIA 
agencies may garnish up to 15% of a delinquent non-tax debtor's 
disposable wages. Prior to the enactment of the DCIA, agencies were 
generally required to obtain a court judgment before garnishing the 
wages of non-Federal employees.
    DCIA requires the Secretary of the Treasury to issue regulations 
implementing the administrative wage garnishment requirements. These 
implementing regulations, which are at 31 CFR 285.11, provide for due 
process for nontax debtors and require agencies to publish regulations 
for administrative wage garnishment hearings. This direct final rule 
implements that requirement.

[[Page 17584]]

    SBA previously published a proposed wage garnishment rule on June 
27, 2000, at 65 FR 124. The Agency received no comments. However, since 
SBA has made changes to the proposed rule to more closely conform it to 
the Treasury final rule, SBA is issuing this as a direct final rule to 
provide the public with a final opportunity to comment. SBA must 
receive comments by the deadline stated above, which is no later than 
30 days after this notice appears in the Federal Register.
    SBA is publishing this rule as a direct final rule because it 
believes the rule is not controversial as it merely conforms SBA's 
administrative wage garnishment procedures to those used by the rest of 
the Government and contains the same substantive and procedural 
requirements as the Treasury final rule on wage garnishment. The 
changes implemented by this rule are beneficial to all affected parties 
by providing exact procedures for SBA's administrative wage garnishment 
process. SBA believes that this rule will not elicit any significant 
adverse comments. However, if adverse comments are received, SBA will 
publish a timely notice of withdrawal in the Federal Register.

Section-by-Section Analysis

Part 134

    SBA is amending 13 CFR Part 134, Rules of Procedure Governing Cases 
before the Office of Hearings and Appeals, to expand the scope of the 
procedures to debt collection cases under DCIA, including 
administrative wage garnishment cases. SBA is not amending the actual 
procedural process. SBA is amending the following specific sections of 
Part 134.
    Section 134.102(i) lists the types of cases over which OHA has 
jurisdiction. SBA is amending this section to add debt collection under 
DCIA to this list of cases.
    Section 134.202 describes how a party, including SBA, may commence 
a case before OHA and the time period within which a party other than 
SBA must commence such cases. SBA is amending Sec.  134.202 to add how 
and when a party may request a hearing on an administrative wage 
garnishment case.
    Section 134.222(a) explains the conditions for obtaining an oral 
hearing; SBA is amending Sec.  134.222(a) to add when an oral hearing 
is available for administrative wage garnishment cases.
    Section 134.226(b) provides that OHA must render a decision within 
60 days after a petition is filed in debt collection cases under the 
Debt Collection Act of 1982 and Part 140 of the SBA regulations. SBA is 
amending Sec.  134.226(b) to add debt collection under DCIA to the 
group of cases in which OHA must render a decision within 60 days.
    Section 134.227(a) describes the cases in which OHA's decision 
constitutes a final agency decision. SBA is amending this section to 
include debt collection under DCIA to this group of cases.

Part 140

    SBA's debt collection regulations can be found at 13 CFR Part 140. 
SBA is amending this Part to establish procedures for administrative 
wage garnishment in accordance with DCIA and the Treasury regulations 
implementing that statute. First, SBA is amending the title to Part 140 
to make it more descriptive of the Part's coverage, by changing the 
title from ``Debt Collection Through Offset'' to ``Debt Collection.'' 
Second, in order to simplify the organization of Part 140, SBA is 
dividing it into Subpart A, Overview; Subpart B, Offset; and Subpart C, 
Administrative Wage Garnishment.
    Subpart A will provide an overview of the scope of Part 140. 
Section 140.1 which currently provides an overview of the coverage of 
Part 140 will fall under Subpart A and is being amended to add 
administrative wage garnishment to the scope of cases that are covered 
by Part 140.
    Subpart B will apply to the procedures for debt collection through 
offset of a federal employee's salary, any money that is due to a 
debtor from SBA or other Federal agencies and a debtor's IRS tax 
refund. Existing Sec. Sec.  140.2 and 140.3 specifically address debt 
collection through offset and will be part of Subpart B. SBA is not 
amending these sections at this time.
    A new section, designated as 140.11 is being added under Subpart C 
to establish the rules and procedures for debt collection through 
administrative wage garnishment.
    (a) General. Subsection (a) describes the administrative wage 
garnishment process and provides the statutory authority for SBA to use 
that process.
    (b) Scope. Subsection (b)(1) states that Sec.  140.11 provides 
procedures for SBA to collect delinquent non-tax debt through 
administrative wage garnishment.
    As provided in the DCIA, subsection (b)(2) explains that the wage 
garnishment provisions in Sec.  140.11 apply despite any State law 
covering such process.
    Subsection (b)(3) explains that SBA's use of this collection tool 
does not interfere with its discretion to compromise a debt, or to 
suspend or terminate collection of the debt.
    Subsection (b)(4) explains that administrative wage garnishment is 
one of many debt collection remedies available to SBA and it may use 
administrative wage garnishment concurrently with other collection 
remedies, even if the Agency is receiving payments under wage 
garnishment.
    Subsection (b)(5) distinguishes Federal salary offset from 
administrative wage garnishment. Federal salary offset procedures, 
whereby Federal salary payments payable to Federal employees who owe 
debt to the United States are withheld to satisfy that debt, are set 
forth in 5 U.S.C 5514 and the implementing regulations.
    Subsection (b)(6) provides that SBA is not required to duplicate 
notices or proceedings that are otherwise required.
    (c) Definitions. Subsection (c) contains the definitions that apply 
to actions under Part 140.
    Agency. The term ``agency'' as used in this section refers to SBA.
    Business day. The term ``business day'' means Monday through Friday 
and will be calculated consistent with Rule 6(a) of the Federal Rules 
of Civil Procedure.
    Day means calendar day and will be calculated consistent with Rule 
6(a) of the Federal Rules of Civil Procedure.
    Debt or claim. For the purposes of this rule, the terms ``debt'' 
and ``claim'' refer to delinquent nontax debt. The term ``delinquent 
nontax debt'' refers to debt that is past-due.
    Debtor. The term ``debtor'' refers to an individual who owes a 
delinquent nontax debt to the United States.
    Delinquent non-tax debt refers to any debt other than one owed 
under the Internal Revenue Code and that has not been paid by the date 
specified in SBA's initial written demand for payment.
    Disposable pay. ``Disposable pay'' is all of a debtor's 
compensation except health insurance premiums and those amounts 
required to be withheld by law, such as social security taxes. Lump sum 
payments, such as bonuses and back pay, are included in disposable pay. 
For purposes of calculating disposable pay, voluntary withholdings, 
such as savings allotments, are not deducted from a debtor's 
compensation.
    Employer. The term ``employer'' refers to a person or entity that 
employs the services of others and includes State and local 
Governments. For purposes of this section, however, the Federal 
Government is not an ``employer'' because debts owed by Federal 
employees are collected in accordance

[[Page 17585]]

with the Federal salary offset procedures.
    Evidence of Service. This term refers to the information that SBA 
will retain as proof that it has mailed a given document, including to 
whom, date of mailing and nature of the document.
    Garnishment. The term ``garnishment'' refers to the process of 
withholding amounts from an employee's pay and forwarding those amounts 
to a creditor in satisfaction of a withholding order.
    Withholding order. The term ``withholding order'' refers to any 
order for withholding or garnishment of pay, whether issued under the 
provisions of this section or otherwise. A withholding order may be 
issued by an agency, or a judicial or administrative body. For purposes 
of this proposed rule, the terms ``wage garnishment order'' and 
``garnishment order'' have the same meaning as ``withholding order.''
    (d) Initiating Proceedings. Subsection (d) sets forth when SBA may 
initiate an administrative wage garnishment proceeding.
    (e) Notice Requirements. Subsection (e)(1) contains the DCIA 
requirement that SBA give the debtor written notice at least 30 days 
before initiating garnishment proceedings. The notice will inform the 
debtor of the nature and amount of the debt and that SBA will collect 
the debt through deductions from pay, as well as an explanation of the 
debtor's rights regarding the proposed action.
    Subsection (e)(2) explains that pursuant to the DCIA SBA will 
provide the debtor with an opportunity to inspect and copy records 
related to the debt, to establish a repayment agreement, and to receive 
a hearing. This subsection also provides that a debtor is entitled to a 
hearing only with respect to (1) the existence of the debt; (2) the 
amount of the debt; or (3) the terms of the proposed repayment schedule 
under the garnishment order. However, the debtor is not entitled to a 
hearing on the terms of the proposed repayment schedule if those terms 
have been established by written agreement between the debtor and SBA.
    Subsection (e)(3) states that SBA will keep a copy of the 
certificate of service.
    (f) Hearing. Subsection (f)(1) states that OHA's procedural rules 
also apply to wage garnishment hearings; subsection (f)(2) addresses 
how a debtor can obtain such a hearing.
    Under subsection (f)(3) SBA addresses the two types of hearings 
that are available; explains when the debtor may receive either a paper 
hearing or an oral hearing and, if the latter, whether the hearing will 
be conducted in person or by telephone.
    Subsection (f)(4) provides that if a request for hearing is timely 
received, SBA will not issue a garnishment order until the Judge 
renders a decision. Timely received means that the request for a 
hearing is received by SBA on or before the 15th business day following 
the mailing of the notice described in Subsection (e)(1) of this 
section. SBA is required to inform the debtor of the deadline for 
requesting a hearing prior to the issuance of a withholding order.
    Subsection (f)(5) addresses hearing requests received after the 
15th business day following the mailing of the notice described in 
Subsection (e)(1) of this section. As provided in the DCIA, SBA does 
not have to delay issuance of the withholding order prior to conducting 
a hearing if the request for a hearing is not timely received.
    Subsection (f)(6) provides that any Judge as designated by the 
Assistant Administrator for Hearings and Appeals may be the hearing 
official.
    Subsection (f)(7) requires the Judge to notify the SBA and the 
debtor about the type of hearing to be held, the date and time of the 
hearing, and any deadline for the submission of evidence.
    Subsection (f)(8) describes the burden of proof on SBA and the 
debtor. SBA must present evidence as to the existence or amount of the 
debt. To dispute the debt, the debtor must show by a preponderance of 
the evidence that no debt exists or that the amount of the debt is 
incorrect. If the terms of the repayment schedule are an issue, the 
debtor must show that such terms are unreasonable or unlawful.
    Subsection (f)(9) provides that the hearing official will maintain 
a summary record of the hearing and that testimony at oral hearings 
will be under oath.
    As required by the DCIA, subsection (f)(10) states that the OHA 
Judge must issue a written decision no later than sixty (60) days after 
OHA received the request for a hearing. This subsection also explains 
that if SBA had previously issued a withholding order, the agency must 
suspend garnishment until the Judge holds a hearing and issues a 
decision.
    Subsection (f)(11) sets forth the information that must be included 
in the hearing official's written decision.
    Subsection (f)(12) states that the OHA Judge's decision is the 
final agency action for judicial review purposes under the 
Administrative Procedures Act (5 U.S.C. 701) .
    Subsection (f)(13) provides that failure of a debtor to appear at 
an oral hearing, without showing good cause, will be deemed an untimely 
filing.
    (g) Wage Garnishment Order. In accordance with the provisions of 
the DCIA, Subsection (g)(1) provides that if the debtor did not file a 
timely request for a hearing, SBA will send the garnishment order to 
the debtor's employer within 30 days following the 15th business day 
after SBA mailed the pre-garnishment, or if debtor makes a timely 
request, 30 days after the Judge renders a final decision to proceed 
with the garnishment.
    Subsection (g)(2) describes the format and content of a withholding 
order, including debtor's name, address and social security number.
    Subsection (g)(3) requires that SBA retain a copy of the 
certificate of service to show when the agency mailed the withholding 
order to the debtor's employer.
    (h) Certification by Employer. When a debtor's employer receives a 
withholding order, Subsection (h) requires the employer to complete a 
certification in a form prescribed by the Secretary of the Treasury on 
matters such as the debtor's employment status and disposable pay 
available for garnishment.
    (i) Amounts Withheld. According to subsection (i)(1), a debtor's 
employer must deduct the amount stated in the garnishment order each 
pay period.
    Subsections (i)(2) and (i)(3) describe the restrictions on the 
amounts that can be withheld from an employee's pay to satisfy a 
garnishment order. As provided in the DCIA, under subsection (i)(1) no 
more than 15% of the debtor's disposable pay for each pay period may be 
garnished; subsection (i)(2) describes the amount that may be garnished 
if, at the time of SBA's garnishment order, the debtor's disposable pay 
is subject to other wage garnishment orders, or where the debtor's wage 
is also subject to garnishment for family support, even if filed after 
SBA's order.
    For example, if the employer is withholding 15% of a debtor's 
disposable pay for a family support or prior withholding order, the 
amount withheld for the subsequent withholding order issued under this 
section is limited to 10% of the debtor's disposable pay. When the 
family support or prior withholding order terminates, the amount 
withheld for the subsequent withholding order issued under this section 
may be increased to the maximum 15% allowed under (i)(1).
    Subsection (i)(4) allows the debtor to consent in writing to 
withholding a greater amount than provided in subsections (i)(2) and 
(i)(3).

[[Page 17586]]

    Under subsection (i)(5), the employer is required to promptly pay 
to SBA amounts withheld under the garnishment order.
    As provided in the DCIA, under subsection (i)(6) an employer is not 
required to vary its pay cycle to comply with a garnishment order.
    Subsection (i)(7) provides that a wage garnishment order issued 
under this section will take priority over any assignment or allotment 
by an employee of his wages, except for assignments or allotments made 
because of a family support judgment or order.
    Subsection (i)(8) requires the employer to continue to garnish an 
employee's wages until the agency notifies the employer that 
garnishment is no longer required.
    (j) Exclusions from Garnishment. As required by the DCIA, 
Subsection (j) provides that SBA may not garnish a debtor's wages if he 
or she has been involuntarily unemployed during the last 12 months and 
also advises that the debtor is responsible for notifying SBA of any 
involuntary unemployment.
    (k) Financial Hardship. Subsection (k)(1) allows a debtor to 
request a review by SBA of the amount being garnished under a wage 
garnishment order based on materially changed circumstances which 
result in a financial hardship.
    Subsection (k)(2) requires the debtor to explain and submit 
evidence of the materially changed circumstances and the effect of the 
change on the debtor's ability to pay.
    Subsection (k)(3) explains that SBA will adjust the amounts 
withheld under the garnishment order if a financial hardship is found 
to exist.
    (l) Ending Garnishment. Subsection (l)(1) provides that SBA will 
instruct the employer to discontinue garnishment upon its receipt of 
the full amount of the debt, including interest, penalties, and 
administrative costs.
    Under subsection (l)(2) once the debtor's account has been paid in 
full, SBA will review the account to ensure that garnishment has been 
terminated.
    (m) Prohibited Actions by the Employer. As mandated by the DCIA, 
subsection (m) prohibits employers from taking action against a debtor 
based on the fact that the debtor's wages are subject to garnishment.
    (n) Refunds. Subsection (n)(1) requires SBA to refund promptly to a 
debtor amounts improperly withheld from wages.
    Subsection (n)(2) provides that, unless required by law or 
contract, refunds shall not bear interest.
    (o) Right of Action. As authorized by the DCIA, subsection (o) 
provides that SBA may sue an employer for the amounts that were not 
properly withheld from the debtor's wages. SBA may initiate action 
against an employer only after terminating its collection efforts 
against the debtor. For purposes of this section, this occurs when SBA 
(1) has terminated collection action in accordance with the Federal 
Claims Collection Standards (FCCS) or other applicable standards, or 
(2) has not received any payments on the debt from any source for at 
least 1 year.
    Finally, since administrative wage garnishment has separate 
specific authority, SBA is also amending the list of authorities for 
Part 140 to add 31 U.S.C. 3720D.

Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork 
Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 
U.S.C. 601-12)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule does not constitute a significant regulatory action under 
Executive Order 12866.

Executive Order 12988

    This action meets applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden.

Executive Order 13132

    This regulation will not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, for the purposes of Executive 
Order 13132, SBA determines that this direct final rule has no 
federalism implications warranting preparation of a federalism 
assessment.

Paperwork Reduction Act of 1995

    For purposes of the Paperwork Reduction Act, 44 U.S.C., Chapter 35, 
SBA has determined that this direct final rule does not impose 
additional reporting or recordkeeping requirements. Although the 
employer of a delinquent debtor must certify certain information about 
the debtor, certifications are not collections of information under the 
Paperwork Reduction Act.

Regulatory Flexibility Act (5 U.S.C. 601-12)

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small non-profit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis which 
describes the impact of the rule on small entities.
    This final rule would not have a significant economic impact on a 
substantial number of small entities. Further, the Administrator, in 
accordance with the RFA, certifies that this rule, including the 
certification contained in Sec.  140.11(h), would not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the RFA.
    This rule applies to individuals with outstanding debts to the 
United States, as well as employers of such individuals. SBA does not 
believe that a substantial number of small entities will be subject to 
this regulation and to its certification requirement. SBA has 
approximately 39,000 Agency-serviced loans that are delinquent or in 
liquidation status, or are subject to collection processes by the U.S. 
Department of the Treasury (Treasury). Although SBA cannot predict the 
number of these loans that will be subject to AWG in the future, SBA 
estimates, based on the experience of other federal agencies, that no 
more than one-fourth (less than 10,000) may be subject to wage 
garnishment procedures. This number is an extremely small percentage of 
the almost 24 million small businesses in the United States, and 
consequently the economic impact of compliance with AWG will be 
minimal.
    Further, even though a limited number of small entities may need to 
comply with these provisions, SBA does not believe that the 
requirements will have a significant economic impact on these entities. 
Although a delinquent debtor's employer must certify certain 
information about the debtor, including the debtor's employment status 
and earnings, the employer's payroll records already contain this 
information. Therefore, an employer will not expend significant time or 
expense completing the certification form. Even if an employer received 
withholding orders on several employees during the year, the cost to 
the employer to complete the certifications would not be significant. 
Employers need not vary normal pay cycles to comply with withholding 
orders issued under this rule.
    Although the new procedures will provide for a hearing if 
specifically requested by the debtor, employers are not required to 
participate in the hearing. In addition, SBA certified in

[[Page 17587]]

the proposed rule that the rule would not have a significant economic 
impact on a substantial number of small entities. SBA did not receive 
any comments from small entities that would indicate that the rule was 
costly or that the certification was incorrect.
    Treasury published regulations for AWG in 1998 and employers have 
been subject to collections through AWG since then. The U.S. Department 
of Education has been using administrative wage garnishment under the 
Higher Education Act for over a decade. Consequently, employers have 
been complying with administrative wage garnishments for student loans 
for many years. Treasury reports that it has not received any 
complaints that the garnishment procedure is overly taxing or costly 
for entities affected. Accordingly, SBA concludes that this rule will 
not have a significant economic impact.

List of Subjects

13 CFR Part 134

    Administrative practice and procedure, Claims, Equal access to 
justice, Lawyers, Organization and functions (government agencies).

13 CFR Part 140

    Claims, Debts, Garnishment, Government employees, Income taxes, 
Wages.


0
For the reasons stated in the preamble and under the authority 
contained in 5(b)(6) of the Small Business Act, 15 U.S.C. 634(b)(6), 
SBA amends 13 CFR parts 134 and 140 as follows:

PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

0
1. The authority citation for part 134 continues to read as follows:

    Authority: 5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 637(a), 
648(l), 656(i), and 687(c); E.O. 12549, 51 FR 6370.


0
2. Amend Sec.  134.102 by revising paragraph (i) to read as follows:


Sec.  134.102  Jurisdiction of OHA.

* * * * *
    (i) Collection of debts owed to SBA and the United States under the 
Debt Collection Act of 1982, the Debt Collection Improvement Act of 
1996, and part 140 of this chapter;
* * * * *

0
3. Amend Sec.  134.202 by revising paragraph (a)(2) to read as follows:


Sec.  134.202  Commencement of cases.

    (a) * * *
    (2) In proceedings for debt collection under part 140 of this 
chapter: no later than 15 days after receipt of a notice of 
indebtedness and intention to collect such debt by salary or 
administrative offset; in accordance with the time frames specified in 
Sec.  140.11 of this chapter with respect to administrative wage 
garnishment;
* * * * *

0
4. Amend Sec.  134.222 by adding paragraph (a)(3) to read as follows:


Sec.  134.222  Oral hearing.

* * * * *
    (a) * * *
    (3) The Judge determines that an oral hearing is necessary in 
administrative wage garnishment proceedings conducted pursuant to Sec.  
140.11 of this chapter.
* * * * *

0
5. Amend Sec.  134.226 by revising paragraph (b) to read as follows:


Sec.  134.226  The decision.

* * * * *
    (b) Time Limits. Decisions pertaining to the collection of debts 
owed to SBA and the United States under the Debt Collection Act of 
1982, the Debt Collection Improvement Act of 1996, and Part 140 of this 
chapter must be made within 60 days after a petition is filed. Time 
limits for decisions in other types of cases, if any, are indicated 
either in the applicable program regulations or in other subparts of 
this part 134.
* * * * *

0
6. Amend Sec.  134.227 by revising paragraph (b)(1) to read as follows:


Sec.  134.227  Finality of decisions.

* * * * *
    (b) * * *
    (1) Collection of debts owed to SBA and the United States under the 
Debt Collection Act of 1982, Debt Collection Improvement Act of 1996, 
and part 140 of this chapter;
* * * * *

PART 140--DEBT COLLECTION

0
7. Revise the heading of part 140 to read as set forth above.

0
8. Revise the authority citation of part 140 to read as follows:

    Authority: 5 U.S.C. 5514; 15 U.S.C. 634(b)(6); 31 U.S.C. 3711, 
3716, 3720, 3720A and 3720D.


0
9. Add subpart A, consisting of existing Sec.  140.1 to read as 
follows:

Subpart A--Overview

0
10. Revise Sec.  140.1 to read:


Sec.  140.1  What does this part cover?

    This part establishes procedures which SBA may use in the 
collection, through offset or administrative wage garnishment, of 
delinquent debts owed to the United States. SBA's failure to comply 
with any provision of the regulations in this part is not available to 
any debtor as a defense against collection of the debt through judicial 
process or otherwise.

0
11. Add subpart B, consisting of existing Sec. Sec.  140.2 and 140.3, 
to read as follows:

Subpart B--Offset

0
12. Add subpart C consisting of a new Sec.  140.11 to read as follows:

Subpart C--Administrative Wage Garnishment


Sec.  140.11  What type of debt is subject to administrative wage 
garnishment, and how can SBA administratively garnish your pay?

    (a) General. SBA may order your employer to pay SBA a portion of 
your disposable pay to satisfy delinquent non-tax debt you owe to the 
United States. This process is called ``administrative wage 
garnishment'' and is authorized by 31 U.S.C. 3720D.
    (b) Scope. (1) This section provides procedures for SBA to collect 
delinquent non-tax debts through administrative wage garnishment.
    (2) This section applies despite any State law.
    (3) Nothing in this section prevents SBA from settling for less 
than the full amount of a debt. See, for example, the Federal Claims 
Collection Standards (FCCS), 31 CFR parts 900-904.
    (4) SBA's receipt of payments under this section does not prevent 
SBA from pursuing other debt collection remedies. SBA may pursue debt 
collection remedies separately or together with administrative wage 
garnishment.
    (5) This section does not apply to the collection of delinquent 
non-tax debt owed to the United States from the wages of Federal 
employees. Federal pay is subject to the Federal salary offset 
procedures set forth in 5 U.S.C. 5514 and other laws, including subpart 
B of this part.
    (6) Nothing in this section requires SBA to duplicate notices or 
administrative proceedings required by contract, other laws, or 
regulations.
    (c) Definitions. In this section the following definitions apply:
    Agency means the SBA.
    Business day means Monday through Friday excluding Federal legal 
holidays.
    Day means calendar day. For purposes of computation, the last day 
of the period will be included unless it is a Saturday, a Sunday, or a 
Federal legal holiday.
    Debt or claim means any amount of money, funds or property that has 
been

[[Page 17588]]

determined by an appropriate official of the Federal Government to be 
owed to the United States by an individual, including debt administered 
by a third party as an agent for the Federal Government. Debt also 
includes accrued interest, administrative costs incurred in collection 
efforts by SBA or a lender participating in an SBA loan program, and 
penalties imposed pursuant to law or contract.
    Debtor or you means an individual who owes a delinquent non-tax 
debt to the United States.
    Delinquent non-tax debt means any debt not related to an obligation 
under the Internal Revenue Code of 1986, as amended, that has not been 
paid by the date specified in SBA's initial written demand for payment, 
or applicable agreement, unless other satisfactory payment arrangements 
have been made. For purposes of this section, the terms ``debt'' and 
``claim'' are synonymous and refer to delinquent non-tax debt.
    Disposable pay means that part of the debtor's compensation 
(including, but not limited to, salary, bonuses, commissions, and 
vacation pay) from an employer remaining after the deduction of health 
insurance premiums and any amounts required by law to be withheld. For 
purposes of this section, ``amounts required by law to be withheld'' 
include amounts for deductions such as social security taxes and 
withholding taxes, but do not include any amount withheld pursuant to a 
court order.
    Employer means a person or entity that employs the services of 
others and that pays their wages or salaries. The term employer 
includes, but is not limited to, State and local Governments, but does 
not include an agency of the Federal Government.
    Evidence of service means information retained by the SBA 
indicating the nature of the document to which it pertains, the date of 
mailing of the document, and to whom the document is being sent. 
Evidence of service may be retained electronically so long as the 
manner of retention is sufficient for evidentiary purposes.
    Garnishment means the process of withholding amounts from an 
employee's disposable pay and the paying of those amounts to a creditor 
in satisfaction of a withholding order.
    Withholding order means any order for withholding or garnishment of 
pay issued by an agency, or judicial or administrative body. For 
purposes of this section, the terms ``wage garnishment order'' and 
``garnishment order'' have the same meaning as ``withholding order.''
    (d) When may the SBA initiate administrative wage garnishment 
proceedings? Whenever SBA determines you owe a delinquent non-tax debt, 
SBA may initiate administrative wage garnishment proceedings to 
withhold a portion of your wages to satisfy the debt.
    (e) What notice must the SBA give you before beginning an 
administrative wage garnishment? (1) SBA will send a written notice by 
first-class mail to your last known address at least 30 days before 
initiating garnishment. This pre-garnishment notice will inform you of:
    (i) The type and amount of the debt;
    (ii) SBA's intent to collect the debt by making deductions from 
your pay until the debt is paid in full;
    (iii) An explanation of your rights, including those listed below, 
and the timeframe within which you may exercise your rights.
    (2) You have the right to:
    (i) Inspect and copy non-privileged SBA records related to the 
debt;
    (ii) Enter into a written repayment agreement with SBA under terms 
agreeable to SBA; and
    (iii) Have a hearing at SBA's Office of Hearings and Appeals (OHA) 
in accordance with paragraph (f) of this section concerning the 
existence or the amount of the debt or the terms of the proposed 
repayment schedule under the garnishment order. However, you are not 
entitled to a hearing concerning the terms of the proposed repayment 
schedule if those terms have been established by written agreement 
under paragraph (e)(2)(ii) of this section.
    (3) SBA will retain evidence of service showing when SBA mailed the 
pre-garnishment notice.
    (f) What type of hearing must SBA give me? (1) Procedural rules. 
Unless they expressly conflict with this section, the rules of 
procedure governing cases before OHA apply to administrative wage 
garnishment hearings.
    (2) Request for hearing. You will be provided with a hearing, if 
you request one in writing disputing either the existence or amount of 
the debt or the terms of the repayment schedule (except a repayment 
schedule you and SBA agreed to in writing).
    (3) Type of hearing or review. (i) You will have the right to an 
oral hearing only if the Judge determines that the issues in dispute 
cannot be resolved solely by review of the documentary evidence, for 
example, when the Judge finds that the validity of the claim turns on 
the issue of credibility or veracity.
    (ii) If the Judge determines an oral hearing is needed, he or she 
will set the time and location. You may choose whether the oral hearing 
is conducted in person or by telephone. You must pay all travel 
expenses for yourself and your witnesses to attend an in-person 
hearing. SBA will pay telephone charges for telephone hearings.
    (iii) If no oral hearing is needed, the Judge will accord you a 
``paper hearing,'' that is, the Judge will decide the issues in dispute 
based upon a review of the written record. The Judge will set a 
reasonable deadline for the submission of evidence.
    (4) Effect of timely request for hearing. Subject to paragraph 
(f)(13) of this section (failure to appear), if the Judge determines 
your written request for a hearing was received at OHA by the 15th 
business day after SBA mailed the pre-garnishment notice, SBA will not 
issue a garnishment order before the Judge renders a decision.
    (5) Untimely request for hearing. If the Judge determines your 
written request for a hearing was not received at OHA by the 15th 
business day after SBA mailed the pre-garnishment notice, SBA will 
provide a hearing to you. However, SBA may proceed with the issuance of 
a garnishment order and acceptance of payments unless the Judge 
determines that the delay in filing the request was caused by factors 
over which you had no control, or that information received justifies a 
delay or cancellation of the garnishment order.
    (6) Hearing official. A hearing official may be any Judge, as 
designated by the Assistant Administrator for Hearings and Appeals.
    (7) Procedure. After you request a hearing, the Judge will decide 
what type of hearing to hold and will notify you and the SBA of:
    (i) The date and time of a telephonic hearing;
    (ii) The date, time, and location of an in-person oral hearing; or
    (iii) The deadline for the submission of evidence for a written 
hearing.
    (8) Burden of proof. (i) The SBA will have the burden of going 
forward to prove the existence or amount of the debt.
    (ii) Thereafter, if you dispute the existence or amount of the 
debt, you must establish by a preponderance of the evidence that no 
debt exists or that the amount of the debt is incorrect. In addition, 
you may present evidence that the terms of the repayment schedule are 
unlawful, would cause you a financial hardship, or that collection of 
the debt may not be pursued due to operation of law.
    (9) Record. The Judge must maintain a summary record of any hearing 
provided under this section. A hearing is not required to be a formal 
evidentiary-type hearing; however, witnesses who testify in oral 
hearings will do so under oath or affirmation.

[[Page 17589]]

    (10) Date of decision. The Judge must render a written decision 
within 60 days of the date on which your request for a hearing was 
received by OHA. If the Judge's decision is not rendered within that 
time, and SBA had previously issued a garnishment order, SBA must 
suspend garnishment beginning on the 61st day. This suspension must 
continue until the Judge renders a decision.
    (11) Content of decision. The written decision shall include:
    (i) A summary of the facts presented;
    (ii) The Judge's findings, analysis and conclusions; and
    (iii) The terms of any repayment schedule, if applicable.
    (12) Final agency action. The Judge's decision will be the final 
agency action for the purposes of judicial review under the 
Administrative Procedure Act (5 U.S.C. 701 et seq.).
    (13) Failure to appear. In the absence of good cause shown, a 
debtor who fails to appear at an oral hearing will be deemed as not 
having timely filed a request for a hearing.
    (g) Garnishment order. (1) Unless SBA receives an adverse decision 
from the Judge or information it believes justifies delaying or 
canceling garnishment, SBA will send the garnishment order to your 
employer by first-class mail, within the following time frames:
    (i) If you did not make a timely request for a pre-garnishment 
hearing, within 30 days following the 15th business day after SBA 
mailed the pre-garnishment notice;
    (ii) If you did make a timely request for a pre-garnishment 
hearing, within 30 days after the Judge renders a final decision to 
proceed with garnishment; or,
    (iii) As soon as reasonably possible thereafter.
    (2) The garnishment order will be in a form prescribed by the 
Secretary of the Treasury, and will contain the signature of, or the 
image of the signature of, SBA's Administrator or his/her delegatee. 
The garnishment order will contain only the information necessary for 
compliance, including your name, address, and social security number, 
the instructions for garnishing your pay, and the address for sending 
payments.
    (3) SBA will retain evidence of service showing when it mailed the 
garnishment order.
    (h) Certification by employer. Along with the garnishment order, 
SBA will send your employer a certification, in a form determined by 
the Secretary of the Treasury. Your employer must complete and return 
this certification to us within the time stated in the certification 
instructions. The certification will include information about your 
employment status and the amount of your disposable pay available for 
garnishment.
    (i) Amounts withheld. (1) Your employer must deduct the garnishment 
amount from your disposable pay during each pay period.
    (2) Except as shown in paragraphs (i)(3) and (i)(4) of this 
section, the amount of garnishment will be the lesser of:
    (i) The amount stated on the garnishment order, not to exceed 15% 
of your disposable pay; or,
    (ii) The amount in 15 U.S.C. 1673(a)(2) (Restriction on 
Garnishment). This is the amount by which your disposable pay exceeds 
an amount equivalent to thirty times the minimum wage. See 29 CFR 
870.10.
    (3) If your pay is subject to other garnishment orders, the 
following applies:
    (i) Unless otherwise provided by Federal law, SBA garnishment 
orders must be paid in the amounts in paragraph (i)(2) of this section, 
and will have priority over other garnishment orders issued later. 
However, withholding orders for family support have priority over SBA 
garnishment orders.
    (ii) If amounts are being withheld from your pay because of a 
garnishment order issued before SBA's garnishment order, or because of 
a garnishment order for family support issued at any time, the earlier 
or family support order will have priority, and the amount withheld 
because of the SBA garnishment order will be the lesser of:
    (A) The amount calculated under paragraph (i)(2) of this section, 
or
    (B) An amount equal to 25% of your disposable pay minus the amount 
withheld under the garnishment order(s) with priority.
    (iii) If you owe more than one delinquent non-tax debt, SBA may 
issue multiple garnishment orders if the amount withheld from your pay 
does not exceed the amount in paragraph (i)(2) of this section.
    (4) You may give written consent for SBA to garnish from your pay 
an amount greater than that in paragraphs (i)(2) and (i)(3) of this 
section.
    (5) Your employer must promptly pay to SBA all amounts withheld 
under a withholding order.
    (6) Your employer is not required to change normal pay cycles to 
comply with the garnishment order.
    (7) No assignment or allotment of your earnings that you have 
requested may interfere with or prohibit execution of SBA's garnishment 
order. The one exception to this rule is that you may assign or allot 
earnings because of a family support judgment or order.
    (8) The garnishment order will state a reasonable time period 
within which your employer must begin wage garnishment. Your employer 
must withhold the designated amount from your wages each pay period 
until SBA notifies your employer to stop wage garnishment.
    (j ) Exclusions from garnishment. SBA may not garnish your wages if 
SBA knows you have been involuntarily unemployed at any time during the 
last 12 months. You are responsible for informing SBA of the facts and 
circumstances of your unemployment.
    (k) Financial hardship. (1) If your wages are subject to a 
garnishment order issued by SBA, you may, at any time, request a review 
of the amount being withheld from your wages based on a material change 
in circumstances that causes you financial hardship, such as 
disability, divorce, or catastrophic illness. You may send your request 
to the Director of SBA's loan servicing center in Birmingham, Alabama.
    (2) If you request review under paragraph (k)(1) of this section, 
you must specifically state why the current amount of garnishment 
causes you financial hardship and you must send documentation 
supporting your claim.
    (3) If SBA finds financial hardship, SBA will decide how much and 
how long to reduce the amount garnished from your pay. SBA will notify 
your employer of any reductions.
    (l) Ending garnishment. (1) After SBA has recovered the amount you 
owe, including interest, penalties, and administrative costs consistent 
with the FCCS, SBA will send a notice to your employer to stop wage 
garnishment with a copy to you.
    (2) SBA will review your account to ensure that garnishment has 
stopped if you have paid your debt in full.
    (m) Prohibited actions. No employer may fire, refuse to employ, or 
take disciplinary action against you because of a withholding order 
issued by SBA.
    (n) Refunds. (1) SBA must promptly refund any amount collected by 
administrative wage garnishment if either--
    (i) A Judge, after a hearing held under paragraph (f) of this 
section, determines you do not owe a debt to the United States; or
    (ii) SBA determines that your employer continued submitting to SBA 
withheld wages after you had paid your debt in full.
    (2) Refunds of amounts collected will not earn interest unless 
required by federal law or contract.

[[Page 17590]]

    (o) Right of action. SBA may sue your employer for any amount that 
the employer fails to withhold from wages owed and payable to you in 
accordance with paragraphs (g) and (i) of this section. However, SBA 
may not file such a suit until the collection action involving you has 
ended unless earlier filing is necessary to avoid expiration of any 
applicable statute of limitations period. For purposes of this section, 
the collection action involving you ends when SBA stops the collection 
action in accordance with the FCCS or other applicable standards. In 
any event, the collection action involving you will be deemed ended if 
SBA has not received any payments from you to satisfy your debt, in 
whole or in part, for a period of one (1) year.

Hector V. Barreto,
Administrator.
[FR Doc. 05-6898 Filed 4-6-05; 8:45 am]
BILLING CODE 8025-01-P