[Federal Register Volume 73, Number 1 (Wednesday, January 2, 2008)]
[Rules and Regulations]
[Pages 1-17]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-25388]



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  Federal Register / Vol. 73, No. 1 / Wednesday, January 2, 2008 / 
Rules and Regulations  

[[Page 1]]



DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 3


Debt Management

AGENCY: Office of the Secretary, USDA.

ACTION: Final Rule.

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

SUMMARY: The United States Department of Agriculture (USDA) amends its 
regulations that govern the management of debts owed to it by program 
participants and other debtors to implement the Debt Collection 
Improvement Act of 1996 (DCIA) and the revised Federal Claims 
Collection Standards. The changes will affect USDA requirements for 
collection and settlement of debts, including administrative offset of 
eligible payments, and referral to the Department of the Treasury 
(Treasury) for collection.

DATES: This rule is effective February 1, 2008.

FOR FURTHER INFORMATION CONTACT: Dale Theurer, Credit, Travel, and 
Grants Policy Division, Office of the Chief Financial Officer, 
Department of Agriculture, Mail Stop 9010, Room 3417 South, 1400 
Independence Avenue, SW., Washington, DC 20250, (202) 720-1167. Persons 
with disabilities who require alternative means for communication 
(Braille, large print, audio tape, etc.) should contact the USDA Target 
Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule is not a significant regulatory action as defined in 
Executive Order 12866.

Regulatory Flexibility Act

    USDA certifies that this rule will not have a significant impact on 
a substantial number of small entities as defined in the Regulatory 
Flexibility Act, Public Law 96-354, as amended (5 U.S.C. 601 et seq.). 
No comments from small entities were received on the proposed rule. 
This regulation will not impose significant costs on small entities 
because this regulation only impacts small entities who receive 
payments from USDA agencies and who are delinquent on debts owed to 
USDA agencies.

Executive Order 12988

    The rule has been reviewed in accordance with Executive Order 
12988. This rule preempts State laws that are inconsistent with its 
provisions. Before a judicial action may be brought concerning this 
rule or action taken under this rule, all administrative remedies must 
be exhausted.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments or the 
private sector. This rule contains no Federal mandates, as defined by 
Title II of the UMRA, for State, local, and tribal governments or the 
private sector. Therefore, this rule is not subject to the requirements 
of sections 202 and 205 of UMRA.

Paperwork Reduction Act

    USDA has determined that the provisions of the Paperwork Reduction 
Act of 1995, as amended, 44 U.S.C. 3501, et seq., do not apply to any 
collections of information contained in this rule because any such 
collections of information are made during the conduct of 
administrative action taken by an agency against specific individuals 
or entities. 5 CFR 1320.4(a)(2).

Background and Purpose

    On November 7, 2001, USDA published an advanced notice of proposed 
rulemaking (66 FR 56247) for revision of the USDA debt management 
regulations, 7 CFR part 3, to reflect promulgation of the revised 
Federal Claims Collection Standards (FCCS) and to incorporate other 
USDA specific changes with respect to collection of debt by 
administrative offset. No comments were received on this notice. On May 
30, 2003, USDA published a proposed rule to revise 7 CFR part 3.
    USDA received comments from four groups in response to the proposed 
rule: two from USDA agencies, one from a State, and one from an 
organization representing grassroots farm and rural advocacy 
organizations. Changes made to the proposed rule reflected in the final 
rule and responses to the comments are as follows.

Section 3.1

    A new paragraph (c) is added to section 3.1 to cover two types of 
debts the collection of which are not subject to these regulations. The 
first is the collection of debts owed by USDA employees for delinquent 
or improper charges under their government travel card accounts. 
Collection of these debts is provided for by separate statutory 
procedures. The Travel and Transportation Reform Act provides 
guidelines for deduction of disposable pay from a USDA employee to 
satisfy a debt owed by the employee to a private contractor, in this 
instance the travel card contractor. However, if the employee disputes 
the debt, the procedures for commercial garnishment of Federal 
employees specified in 5 U.S.C. 5520a, as implemented at 5 CFR part 
582, must be followed.
    The second type is collection of debts under the Food Stamp 
Program. One commenter, a state Department of Health and Welfare, noted 
the difficulties in applying these debt collection procedures to debts 
owed by individuals under the Food Stamp Program for overpayments. 
While debts owed under the Food Stamp Program are subject to collection 
under the DCIA, additional provisions of the Food Stamp Act govern the 
collection of these debts. The collection of Food Stamp Program debts 
owed by individual recipients is not covered by this rule and instead 
will be covered by the regulations at 7 CFR 273.18.
    However, the commenter cast its question in terms of whether the 
proposed regulations would apply to State agencies, while the substance 
of its comments noted the problems of applying these regulations to 
collection of debts owed by individual Food Stamp Program recipients. 
While the final rule is revised to reflect that it does not apply to 
individual Food Stamp Program recipients, it will continue to apply to 
States for debts otherwise owed

[[Page 2]]

by the States as States under the Food Stamp Program, as States are 
included in the definition of ``debtor'' in section 3.3(h). These 
procedures, as applicable to States, will be complementary to any 
specific procedures for the collection of State debts (as well as those 
of Food Stamp retailers) provided in the Food Stamp Act, as permitted 
by Sec.  3.1(a)(2) and 3.1(b)(2).
    One commenter objected to the removal from 7 CFR part 3 of the debt 
collection procedures under the Act of December 20, 1944 (12 U.S.C. 
1150, et seq.) (1944 Act). As indicated in the preamble to the proposed 
rule, it is unlikely that collection under that Act will ever be 
initiated.
    The 1944 Act authorizes the Secretary to compromise certain debts 
of $1,000 or less if certain factors are not met, including that ``the 
debtor is unable to pay said indebtedness in full and has no reasonable 
prospect of being able to do so'' (12 U.S.C. 1150(2)). This criterion 
is similar to that in the FCCS provisions that allow an agency to 
compromise a claim of $100,000 or less: ``[t]he debtor is unable to pay 
the full amount in a reasonable time'' (31 CFR 902.2(a)(1)). 
Accordingly, USDA has determined that the minimum requirement of the 
1944 Act will be met by application of the FCCS standards in any event 
and thus redundant regulations for the small debts covered by the 1944 
Act are not required.
    The 1944 Act further authorizes the Secretary to cancel debts of 
less than ten dollars in certain limited circumstances. See 12 U.S.C. 
1150. Again, USDA has determined that application of the FCCS standards 
for compromise of debt at 31 CFR 902.2 would cover the same 
circumstances as set forth in the statute.
    In any event, as noted in the preamble to the proposed rule, the 
authority to take action under the 1944 Act is reserved by the language 
of Sec.  3.1(a)(2).

Section 3.2

    One commenter suggested that the terms ``commercial debt'' and 
``consumer debt'' should be defined with respect to reporting to 
credit-reporting bureaus. The commenter also suggested that commercial 
debt reporting also should be subject to due process requirements, 
which is addressed below. With respect to the definitions, USDA has 
relied upon the Financial Management Service, Department of Treasury 
``Guide to the Federal Credit Bureau Program'' to define ``commercial 
debt'' as a debt arising from a business activity and a ``consumer 
debt'' as a debt arising from a personal activity. For example, a loan 
to a farmer to obtain additional land or equipment is considered a 
commercial loan whereas a loan to the same farmer to purchase a 
personal residence would be a consumer loan.
    Two commenters urged USDA to use consistent deadlines and 
definition of ``day'' for purposes of calculating deadlines. The issue 
of consistent deadlines is addressed below, however ``day'' has been 
defined as a calendar day unless otherwise specified.
    One commenter noted that the Farm Service Agency (FSA) has for many 
years defined a debt as ``delinquent'' as payments that have not been 
made 30 days after the due date. The commenter also noted that the 
preamble to the FCCS specifically provided that agencies may further 
define ``delinquency'' depending on specific agency program 
requirements and particular types of debt. Accordingly, the definition 
of ``delinquent'' has been amended to provide USDA agencies the 
flexibility to define ``delinquency'' as required by statute or 
regulation by adding the phrase ``or as otherwise defined by program 
specific statutes or regulations'' to the definition.
    One commenter noted that a definition of an ``offset'' itself had 
been omitted. Accordingly, a definition of ``offset'' has been added, 
which necessitated the addition of definitions for the terms ``payee'' 
and ``person,'' and a revision of the definition of the term 
``debtor.'' These definitions are drawn from the Treasury offset 
regulation definitions at 31 CFR 285.5.
    One commenter suggested that a definition for ``cross-servicing'' 
be added to the regulation. ``Cross-servicing'' refers to the mandatory 
requirement in the DCIA to transfer to Treasury all debts that have 
been delinquent for 180 days or more so that Treasury can take action 
to collect the debt. It is a separate and distinct process from 
transfer to Treasury for collection pursuant to centralized 
administrative offset under Treasury Offset Program (TOP), and there 
are separate statutory requirements in the DCIA for transfer of 
delinquent debts to Treasury generally and transfer of debts for 
administrative offset. Treasury regulations cover the two mandatory 
transfer requirements in separate provisions. See 31 CFR 285.12 (cross-
servicing) and 31 CFR 285.5 (centralized offset through TOP).
    USDA understands that existence of two separate Treasury transfer 
mechanisms is confusing but it is required by law. Since ``cross-
servicing'' is a description of a process, USDA declines to add a 
definition that would be nothing more than restating the cross-
servicing process as already set out in Sec.  3.31 of the proposed 
rule.

Section 3.11

    Paragraph (b) has been reformatted to clarify when OGC consultation 
should be sought in determining whether to remove an item from a demand 
letter.

Section 3.31

    Paragraph (a) is revised to delete the words ``or more'' after 
``180 days'' because the statutory requirement is that debts be 
transferred after 180 days.

Section 3.41

    Paragraph (b)(3) is revised to clarify that the authority for an 
agency to offset payments prior to notice and an opportunity to review 
applies only in the cases of non-centralized administrative offsets.
    Paragraph (b)(4) provided that only one chance would be given for 
notice and review opportunities ``with respect to a particular debt.'' 
One commenter suggested that this be revised to state ``with respect to 
a particular delinquency'' so that if a borrower became delinquent on a 
debt once, received the notice, and became current on payments in 
response, and later then became delinquent again, the borrower would 
receive notice and opportunity for review again for the second 
delinquency. The language ``with respect to a particular debt'' comes 
directly from the FCCS; therefore, USDA declines to make the 
recommended change.
    ``Debt'' as defined in these regulations is not synonymous with 
``loan.'' This comment, however, does suggest the need to clarify the 
USDA position with respect to due process procedures for delinquencies 
on loans paid on an installment basis, which is done with the addition 
of a new language in paragraph (b)(4). With respect to loans that are 
repaid on an installment basis, the borrower may go in and out of being 
current or delinquent on the loan many times over the life of the loan. 
Based on its consultation with the Financial Management Service of the 
Department of the Treasury regarding such installment loans, USDA takes 
the position that, at a minimum, only one opportunity for review need 
be provided for the first delinquent installment payment. For credit 
reporting, this means that the first notice may provide that the 
borrower will be reported as delinquent and provide due process review 
rights, but once the account is set up at the credit reporting agency, 
then USDA in the future simply may update the status of the account as 
to its current or delinquent status without further notice to the 
borrower. For referral to TOP, the

[[Page 3]]

first notice may advise the borrower of referral of the delinquency, 
and all future delinquencies to TOP, with an opportunity for review but 
thereafter the borrower may be notified only that a delinquency has 
been referred to TOP without further opportunity for review. Any 
interest accrued or any installments coming due after the offset is 
initiated also would not require a new notice and opportunity to 
review. Program specific regulations may provide for more opportunities 
for due process review.

Section 3.44

    Paragraph (d) generally is amended to reflect, in cases of 
centralized administrative offset, the additional warning notices 
required for offset of debts against recurring payments as required by 
31 CFR 285.5(g)(1) and (2) and the priorities for collecting multiple 
debts owed by a payee, as required by 31 CFR 285.5(f)(3). Since these 
changes incorporate already applicable requirements in the Treasury 
regulations, no further comment is required.
    Finally, there were a number of comments of a general nature about 
the proposed rule for which general modifications were made or for 
which the agency declined to modify the rule.

Words of Authority

    One commenter noted that the proposed rule in many instances used 
the term ``should'' which was ambiguous as to its binding effect in 
contrast to the mandatory terms ``shall'' and ``must'' and the 
permissive term ``may.'' The final rule is modified accordingly to 
convert ``should'' into either mandatory or permissive terms, except 
where use of the term ``should'' is appropriate as encouraging agency 
action but not requiring it.

Consistent Deadlines

    As noted above, the term ``day'' has been defined to be a calendar 
day and references to ``working'' days have been removed. The reference 
to ``working'' days was incorporated from the prior 7 CFR part 3, but 
there is no statutory or regulatory requirement for the term, therefore 
USDA has opted for consistent use of calendar days.
    Two commenters noted that in some cases, deadlines were calculated 
from the date of a notice or request, and in others, from date of 
receipt of a notice or request. One commenter in particular questioned 
how USDA would determine the date of receipt. Accordingly, all 
deadlines have been changed to reflect calculation from the date of the 
notice or request except where the regulations of other agencies 
require calculation from the date of receipt of a notice or request. 
This is consistent with the position taken by the Departments of 
Justice and Treasury which concluded in promulgating the final FCCS 
that calculating the date from when the notice was sent met statutory 
and constitutional requirements.
    The same two commenters also noted that there were 10, 20, 30, and 
60 day deadlines used throughout the proposed rule which was confusing, 
and suggested that a consistent deadline should be used for simplicity.
    A particular objection was raised to the difference between the 30-
day deadline to seek review for noncentralized offset and the 60-day 
deadline set for centralized offset through referral to the TOP. This 
difference is necessitated by the different statutory and regulatory 
requirements that apply to these offsets. Any debt referred to TOP for 
administrative offset may be collected through a variety of tools, 
including offset of tax refunds. The tax refund statute requires that 
60 days be allowed for a debtor to seek review of a tax refund offset. 
See 31 U.S.C. 3720A. On the other hand, the FCCS and the DCIA only 
require that agencies provide an opportunity for a debtor to seek 
administrative review, an opportunity to review records related to the 
debt, and an opportunity to enter into a written repayment agreement 
prior to centralized offset, without specifying any specific time 
period for such. See 31 CFR 901.3(b)(4)(ii)(B). Further, for 
noncentralized offset, the offset may even be initiated in certain 
circumstances prior to the review. See 31 CFR 901.3(b)(4)(iii)(C).
    Without a mandatory prescribed time period for these opportunities, 
USDA simply incorporated the existing timelines from the current 7 CFR 
part 3 for these procedures. However, in light of the comment, USDA has 
changed the period for seeking inspection of records or proposing a 
repayment plan to 30 days from the date of the Notice of Intent to 
Collect by Administrative Offset to be consistent with the 30-day 
deadline for seeking administrative review of the proposed offset. 
However, USDA has retained the 60-day deadline for centralized offset 
and 30-day deadline for noncentralized offset. USDA does not see the 
need to extend the deadline for the internal offset of payments to its 
debtors to 60 days. The longer time period likely only would result in 
more payments being offset prior to the due process review in 
accordance with 31 CFR 901.3(b)(4)(iii)(C).
    One commenter also noted that the proposed regulation presents a 
debtor with the dilemma of either seeking administrative review or 
filing a repayment plan, or doing both simultaneously. USDA has revised 
the final rule to allow a debtor 15 days to file a proposed repayment 
plan in the event of a decision adverse to a debtor or employee under 
subpart F or Sec.  3.78.
    Finally, USDA has retained the timelines for various actions in 
administrative hearings conducted under Sec.  3.62. Those deadlines 
come from the existing provisions of part 3, have not proven 
problematic in the past, and preserve flexibility for the hearing 
official in conducting these information proceedings.

Statute of Limitations

    One commenter requested that USDA clarify the application of the 
statute of limitations to collection by administrative offset by 
eliminating the qualifying language in Sec.  3.40(e) and the reference 
to the Office of Personnel Management ``flagging'' civil service 
retirement and disability accounts prior to time those benefits begin. 
USDA declines to modify this language which is taken directly from the 
FCCS.

Review of Reporting of Commercial Debts

    One commenter suggested that if agencies are going to report 
commercial debts to credit reporting agencies as recommended in Sec.  
3.12(e), then the pre-reporting requirements applicable to reporting of 
consumer debts as set forth in Sec.  3.12 also should apply to 
commercial debt. These protections for consumer debt reporting are 
required by statute. USDA declines to apply those protections to 
commercial debts in the absence of any statute or regulation requiring 
Federal agencies to do so.

Loan Servicing Timetables

    With respect to farm loan programs, one commenter contended that 
the primary purpose of the Farm Loan Program to serve as a lender of 
last resort and keep family farmers on the land was inconsistent with 
the increased general government interest in debt collection 
activities, and that the debt collection activities of USDA with 
respect to the Farm Loan Program should be secondary to that primary 
purpose. The commenter suggested that this did not require according 
complete precedence to loan making and loan servicing, but rather only 
coordination of debt collection with loan making and servicing 
activities. To that extent, the commenter suggested that the provisions 
of the proposed rule present

[[Page 4]]

certain inefficiencies in its requirements for referral of debts to 
Treasury and reporting of delinquent debts (Sec. Sec.  3.11(b)(7) and 
3.31(c)) in light of the requirement for FSA issuance of a ``Notice of 
Availability of Loan Servicing Programs'' when a borrower is 90 days 
past due on scheduled loan payments or FSA finds the borrower in non-
monetary default, to which the borrower has 60 days to respond. The 
commenter noted similar inefficiencies with respect to the reporting to 
credit reporting agencies (where applicable) (Sec.  3.12(a)(1)) and the 
charging of a 6 percent penalty on delinquent debts. Given that 
successful resolution of an application for loan servicing could moot 
these referrals, reports, and penalties, the commenter suggests that 
these provisions of the proposed rule be amended to state that 
implementation of these provisions will occur only after resolution of 
all pending loan servicing applications.
    USDA declines to revise the rule as suggested. First, this rule is 
intended as a general rule for debt collection for the entire 
Department, not only farm loan programs. As noted in Sec.  3.1(b)(2), 
USDA agencies may issue regulations to supplement these Department 
regulations in order to meet the specific requirements of individual 
programs. Second, Sec.  3.31(b)(1) provides that referrals to Treasury 
for cross-servicing are not applicable to debts in litigation and 
foreclosure, and only legally enforceable debts may be referred to 
Treasury for centralized offset (see Sec.  3.41(c) and 31 CFR 
285.5(d)(1)). Third, FSA farm loan debt is commercial debt, not 
consumer debt, so the commenter's comments on Sec.  3.12(a)(1) are 
inapplicable. Finally, the up to 6 percent penalty can be avoided if 
borrowers take action to bring their accounts current in a timely 
manner, or making necessary financial arrangements to avoid becoming 
delinquent.

Installment Loans

    One commenter suggested, with particular reference to Sec.  3.16, 
that the proposed rule's emphasis on collection of the entirety of a 
debt failed to distinguish between collecting the total amount of the 
debt from the collection of a missed installment payment. The comment 
apparently assumes that use of the word ``debt'' in the proposed 
regulation equates to an entire loan held by a borrower. As the 
definitions make clear, the term ``debt'' only refers to amounts 
determined to be due the United States, e.g., the amount of any given 
installment payment or payments due on a loan or loans at a given time, 
not the entire amount of a loan or loans. Further, the proposed 
regulation also covers debts owed USDA other than debts arising under 
loans, for example, civil penalties owed for program violations, 
disallowed costs under grants, etc. Accordingly, USDA declines to make 
the commenter's suggested change to the proposed rule to specify ``the 
debt or missed installment payment.''

3.16(c)--Additional Security

    One commenter noted that most farm program loan debts already are 
secured, and thus no extra security would be needed to assure the 
government of adequate protection. Accordingly, the commenter 
recommended that the regulation should include guidance with respect to 
the types of cases in which taking additional security would be 
appropriate.
    If a debt already is secured, then additional security would not be 
warranted. However, USDA declines to add further guidance as to when 
security should be obtained for unsecured deferred payments under an 
installment repayment plan in order to afford agencies maximum 
flexibility to require, or not require, such security in appropriate 
cases.

Review of Rejection of Repayment Plan

    One commenter stated that the rejection by the agency of a 
repayment plan offered under Sec.  3.42(b) seems to be a ``denial'' 
constituting an adverse agency decision appealable to the National 
Appeals Division (NAD), and that this should be stated in the final 
rule.
    USDA disagrees with this comment. An offer of a repayment plan is 
an offer to the agency which the agency is not required to accept; it 
is not a request for a decision of the agency under agency program 
statutes and regulations that the agency has denied. Further, Sec.  
3.42(a) requires that agency decisions with respect to inspection or 
copying of records be consistent with 7 CFR part 1, subpart A, 
decisions under which expressly are not appealable to NAD. See 7 CFR 
11.1 (definition of ``participant'').

Exempt Farm Program Payments

    One commenter requested that the Secretary of Agriculture exempt 
all farm disaster payments from both referral to Treasury for cross-
servicing and administrative offset, and that the final rule include a 
provision recognizing the authority of the Secretary of Agriculture to 
exempt other payments from administrative offset.
    The commenter misinterprets the DCIA and fails to understand that 
offset and cross-servicing are two distinct processes. The Secretary of 
Agriculture has no authority to exempt debts from the statutory 
requirements for referral for cross-servicing or administrative offset 
or to exempt certain payments from offset. Only the Secretary of the 
Treasury has the authority to exempt certain payments from offset if 
offset would ``tend to interfere substantially with or defeat the 
purposes of the payment certifying agency's program.'' 7 U.S.C. 
3716(c)(3). The Secretary of the Treasury exempts classes of payments 
for programs upon request by a payment agency only if the standards set 
by Treasury for such exemptions are met. See 31 CFR 285.5(e)(7). This 
trumps the current USDA debt collection regulations that allow USDA to 
make that determination. See 7 CFR 3.23(b)(3) (2005). Similarly, the 
Secretary of the Treasury may exempt any class of debt from referral 
for cross-servicing upon request of an executive agency (31 U.S.C. 
3711(g)(2)(B)) in accordance with the criteria specified in 31 CFR 
285.12(d)(5)).

List of Subjects in 7 CFR Part 3

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

0
For the reasons stated in the preamble, USDA amends 7 CFR part 3 as 
follows:

PART 3--DEBT MANAGEMENT

0
1. The authority citation for 7 CFR part 3 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 31 U.S.C. 3701, 3711, 3716-18, 3720B; 
31 CFR parts 285 and 901-904.


0
2. Subpart E is redesignated as subpart I.


0
3. Subparts A through D are revised, and subparts E through H are 
added, to read as follows:

PART 3--DEBT MANAGEMENT

Subpart A--General
Sec.
3.1 Purpose and scope.
3.2 Authority.
3.3 Definitions.
3.4 Delegations of authority.
Subpart B--Standards for the Administrative Collection and Compromise 
of Claims
3.10 Aggressive agency collection activity.
3.11 Demand for payment.
3.12 Reporting of consumer debts.

[[Page 5]]

3.13 Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets. [Reserved]
3.14 Suspension or revocation of eligibility for loans and loan 
guarantees, licenses, permits, or privileges.
3.15 Liquidation of collateral.
3.16 Collection in installments.
3.17 Interest, penalties, and administrative costs.
3.18 Use and disclosure of mailing addresses.
3.19 Standards for the compromise of claims.
3.20 Standards for suspending or terminating collection activities.
3.21 Referrals of Debts to Justice.
Subpart C--Referral of Debts to Treasury
3.30 General requirements.
3.31 Mandatory referral for cross-servicing.
3.32 Discretionary referral for cross-servicing.
3.33 Required certification.
3.34 Fees.
Subpart D--Administrative Offset
3.40 Scope.
3.41 Procedures for notification of intent to collect by 
administrative offset.
3.42 Debtor rights to inspect or copy records, submit repayment 
proposals, or request administrative review.
3.43 Non-centralized administrative offset.
3.44 Centralized administrative offset.
3.45 USDA payment authorizing agency offset of pro rata share of 
payments due entity in which debtor participates.
3.46 Offset against tax refunds.
3.47 Offset against amounts payable from Civil Service Retirement 
and Disability Fund.
Subpart E--Administrative Wage Garnishment
3.50 Purpose.
3.51 Scope.
3.52 Definitions.
3.53 Procedures.
Subpart F--Administrative Reviews for Administrative Offset, 
Administrative Wage Garnishment, and Disclosure to Credit Reporting 
Agencies
3.60 Applicability.
3.61 Presiding employee.
3.62 Procedures.
Subpart G--Federal Salary Offset
3.70 Scope.
3.71 Definitions.
3.72 Coordinating offset with another Federal agency.
3.73 Determination of indebtedness.
3.74 Notice requirements before offset.
3.75 Request for a hearing.
3.76 Result if employee fails to meet deadlines.
3.77 Hearing.
3.78 Written decision following a hearing.
3.79 Review of USDA records related to the debt.
3.80 Written agreement to repay debts as alternative to salary 
offset.
3.81 Procedures for salary offset: when deductions may begin.
3.82 Procedures for salary offset: types of collection.
3.83 Procedures for salary offset: methods of collection.
3.84 Procedures for salary offset: imposition of interest, 
penalties, and administrative costs.
3.85 Non-waiver of rights.
3.86 Refunds.
3.87 Agency regulations.
Subpart H--Cooperation with the Internal Revenue Service
3.90 Reporting discharged debts to the Internal Revenue Service.
Subpart I--Adjusted Civil Monetary Penalties
3.91 Adjusted civil monetary penalties.

    Authority: 5 U.S.C. 301; 31 U.S.C. 3701, 3711, 3716-18, 3720B; 
31 CFR parts 285 and 901-904.

Subpart A--General


Sec.  3.1  Purpose and scope.

    (a) In general. (1) The regulations in this part prescribe 
standards and procedures for use by USDA agencies in the collection, 
compromise, suspension, or termination of debts owed to the United 
States.
    (2) The regulations in this part apply to all debts of the United 
States subject to collection by USDA agencies, except as otherwise 
specified in this part or by statute.
    (3) The regulations in this part do not preclude the Secretary from 
collection, compromise, suspension, or termination of debts as 
otherwise authorized by law. In such cases the laws and implementing 
regulations that are specifically applicable to claims collection 
activities of a particular agency generally shall take precedence over 
this part.
    (b) Agency specific regulations. (1) The regulations of this part 
shall apply to the Commodity Credit Corporation to the extent specified 
in 7 CFR part 1403.
    (2) USDA agencies may issue regulations to supplement this part in 
order to meet the specific requirements of individual programs.
    (c) Inapplicability. The regulations of this part shall not apply 
to:
    (1) Collection of debts owed government travel card contractors by 
USDA employees;
    (2) Collection of debts owed by individual Food Stamp Program 
recipients for whom debt collection procedures are provided under 7 CFR 
273.18.


Sec.  3.2  Authority.

    The regulations in this part are issued under the Debt Collection 
Act of 1982, as amended by the Debt Collection Improvement Act of 1996 
(DCIA) (31 U.S.C. 3701 et seq.) and the Federal Claims Collection 
Standards issued pursuant to the DCIA by Treasury and Justice (31 CFR 
parts 901-904) that prescribe government-wide standards for 
administrative collection, compromise, suspension, or termination of 
agency collection action, disclosure of debt information to credit 
reporting agencies, referral of claims to private collection 
contractors for resolution, and referral to Justice for litigation to 
collect debts owed the government. The regulations under this part also 
are issued under Treasury regulations implementing DCIA (31 CFR part 
285) and related statutes and regulations governing the offset of 
Federal salaries (5 U.S.C. 5512 and 5514; 5 CFR part 550, subpart K) 
and administrative offset of tax refunds (31 U.S.C. 3720A).


Sec.  3.3  Definitions.

    For the purpose of this part, except as where otherwise 
specifically provided, the term or terms:
    Agency means a subagency, office, or corporation within USDA 
subject to the authority or general supervision of the Secretary.
    Centralized administrative offset means referral of a debt to the 
Treasury Offset Program (TOP) for offset of payments made to a debtor 
by Federal agencies other than USDA.
    Claim and debt are synonymous and interchangeable, and refer to an 
amount of money, funds, or property that has been determined by an 
agency official to be due the United States from any person, 
organization, or entity, except another Federal agency.
    Commercial debt means a debt arising out of a business activity.
    Consumer debt means a debt arising out of a personal activity.
    Contracting officer has the same meaning as in 41 U.S.C. 601.
    Credit reporting agencies (also known as credit bureaus) means 
major consumer credit reporting agencies that have signed agreements 
with agencies to receive and integrate credit information (data) from 
voluntary subscribers (Federal agencies and private sector entities) 
into their respective databases for the purpose of generating credit 
reports for sale to purchasers of credit data.
    Creditor agency means a Federal agency or USDA agency to which a 
debtor owes a debt, including a debt collection center when acting on 
behalf of a creditor agency in matters pertaining to collection of the 
debt.
    Day means calendar day unless otherwise specified.
    Debt collection center means Treasury or other government agency or 
division,

[[Page 6]]

designated by the Secretary of the Treasury with authority to collect 
debt on behalf of creditor agencies in accordance with 31 U.S.C. 
3711(g).
    Debtor means a person who owes a delinquent, nontax debt to the 
United States.
    Delinquent means a debt that has not been paid by the date 
specified in the agency's initial written demand for payment or 
applicable agreement or instrument (including a post-delinquency 
payment agreement), unless other satisfactory payment arrangements have 
been made, or as otherwise defined by program specific statutes or 
regulations.
    Federal agency means any other Department or entity within the 
Executive branch of the government.
    Government or Federal government means the government of the United 
States, unless otherwise specified.
    Internal administrative offset means a non-centralized 
administrative offset between a USDA creditor agency and a USDA payment 
authorizing agency.
    Justice means the United States Department of Justice.
    NAD means the USDA National Appeals Division.
    Non-centralized administrative offset means an agreement between a 
USDA creditor agency and a payment authorizing agency to offset the 
payments made by the payment authorizing agency to satisfy a USDA debt. 
An internal administrative offset is a type of non-centralized 
administrative offset.
    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.
    OGC means the USDA Office of the General Counsel.
    Payee means a person who is due a payment from a payment 
authorizing agency, and includes a person who is entitled to all or 
part of a payment.
    Payment authorizing agency means a Federal agency or USDA agency 
that is authorized to disburse payments to a recipient.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of public or 
private entity other than a Federal agency.
    Recoupment means a special method for adjusting debts arising under 
the same transaction or occurrence, such as obligations arising under 
the same contract.
    Reviewing officer means a person designated by a creditor agency as 
responsible for conducting a hearing or providing documentary review on 
the existence of the debt and the propriety of an administrative 
collection action.
    Secretary means the Secretary of Agriculture, unless otherwise 
specified.
    Treasury means the United States Department of the Treasury.
    USDA means the United States Department of Agriculture.


Sec.  3.4  Delegations of authority.

    The head of an agency is authorized to exercise any or all of the 
functions provided by this part with respect to programs for which the 
head of the agency has delegated responsibility, and may delegate and 
authorize the redelegation of any of the functions vested in the head 
of the agency by this part, except as otherwise provided by this part.

Subpart B--Standards for the Administrative Collection and 
Compromise of Claims


Sec.  3.10  Aggressive agency collection activity.

    An agency shall aggressively collect all debts arising out of 
activities of, or referred or transferred for collection services to, 
that agency. Collection activities shall be undertaken promptly with 
follow-up action taken as necessary.


Sec.  3.11  Demand for payment.

    (a) Demand Letters. Generally, debt collection is initiated with a 
written demand for payment to the debtor unless an applicable agreement 
or instrument (including a post-delinquency payment agreement) provides 
otherwise (such as providing USDA an immediate right to collect upon 
delinquency). Written demand as described in paragraph (b) of this 
section shall be made promptly upon a debtor of the United States in 
terms that inform the debtor of the consequences of failing to 
cooperate with the agency to resolve the debt. 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 agency's 
letters or telephone calls. Where statutes or agency regulations are 
specific as to the requirements for demand letters, an agency shall 
follow its own procedures in formulating demand letters. Generally, one 
demand letter should suffice. In determining the timing of the demand 
letter(s), an agency shall give due regard to the need to refer debts 
promptly to Justice for litigation, in accordance with 31 CFR 904.1 or 
otherwise. When necessary to protect the government's interest (for 
example, to prevent the running of a statute of limitations), written 
demand may be preceded by other appropriate actions under this part, 
including immediate referral for litigation.
    (b) Required notices. In demand letters, the USDA creditor agency 
shall inform the debtor:
    (1) The nature and amount of the debt; and the facts giving rise to 
the debt;
    (2) How interest, penalties, and administrative costs are added to 
the debt, the date by which payment must be made to avoid such charges, 
and that such assessments must be made unless excused in accordance 
with Sec.  3.17;
    (3) The date by which payment should be made to avoid the enforced 
collection actions described in paragraph (b)(6) of this section;
    (4) The willingness of the creditor agency to discuss alternative 
payment arrangements and how the debtor may enter into a written 
agreement to repay the debt under terms acceptable to the agency (see 
Sec.  3.16);
    (5) The name, address, telephone number and email address 
(optional) of a contact person or office within the creditor agency;
    (6) The intention of the creditor agency to enforce collection if 
the debtor fails to pay or otherwise resolve the debt, by taking one or 
more of the following actions:
    (i) Offset. Offset the debtor's USDA payments and refer the 
debtor's debt to TOP for offset against other Federal payments, 
including income tax refunds, in accordance with subpart D;
    (ii) Private collection agency. [Reserved].
    (iii) Credit reporting agency reporting. Report the debt to a 
credit reporting agency in accordance with Sec.  3.12;
    (iv) Administrative wage garnishment. Refer the debt to Treasury in 
accordance with subpart E for possible collection by garnishing the 
debtor's wages through administrative wage garnishment;
    (v) Litigation. Refer the debt to Justice in accordance with Sec.  
3.21 to initiate litigation to collect the debt;
    (vi) Referral to Treasury. Referral of the debt to Treasury for 
collection in accordance with subpart C of this part;
    (7) That USDA debts over 180 days delinquent must be referred to 
Treasury for the collection actions described in paragraph (b)(6) of 
this section;
    (8) How the debtor may inspect and copy records related to the 
debt;
    (9) How the debtor may request a review of the USDA creditor 
agency's determination that the debtor owes a debt and present evidence 
that the debt is not delinquent or legally enforceable (see subpart F 
of this part);
    (10) [Reserved].
    (11) How a debtor who is a Federal employee subject to Federal 
salary offset

[[Page 7]]

may request a hearing (see subpart G of this part);
    (12) How a debtor may request a waiver of the debt, if applicable;
    (13) How the debtor's spouse may claim his or her share of a joint 
income tax refund by filing Form 8379 with the Internal Revenue Service 
(see http://www.irs.gov);
    (14) How the debtor may exercise other statutory or regulatory 
rights and remedies available to the debtor;
    (15) That certain debtors may be ineligible for government loans, 
guarantees, and insurance (see Sec.  3.14);
    (16) If applicable, the creditor agency's intention to suspend or 
revoke licenses, permits, or privileges (see Sec.  3.14); and
    (17) That the debtor must advise the creditor agency of the filing 
of any bankruptcy proceedings of the debtor or of another person liable 
for the debt being collected.
    (c) Exceptions to notice requirements. A USDA creditor agency may 
omit from a demand letter one or more of the provisions contained in 
paragraphs (b)(6) through (b)(17) if the USDA creditor agency, in 
consultation with OGC, determines that any provision is not legally 
required given the collection remedies to be applied to a particular 
debt.
    (d) Agencies shall exercise care to ensure that demand letters are 
mailed or hand-delivered on the same day that they are dated. There is 
no prescribed format for demand letters. Agencies shall utilize demand 
letters and procedures that will lead to the earliest practicable 
determination of whether the debt can be resolved administratively or 
must be referred for litigation.
    (e) Agencies shall respond promptly to communications from debtors, 
within 30 days of receipt whenever feasible, and shall advise debtors 
who dispute debts to furnish available evidence to support their 
contentions.
    (f) Prior to the initiation of the demand process or at any time 
during or after completion of the demand process, if an agency 
determines to pursue, or is required to pursue, internal administrative 
offset, the procedures applicable to offset must be followed (see 
subpart D). The availability of funds or money for debt satisfaction by 
internal administrative offset, and the agency's determination to 
pursue collection by internal administrative offset, shall release the 
agency from the necessity of further compliance with paragraphs (a), 
(b), and (c) of this section.
    (g) Prior to referring a debt for litigation under 31 CFR part 904, 
agencies shall advise each debtor determined to be liable for the debt 
that, unless the debt can be collected administratively, litigation may 
be initiated. This notification shall comply with Executive Order 12988 
(3 CFR, 1996 Comp., pp. 157-163) and may be given as part of a demand 
letter under paragraph (b) of this section or in a separate document. 
Litigation counsel for the government shall be advised that this notice 
has been given.
    (h) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, before proceeding with further collection 
action, the agency shall immediately seek legal advice from OGC 
concerning the impact of the Bankruptcy Code on any pending or 
contemplated collection activities. Unless the agency is advised that 
the automatic stay imposed at the time of filing pursuant to 11 U.S.C. 
362 has been lifted or is no longer in effect, in most cases collection 
activity against the debtor must stop immediately. The agency should 
take the following steps:
    (1) After seeking legal advice, a proof of claim must be filed in 
most cases with the bankruptcy court or the Trustee. Agencies shall 
refer to the provisions of 11 U.S.C. 106 relating to the consequences 
on sovereign immunity of filing a proof of claim.
    (2) If the agency is a secured creditor, it may seek relief from 
the automatic stay regarding its security, subject to the provisions 
and requirements of 11 U.S.C. 362.
    (3) Offset is stayed in most cases by the automatic stay. However, 
agencies may seek legal advice from OGC to determine whether their 
payments to the debtor and payments of other agencies available for 
offset may be frozen by the agency until relief from the automatic stay 
can be obtained from the bankruptcy court. Agencies also may seek legal 
advice from OGC to determine whether recoupment is available.


Sec.  3.12  Reporting of consumer debts.

    (a) Notice. In demand letters to debtors sent in accordance with 
Sec.  3.11, agencies shall inform debtors:
    (1) The intent of the agency to report the delinquent consumer debt 
to credit reporting agencies after 60 days;
    (2) The specific information to be transmitted (i.e., name, 
address, and taxpayer identification number, information about the 
debt);
    (3) The actions which may be taken by the debtor to prevent the 
reporting (i.e., repayment in full or a repayment agreement); and
    (4) The rights of the debtor to seek review of the existence of the 
debt in accordance with subpart F.
    (b) Disclosure. Disclosure of delinquent consumer debts must be 
consistent with the requirements of 31 U.S.C. 3711(e), the Privacy Act 
of 1974 (5 U.S.C. 552a), the Bankruptcy Code, and 31 CFR 901.4.
    (c) Non-duplication of hearings. When an agency has given a debtor 
any of the notices required by this part and an opportunity for 
administrative review under subpart F, the agency need not duplicate 
such notice and review opportunities before reporting the delinquent 
debt to credit bureaus.
    (d) Stay of disclosure. Agencies shall not disclose a delinquent 
debt to a credit reporting agency if a debtor requests review under 
subpart F until a final determination is made by a reviewing official 
that upholds the agency intent to disclose.
    (e) Commercial debt. The requirement of this section does not apply 
to commercial debts, although agencies should report commercial debts 
to commercial credit bureaus.


Sec.  3.13  Contracting with private collection contractors and with 
entities that locate and recover unclaimed assets. [Reserved.]


Sec.  3.14  Suspension or revocation of eligibility for loans and loan 
guarantees, licenses, permits, or privileges.

    (a) Agencies are not permitted to extend financial assistance in 
the form of a loan, loan guarantee, or loan insurance to any person 
delinquent on a nontax debt owed to a Federal agency, except as 
otherwise authorized by law or upon waiver of application of this 
section by the USDA Chief Financial Officer (CFO) or Deputy CFO. This 
prohibition does not apply to disaster loans. Agencies may extend 
credit after the delinquency has been resolved. The Secretary of the 
Treasury may exempt classes of debts from this prohibition and has 
prescribed standards defining when a ``delinquency'' is ``resolved'' 
for purposes of this prohibition. See 31 CFR 285.13 (Barring Delinquent 
Debtors From Obtaining Federal Loans or Loan Insurance or Guarantees).
    (b) Similarly, agencies also are not permitted to extend financial 
assistance (either directly or indirectly) in the form of grants, 
loans, or loan guarantees to judgment debtors who have a judgment lien 
placed against their property until the judgment is satisfied, unless 
the agency grants a waiver in accordance with agency regulations. See 
31 U.S.C. 3201(e).
    (c) In non-bankruptcy cases, agencies seeking the collection of 
statutory penalties, forfeitures, or other types of

[[Page 8]]

claims must consider the suspension or revocation of licenses, permits, 
or other privileges for any inexcusable or willful failure of a debtor 
to pay such a debt in accordance with the agency's regulations or 
governing procedures. The debtor shall be advised in the agency's 
written demand for payment of the agency's ability to suspend or revoke 
licenses, permits, or privileges.
    (d) Any agency making, guaranteeing, insuring, acquiring, or 
participating in, loans must consider suspending or disqualifying any 
lender, contractor, or broker from doing further business with the 
agency or engaging in programs sponsored by the agency if such lender, 
contractor, or broker fails to pay its debts to the government within a 
reasonable time or if such lender, contractor, or broker has been 
suspended, debarred, or disqualified from participation in a program or 
activity by another Federal agency. Failure to pay a single substantial 
debt, or a number of outstanding debts (including disallowed costs and 
overrun payments, but not including sums owed to the government under 
the Internal Revenue Code) owed to any Federal agency or 
instrumentality is grounds for nonprocurement suspension or debarment 
if the debt is uncontested and the debtor's legal administrative 
remedies for review of the debt are exhausted. See 7 CFR 3017.305(c)(3) 
and 405(a)(2).
    (e) The failure of any surety to honor its obligations in 
accordance with 31 U.S.C. 9305 shall be reported to Treasury. Treasury 
will forward to all interested agencies notification that a surety's 
certificate of authority to do business with the government has been 
revoked.
    (f) The suspension or revocation of licenses, permits, or 
privileges also may extend to USDA programs or activities that are 
administered by the States on behalf of the government, to the extent 
that they affect the government's ability to collect money or funds 
owed by debtors. Therefore, States that manage USDA activities, 
pursuant to approval from the agencies, shall ensure that appropriate 
steps are taken to safeguard against issuing licenses, permits, or 
privileges to debtors who fail to pay their debts to the government.
    (e) In bankruptcy cases, before advising the debtor of an agency's 
intention to suspend or revoke licenses, permits, or privileges, 
agencies may seek legal advice from OGC concerning the impact of the 
Bankruptcy Code, particularly 11 U.S.C. 362 and 525, which may restrict 
such action.


Sec.  3.15  Liquidation of collateral.

    (a) In accordance with applicable statutes and regulations, 
agencies may liquidate security or collateral through a sale or a 
nonjudicial 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 interest of the 
United States. Collection from other sources, including liquidation of 
security or collateral, is not a prerequisite to requiring payment by a 
surety, insurer, or guarantor unless such action is expressly required 
by statute or contract.
    (b) When an agency learns that a bankruptcy petition has been filed 
with respect to a debtor, the agency may seek legal advice from OGC 
concerning the impact of the Bankruptcy Code, including, but not 
limited to, 11 U.S.C. 362, to determine the applicability of the 
automatic stay and the procedures for obtaining relief from such stay 
prior to proceeding under paragraph (a) of this section.


Sec.  3.16  Collection in installments.

    (a) Whenever feasible, agencies shall collect the total amount of a 
debt in one lump sum. If a debtor is financially unable to pay a debt 
in one lump sum, agencies may accept payment in regular installments. 
Agencies shall obtain financial statements from debtors who represent 
that they are unable to pay in one lump sum and independently verify 
such representations whenever possible (see 31 CFR 902.2(g) for methods 
of verification). Agencies that agree to accept payments in regular 
installments shall obtain a legally enforceable written agreement from 
the debtor that specifies all terms of the arrangement and that 
contains a provision accelerating the debt in the event of default.
    (b) The size and frequency of installment payments shall bear a 
reasonable relation to the size of the debt and the debtor's ability to 
pay. If possible, the installment payments shall be sufficient in size 
and frequency to liquidate the debt in three years or less.
    (c) Security for deferred payments shall be obtained in appropriate 
cases. Agencies may accept installment payments notwithstanding the 
refusal of the debtor to execute a written agreement or to give 
security, at the agency's option.


Sec.  3.17  Interest, penalties, and administrative costs.

    (a) Except as provided in paragraphs (g) and (i) of this section, 
agencies shall charge interest, penalties, and administrative costs on 
debts owed to the United States pursuant to 31 U.S.C. 3717. If not 
included in the agency's demand notice, an agency shall mail or hand-
deliver a written notice to the debtor, at the debtor's most recent 
address available to the agency, explaining the agency's requirements 
concerning these charges except where these requirements are included 
in a contractual or repayment agreement. 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) Agencies shall charge interest on debts owed the United States 
as follows, except as otherwise required by law:
    (1) Interest shall accrue from the date of delinquency, or as 
otherwise provided by law.
    (2) Unless otherwise established in a contract, repayment 
agreement, or by statute, the rate of interest charged shall be the 
rate established annually by the Secretary of the Treasury in 
accordance with 31 U.S.C. 3717. Pursuant to 31 U.S.C. 3717, an agency 
may charge a higher rate of interest if it reasonably determines that a 
higher rate is necessary to protect the rights of the United States. 
The agency must document the reason(s) for its determination that the 
higher rate is necessary.
    (3) 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 agency 
may require payment of interest at a new rate that reflects the current 
value of funds to the Treasury at the time the new agreement is 
executed. Interest shall not be compounded, that is, interest shall not 
be charged on interest, penalties, or administrative costs required by 
this section. If, however, a 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) Agencies shall assess administrative costs incurred for 
processing and handling delinquent debts. The calculation of 
administrative costs shall be based on actual costs incurred or upon 
estimated costs as determined by the assessing agency.
    (d) Unless otherwise established in a contract, repayment 
agreement, or by statute, agencies shall charge a penalty, pursuant to 
31 U.S.C. 3717(e)(2), not to exceed 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.

[[Page 9]]

    (e) Agencies may increase an ``administrative debt'' 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 guarantees. 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. Increases to administrative debts 
shall be computed annually. Agencies may use this alternative only 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.
    (f) When a debt is paid in partial or installment payments, amounts 
received by the agency shall be applied first to outstanding penalties, 
second to administrative charges, third to interest, and last to 
principal, except as otherwise required by law.
    (g) Agencies shall waive the collection of interest and 
administrative charges imposed pursuant to this section (i.e., this 
does not apply to interest or administrative penalties determined by an 
applicable agreement or instrument such as a loan contract) on the 
portion of the debt that is paid within 30 days after the date on which 
interest began to accrue. Agencies may extend this 30-day period on a 
case-by-case basis. In addition, agencies may waive interest, 
penalties, and administrative costs charged under this section, in 
whole or in part, without regard to the amount of the debt, either 
under the criteria set forth in the Federal standards for the 
compromise of debts (31 CFR part 902), or if the agency determines that 
collection of these charges is against equity and good conscience or is 
not in the best interest of the United States.
    (h) [Reserved]
    (i) Agencies are authorized to impose interest and related charges 
on debts not subject to 31 U.S.C. 3717, in accordance with the common 
law. Agencies shall consult OGC before imposing interest and related 
charges under common law for any debt.


Sec.  3.18  Use and disclosure of mailing addresses.

    (a) When attempting to locate a debtor in order to collect or 
compromise a debt under this part or parts 902-904 of title 31 or other 
authority, agencies may send a request to Treasury to obtain a debtor's 
mailing address from the records of the Internal Revenue Service (IRS).
    (b) Agencies are authorized to use mailing addresses obtained under 
paragraph (a) of this section to enforce collection of a delinquent 
debt and may disclose such mailing addresses to other agencies and to 
collection agencies for collection purposes.


Sec.  3.19  Standards for the compromise of claims.

    An agency shall follow the standards set forth in 31 CFR part 902 
for the compromise of debts pursuant to 31 U.S.C. 3711 arising out of 
the activities of, or referred or transferred for collection services 
to, that agency, except where otherwise authorized or required by law.


Sec.  3.20  Standards for suspending or terminating collection 
activities.

    An agency shall follow the standards set forth in 31 CFR part 903 
for the suspension or termination of collection activity pursuant to 31 
U.S.C. 3711, except where otherwise authorized or required by law.


Sec.  3.21  Referrals of Debts to Justice.

    An agency shall promptly refer to Justice for litigation debts on 
which aggressive collection activity has been taken in accordance with 
this part, and that cannot be compromised by the agency or on which 
collection activity cannot be suspended or terminated in accordance 
with 31 CFR parts 902 and 903. Agencies shall follow the procedures set 
forth in 31 CFR part 904 in making such referrals.

Subpart C--Referral of Debts to Treasury


Sec.  3.30  General requirements.

    (a) Agencies are required by law to transfer delinquent, nontax, 
legally enforceable debts to Treasury for collection through cross-
servicing and through centralized administrative offset. Additionally, 
USDA has chosen to transfer debts to Treasury for collection through 
administrative wage garnishment. Agencies need not make duplicate 
referrals to Treasury for all these purposes; a debt may be referred 
simultaneously for purposes of collection by cross-servicing, 
centralized administrative offset, and administrative wage garnishment 
where applicable. However, in some instances a debt exempt from 
collection via cross-servicing may be subject to collection by 
centralized administrative offset so simultaneous referrals are not 
always the norm. This subpart sets forth rules applicable to the 
transfer of debts to Treasury for collection by cross-servicing. Rules 
for transfer to Treasury for centralized administrative offset are set 
forth in subpart D, and for administrative wage garnishment in subpart 
E.
    (b) When debts are referred or transferred to Treasury, or 
Treasury-designated debt collection centers under the authority of 31 
U.S.C. 3711(g), Treasury shall service, collect, or compromise the 
debts, or Treasury will suspend or terminate the collection action, in 
accordance with the statutory requirements and authorities applicable 
to the collection of such debts.


Sec.  3.31  Mandatory referral for cross-servicing.

    (a) Agencies shall transfer to Treasury any legally enforceable 
nontax debt in excess of $25, or combination of debts less than $25 
that exceeds $25 (in the case of a debtor whose taxpayer identification 
number (TIN) is unknown the applicable threshold is $100), that has or 
have been delinquent for a period of 180 days in accordance with 31 CFR 
285.12 so that Treasury may take appropriate action on behalf of the 
creditor agency to collect or compromise, or to suspend or terminate 
collection, of the debt, including use of debt collection centers and 
private collection contractors to collect the debt or terminate 
collection action.
    (b) The requirement of paragraph (a) of this section does not apply 
to any debt that:
    (1) Is in litigation or foreclosure (see 31 CFR 385.12 (d)(2) for 
definition);
    (2) Will be disposed of under an approved asset sale program (see 
31 CFR 285.12(d)(3)(i) for definition);
    (3) Has been referred to a private collection contractor for a 
period of time acceptable to Treasury;
    (4) Is at a debt collection center for a period of time acceptable 
to Treasury;
    (5) Will be collected under internal offset procedures within three 
years after the debt first became delinquent;
    (6) Is exempt from this requirement based on a determination by the 
Secretary of the Treasury that exemption for a certain class of debt is 
in the best interest of the United States. Federal agencies may request 
that the Secretary of the Treasury exempt specific classes of debts. 
Any such request by an agency must be sent to the Fiscal Assistant 
Secretary of the Treasury by the USDA CFO.
    (c) A debt is considered 180 days delinquent for purposes of this 
section if it is 180 days past due and is legally enforceable. A debt 
is past due if it has not been paid by the date specified in the 
agency's initial written demand for

[[Page 10]]

payment or applicable agreement or instrument (including a post-
delinquency payment agreement) unless other satisfactory payment 
arrangements have been made. A debt is legally enforceable if 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. Where, for 
example, a debt is the subject of a pending administrative review 
process required by statute or regulation and collection action during 
the review process is prohibited, the debt is not considered legally 
enforceable for purposes of mandatory transfer to Treasury and is not 
to be transferred even if the debt is more than 180 days past due. When 
a final agency determination is made after an administrative appeal or 
review process (including administrative review under subpart F), the 
creditor agency must transfer such debt to Treasury, if more than 180 
days delinquent, within 30 days after the date of the final decision.


Sec.  3.32  Discretionary referral for cross-servicing.

    Agencies shall consider referring legally enforceable nontax debts 
that are less than 180 days delinquent to Treasury or to Treasury-
designated ``debt collection centers'' in accordance with 31 CFR 285.12 
to accomplish efficient, cost effective debt collection if no USDA 
payments will be available to collect the debt through internal 
administrative offset under Sec.  3.43.


Sec.  3.33  Required certification.

    Agencies referring delinquent debts to Treasury for collection via 
cross-servicing must certify, in writing, that:
    (a) The debts being transferred are valid and legally enforceable;
    (b) There are no legal bars to collection; and
    (c) The agency has complied with all prerequisites to a particular 
collection action under the laws, regulations or policies applicable to 
the agency, unless the agency and Treasury agree that Treasury will do 
so on behalf of the agency.


Sec.  3.34  Fees.

    Federal agencies operating Treasury-designated debt collection 
centers are authorized to charge a fee for services rendered regarding 
referred or transferred debts. The fee may be paid out of amounts 
collected and may be added to the debt as an administrative cost.

Subpart D--Administrative Offset


Sec.  3.40  Scope.

    (a) This subpart sets forth the procedures to be used by agencies 
in collecting debts by administrative offset. The term ``administrative 
offset'' has the meaning provided in 31 U.S.C. 3701(a)(1).
    (b) This section does not apply to:
    (1) Debts arising under the Social Security Act, except as provided 
in 42 U.S.C. 404;
    (2) Payments made under the Social Security Act, except as provided 
for in 31 U.S.C. 3716(c) (see 31 CFR 285.4, Federal Benefit Offset);
    (3) Debts arising under, or payments made under, the Internal 
Revenue Code (except for offset of tax refunds) or the tariff laws of 
the United States;
    (4) Offsets against Federal salaries (such offsets are covered by 
subpart F);
    (5) Offsets under 31 U.S.C. 3728 against a judgment obtained by a 
debtor against the United States;
    (6) Offsets or recoupments under common law, State law, or Federal 
statutes specifically prohibiting offsets or recoupments of particular 
types of debts;
    (7) Offsets in the course of judicial proceedings, including 
bankruptcy; or
    (8) Intracontractual offsets to satisfy contract debts taken by a 
contracting officer under the Contract Disputes Act, 41 U.S.C. 601-613.
    (c) 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 by administrative offset under the common law or 
other applicable statutory authority.
    (d) Supplemental provisions related to offsets by the Commodity 
Credit Corporation (CCC) may be found at 7 CFR part 1403 and for the 
Farm Service Agency at 7 CFR part 792.
    (e) Unless otherwise provided by law, administrative offset of 
payments under the authority of 31 U.S.C. 3716 to collect a debt may 
not be conducted more than 10 years after the government's right to 
collect the debt first accrued, unless facts material to the 
government's right to collect the debt were not known and could not 
reasonably have been known by the official or officials of the 
government who were charged with the responsibility to discover and 
collect such debts. This limitation does not apply to debts reduced to 
a judgment.
    (f) In bankruptcy cases, agencies may seek legal advice from OGC 
concerning the impact of the Bankruptcy Code, particularly 11 U.S.C. 
106, 362, and 553, on pending or contemplated collections by offset.


Sec.  3.41  Procedures for notification of intent to collect by 
administrative offset.

    (a) Prior to initiation of collection by administrative offset, a 
creditor agency must:
    (1) Send the debtor a written Notice of Intent to Collect by 
Administrative Offset, by mail or hand-delivery, of the type and amount 
of the debt, the intention of the agency to use non-centralized 
administrative offset (which includes a USDA internal administrative 
offset) to collect the debt 30 days after the date of the Notice, the 
name of the Federal agency or USDA agency from which the creditor 
agency wishes to collect in the case of a non-centralized 
administrative offset, the intent to refer the debt to Treasury for 
collection through centralized administrative offset (including 
possible offset of tax refunds) 60 days after the date of the Notice if 
the debt is not satisfied by offset within USDA or by agreement with 
another Federal agency, and an explanation of the debtor's rights under 
31 U.S.C. 3716; and
    (2) Give the debtor the opportunity:
    (i) To inspect and copy agency records related to the debt;
    (ii) For a review within the agency of the determination of 
indebtedness in accordance with subpart F; and
    (iii) To make a written agreement to repay the debt.
    (b) The procedures set forth in paragraph (a) of this section are 
not required when:
    (1) The offset is in the nature of a recoupment;
    (2) The debt arises under a contract subject to the Contracts 
Disputes Act;
    (3) In the case of a non-centralized administrative offset, the 
agency 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 agency 
shall give the debtor such notice and an opportunity for review as soon 
as practicable and shall promptly refund any money ultimately found not 
to have been owed to the government; or
    (4) The agency previously has given a debtor any of the notice and 
review opportunities required under this part, with respect to a 
particular debt (see, e.g., Sec.  3.11). With respect to loans paid on 
an installment basis, notice and opportunity to review under this part 
may only be provided once for the life of the loan upon the occurrence 
of the first delinquent installment. Subsequently, if an agency elects 
this option, credit reporting agencies may be furnished periodically 
with updates as

[[Page 11]]

to the current or delinquent status of the loan account and the 
borrower may receive notice of referral to TOP for delinquent 
installments without further opportunity for review. Any interest 
accrued or any installments coming due after the offset is initiated 
also would not require a new notice and opportunity to review.
    (c) The Notice of Intent to Collect by Administrative Offset shall 
be included as part of a demand letter issued under Sec.  3.11 to 
advise the debtor of all debt collection possibilities that the agency 
will seek to employ.


Sec.  3.42  Debtor rights to inspect or copy records, submit repayment 
proposals, or request administrative review.

    (a) A debtor who intends to inspect or copy agency or USDA records 
with respect to the debt must notify the creditor agency in writing 
within 30 days of the date of the Notice of Intent to Collect by 
Administrative Offset. In response, the agency must notify the debtor 
of the location, time, and any other conditions, consistent with part 
1, subpart A, of this title, for inspecting and copying, and that the 
debtor may be liable for reasonable copying expenses. A decision by the 
agency under this paragraph shall not be subject to review under 
subpart F or by NAD under 7 CFR part 11.
    (b) The debtor may, in response to the Notice of Intent to Collect 
by Administrative Offset, propose to the creditor agency a written 
agreement to repay the debt as an alternative to administrative offset. 
Any debtor who wishes to do this must submit a written proposal for 
repayment of the debt, which must be received by the creditor agency 
within 30 days of the date of the Notice of Intent to Collect by 
Administrative Offset or 15 days after the date of a decision adverse 
to the debtor under subpart F. In response, the creditor agency must 
notify the debtor in writing whether the proposed agreement is 
acceptable. In exercising its discretion, the creditor agency must 
balance the government's interest in collecting the debt against 
fairness to the debtor. A decision by the agency under this paragraph 
shall not be subject to review under subpart F or by NAD under 7 CFR 
part 11.
    (c) A debtor must request an administrative review of the debt 
under subpart F within 30 days of the date of the Notice of Intent to 
Collect by Administrative Offset for purposes of a proposed collection 
by non-centralized administrative offset and within 60 days of the date 
of the Notice of Intent to Collect by Administrative Offset for 
purposes of a proposed collection by referral to Treasury for offset 
against other Federal payments that would include tax refunds.


Sec.  3.43  Non-centralized administrative offset.

    (a) Scope. In cooperation with the Federal agency certifying or 
authorizing payments to the debtor, a creditor agency may make a 
request directly to a payment authorizing agency to offset a payment 
due a debtor to collect a delinquent debt from, for example, a Federal 
employee's lump sum payment upon leaving government service in order to 
pay an unpaid advance. Also, non-centralized administrative offsets 
include USDA internal administrative offsets, for example, of CCC 
payments to pay Farm Service Agency (FSA) delinquent debts. Unless 
prohibited by law, when centralized administrative offset is not 
available or appropriate, past due, legally enforceable nontax 
delinquent debts may be collected through non-centralized 
administrative offset.
    (b) Effectuation of offset. A non-centralized administrative offset 
may be effected 31 days after the date of the Notice of Intent to 
Collect by Administrative Offset, any time after the final 
determination in an administrative review conducted under subpart F 
upholds the creditor agency's decision to offset, or any time after the 
creditor agency notifies the debtor that its repayment proposal 
submitted under Sec.  3.42(c) is not acceptable if the 30-day period 
for the debtor to seek review of the Notice has expired, unless the 
creditor agency makes a determination under Sec.  3.41(b)(3) that 
immediate action to effectuate the offset is necessary.
    (c) Certification. A payment authorizing agency may conduct a non-
centralized administrative offset only after certification by a 
creditor agency that:
    (1) The debtor has been provided notice and opportunity for review 
as set forth in Sec.  3.41; and
    (2) The payment authorizing agency has received written 
certification from the creditor agency that the debtor owes the past 
due, legally enforceable delinquent debt in the amount stated, and that 
the creditor agency has fully complied with its regulations concerning 
administrative offset.
    (d) Responsibilities of payment authorizing agencies. Payment 
authorizing agencies shall comply with offset requests by creditor 
agencies to collect debts owed to the United States, unless the offset 
would not be in the best interests of the United States with respect to 
the program of the payment authorizing agency, 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.
    (e) Application of recovered amounts to satisfaction of debts. When 
collecting multiple debts by non-centralized administrative offset, 
agencies shall apply the recovered amounts to those debts in accordance 
with the best interests of the United States, as determined by the 
facts and circumstances of the particular case, particularly the 
applicable statute of limitations.


Sec.  3.44  Centralized administrative offset.

    (a) Mandatory referral. After the notice and review opportunity 
requirements of Sec.  3.41 are met, an agency shall refer debts which 
are over 180 days delinquent to Treasury for collection through 
centralized administrative offset 61 days after the date of the Notice 
of Intent to Collect by Administrative Offset provided in accordance 
with Sec.  3.41. If the debtor seeks review under subpart F, referral 
of the debt must occur within 30 days of the final decision upholding 
the agency decision to offset the debt if the debt is more than 180 
days delinquent.
    (b) Discretionary referral. After the notice and review opportunity 
requirements of Sec.  3.41 are met, and administrative review under 
subpart F is not sought or is unsuccessful on the part of the debtor, 
an agency may refer a debt that is less than 180 days delinquent.
    (c) Procedures for referral. Agencies shall refer debts to Treasury 
for collection in accordance with Treasury procedures set forth in 31 
CFR part 285.5.
    (d) Payment authorizing agency responsibilities. (1) The names and 
TINs of debtors who owe debts referred to Treasury under this section 
shall be compared to the names and TINs on payments to be made by 
Federal disbursing officials. Federal disbursing officials include 
disbursing officials of Treasury, the Department of Defense, the United 
States Postal Service, other government corporations, and disbursing 
officials of the United States designated by Treasury. When the name 
and TIN of a debtor match the name and TIN of a payee and all other 
requirements for offset have been met, the payment authorizing agency 
must offset a payment to satisfy the debt.
    (2) Any USDA official serving as a Federal disbursing official for 
purposes of effecting centralized administrative offset under this 
section must notify a debtor/payee in writing that an offset has 
occurred to satisfy, in part or in full,

[[Page 12]]

a past due, legally enforceable delinquent debt. The notice must 
include the information set forth in paragraph (d)(4) of this section.
    (3) As described in 31 CFR 285.5(g)(1) and (2), any USDA official 
serving as a Federal disbursing official for purposes of centralized 
administrative offset under this section shall furnish a warning notice 
to a payee/debtor prior to beginning offset of recurring payments. Such 
warning notice shall include the information set forth in paragraph 
(d)(4) of this section.
    (4) The notice shall include a description of the type and amount 
of the payment from which the offset was taken, the amount of offset 
that was taken, the identity of the creditor agency requesting the 
offset, and a contact point within the creditor agency who will respond 
to questions regarding the offset.
    (5) The priorities for collecting multiple payments owed by a 
payee/debtor shall be those set forth in 31 CFR 285.5(f)(3).


Sec.  3.45  USDA payment authorizing agency offset of pro rata share of 
payments due entity in which debtor participates.

    (a) A USDA payment authorizing agency, to satisfy either a non-
centralized or centralized administrative offset under Sec. Sec.  3.43 
and 3.44, may offset:
    (1) A debtor's pro rata share of USDA payments due any entity in 
which the debtor participates, either directly or indirectly, as 
determined by the creditor agency or the payment authorizing agency; or
    (2) USDA payments due any entity that the debtor has established, 
or reorganized, transferred ownership of, or changed in some other 
manner the operation of, for the purpose of avoiding payment on the 
claim or debt, as determined by the creditor agency or the payment 
authorizing agency.
    (b) Prior to exercising the authority of this section to offset any 
portion of a payment due an entity, the creditor agency must have 
provided notice to that entity in accordance with Sec.  3.41 of its 
intent to offset payments to the entity in satisfaction of the debt of 
an individual debtor participating in that entity.


Sec.  3.46  Offset against tax refunds.

    USDA will take action to effect administrative offset against tax 
refunds due to debtors under 26 U.S.C. 6402 in accordance with the 
provisions of 31 U.S.C. 3720A through referral for centralized 
administrative offset under Sec.  3.44.


Sec.  3.47  Offset against amounts payable from Civil Service 
Retirement and Disability Fund.

    Upon providing the Office of Personnel Management (OPM) written 
certification that a debtor has been afforded the procedures provided 
in Sec.  3.41, creditor agencies 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 regulations 
codified at 5 CFR 831.1801 through 831.1808. 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. This will satisfy any requirement 
that offset be initiated prior to the expiration of the time 
limitations referenced in Sec.  3.40(e).

Subpart E--Administrative Wage Garnishment


Sec.  3.50  Purpose.

    This subpart provides USDA procedures for use of administrative 
wage garnishment to garnish a debtor's disposable pay to satisfy 
delinquent nontax debt owed to USDA creditor agencies.


Sec.  3.51  Scope.

    (a) This subpart applies to any agency that administers a program 
that gives rise to a delinquent nontax debt owed to the United States 
and to any agency that pursues recovery of such debt.
    (b) This subpart shall apply notwithstanding any provision of State 
law.
    (c) Nothing in this subpart precludes the compromise of a debt or 
the suspension or termination of collection action in accordance with 
the provisions of this part or other applicable law.
    (d) The receipt of payments pursuant to this subpart does not 
preclude an agency from pursuing other debt collection remedies under 
this part. An agency may pursue such debt collection remedies 
separately or in conjunction with administrative wage garnishment.
    (e) This subpart does not apply to the collection of delinquent 
nontax debt owed to the United States from the wages of Federal 
employees from their Federal employment. Federal pay is subject to the 
salary offset procedures of subpart G of this part.
    (f) Nothing in this subpart requires agencies to duplicate notices 
or administrative proceedings required by contract or other laws or 
regulations, or other provisions of this part.


Sec.  3.52  Definitions.

    As used in this subpart the following definitions shall apply:
    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.
    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.''


Sec.  3.53  Procedures.

    (a) USDA has determined to pursue administrative wage garnishment 
of USDA debtors by referral of nontax legally enforceable debts to 
Treasury for issuance of garnishment orders by Treasury or its 
contractors.
    (b) Pursuant to Sec.  3.11, agencies must notify debtors of their 
intent to pursue garnishment of their disposable pay through referral 
of the debt to Treasury for issuance of an administrative wage 
garnishment order and provide debtors with the opportunity for review 
of the existence of the debt under subpart F within 60 days of the date 
of the demand letter.
    (c) Upon expiration of the 60-day period for review, or upon 
completion of a review under subpart F that upholds the agency's 
determination of the debt, USDA will transfer the debt for collection 
through administrative wage garnishment as well as other means through 
cross-servicing or centralized administrative offset.
    (d) If Treasury elects to pursue collection through administrative 
wage garnishment, Treasury, or its contractor, will notify the debtor 
of its intent to initiate garnishment proceedings and provide the 
debtor with the opportunity

[[Page 13]]

to inspect and copy agency records related to the debt, enter into a 
repayment agreement, or request a hearing as to the existence or amount 
of the debt or the terms of the proposed repayment schedule under the 
proposed garnishment order, in accordance with 31 CFR 285.11.
    (e) If the debtor requests a hearing at any time, Treasury will 
forward the request to the USDA creditor agency to which the debt is 
owed, and the creditor agency will contact the Office of the CFO (OCFO) 
for selection of a hearing official. The issuance of proposed 
garnishment orders by Treasury shall not be subject to appeal to NAD 
under 7 CFR part 11. Hearings will be conducted in accordance with 31 
CFR 285.11(f).
    (f) OCFO shall provide a copy of the hearing official's final 
decision to Treasury for implementation with respect to the subject 
garnishment order.

Subpart F--Administrative Reviews for Administrative Offset, 
Administrative Wage Garnishment, and Disclosure to Credit Reporting 
Agencies


Sec.  3.60  Applicability.

    (a) This section establishes consolidated administrative review 
procedures for debts subject to administrative offset, administrative 
wage garnishment, and disclosure to credit reporting agencies, under 
subparts D and E. A hearing or review under this section shall satisfy 
the required opportunity for administrative review by the agency of the 
determination of a debt for both administrative offset and 
administrative wage garnishment that is required before transfer to 
Treasury for collection or collection by the agency through non-
centralized administrative offset.
    (b) For debt collection proceedings initiated by FSA, CCC, the 
Rural Housing Service, the Rural Business-Cooperative Service, the Risk 
Management Agency, the Federal Crop Insurance Corporation, the Natural 
Resources Conservation Service, Rural Development, and the Rural 
Utilities Service (but not for programs authorized by the Rural 
Electrification Act of 1936 or the Rural Telephone Bank Act, 7 U.S.C. 
901 et seq.), unless otherwise specified, any administrative review 
will be conducted by NAD in accordance with 7 CFR part 11 and not the 
procedures of this subpart.


Sec.  3.61  Presiding employee.

    An agency reviewing officer may be an agency employee, or the 
agency may provide for reviews to be done by another agency through an 
interagency agreement. No agency employee may act as a reviewing 
officer for the consideration of collection by administrative offset in 
a matter for which the employee was a contracting officer or a debt 
management officer.


Sec.  3.62  Procedures.

    (a) A debtor who receives a Notice of Intent to Collect by 
Administrative Offset, Notice of Disclosure to Credit Reporting 
Agencies, or Notice of Intent to Collect by Administrative Wage 
Garnishment, or more than one of the above simultaneously, may request 
administrative review of the agency's determination that the debt 
exists and the amount of the debt. Any debtor who wishes to do this 
must submit a written explanation of why the debtor disagrees and seeks 
review. The request must be received by the creditor agency within 60 
days of the date of the notice in the case of a Notice of Intent to 
Collect by Administrative Offset that includes referral to Treasury for 
offset against other Federal payments including tax refunds and 30 days 
in the case of all other notices.
    (b) In response, the creditor agency must notify the debtor in 
writing whether the review will be by documentary review or by hearing. 
An oral hearing is not necessary with respect to debt collection 
systems in which a determination of indebtedness rarely involves issues 
of credibility or veracity and the agency has determined that review of 
the written record is ordinarily an adequate means to correct prior 
mistakes. The agency shall provide the debtor with a reasonable 
opportunity for an oral hearing when the debtor requests 
reconsideration of the debt and the agency determines that the question 
of the indebtedness cannot be resolved by review of the documentary 
evidence, for example, when the validity of the debt turns on an issue 
of credibility or veracity. If the debtor requests a hearing, and the 
creditor agency decides to conduct a documentary review, the agency 
must notify the debtor of the reason why a hearing will not be granted. 
The agency must also advise the debtor of the procedures to be used in 
reviewing the documentary record, or of the date, location and 
procedures to be used if review is by a hearing.
    (c) An oral hearing may, at the debtor's option, be conducted 
either in-person or by telephone conference. All travel expenses 
incurred by the debtor in connection with an in-person hearing will be 
borne by the debtor. All telephonic charges incurred during the hearing 
will be the responsibility of the agency.
    (d) After the debtor requests a hearing, the hearing official shall 
notify the debtor of:
    (1) The date and time of a telephonic hearing;
    (2) The date, time, and location of an in-person oral hearing; or
    (3) The deadline for the submission of evidence for a documentary 
review.
    (e) Unless otherwise arranged by mutual agreement between the 
debtor and the agency, evidenced in writing, any documentary review or 
hearing will be conducted not less than 10 days and no more than 45 
days after receipt of the request for review.
    (f) Unless otherwise arranged by mutual agreement between the 
debtor and the agency, evidenced in writing, a documentary review or 
hearing will be based on agency records plus other relevant documentary 
evidence which may be submitted by the debtor within 10 days after the 
request for review is received.
    (g)(1) Hearings. Hearings will be as informal as possible, and will 
be conducted by a reviewing officer in a fair and expeditious manner. 
The reviewing officer need not use the formal rules of evidence with 
regard to the admissibility of evidence or the use of evidence once 
admitted. However, clearly irrelevant material should not be admitted, 
whether or not any party objects. Any party to the hearing may offer 
exhibits, such as copies of financial records, telephone memoranda, or 
agreements, provided the opposing party is notified at least five days 
before the hearing.
    (2) Burden of proof. (i) The agency will have the burden of going 
forward to prove the existence or amount of the debt.
    (ii) Thereafter, if the debtor disputes the existence or amount of 
the debt, the debtor must prove by a preponderance of the evidence that 
no debt exists or that the amount of the debt is incorrect. In 
addition, the debtor may present evidence that repayment would cause a 
financial hardship to the debtor or that collection of the debt may not 
be pursued due to operation of law
    (3) Witnesses must testify under oath or affirmation.
    (4) Debtors may represent themselves or may be represented at their 
own expense by an attorney or other person.
    (5) The substance of all significant matters discussed at the 
hearing must be recorded. No official record or transcript of the 
hearing need be created, but if a debtor requested that a transcript be 
made, it will be at the debtor's expense.
    (h) In the absence of good cause shown, a debtor who fails to 
appear at a hearing scheduled pursuant to

[[Page 14]]

paragraph (f)(4) of this section will be deemed as not having timely 
filed a request for a hearing.
    (i)(1) Within no more than 30 days after the hearing or receipt of 
documentation for the documentary review, the reviewing officer will 
issue a written decision to the debtor and the agency, including the 
supporting rationale for the decision. The deadline for issuance of the 
decision may be extended by the reviewing officer for good cause for no 
more than 30 days.
    (2) The written decision shall include:
    (i) A summary of the facts presented;
    (ii) The hearing official's findings, analysis and conclusions; and
    (iii) Resolution of any significant procedural matter which was in 
dispute before or during the hearing or documentary review.
    (3) The reviewing officer's decision constitutes final agency 
action for purposes of judicial review under the Administrative 
Procedure Act (5 U.S.C. 701 et seq.) as to the following issues:
    (i) All issues of fact relating to the basis of the debt (including 
the existence of the debt and the propriety of administrative offset), 
in cases where the debtor previously had not been afforded due process; 
and
    (ii) The existence of the debt and the propriety of administrative 
offset, in cases where the debtor previously had been afforded due 
process as to issues of fact relating to the basis of the debt.
    (j) The reviewing officer will promptly distribute copies of the 
decision to the USDA CFO, the agency CFO (if any), the agency debt 
management officer, the debtor, and the debtor's representative, if 
any.

Subpart G--Federal Salary Offset

    Authority : 5 U.S.C. 5514; 5 CFR part 550, subpart K.


Sec.  3.70  Scope.

    (a) The provisions of this subpart set forth USDA procedures for 
the collection of a Federal employee's pay by salary offset to satisfy 
certain valid and past due debts owed the government.
    (b) These regulations apply to:
    (1) Current USDA employees and employees of other agencies who owe 
debts to USDA; and
    (2) Current USDA employees who owe debts to other agencies.
    (c) These regulations do not apply to debts owed by FSA county 
executive directors or county office employees. Salaries of those 
employees are subject to administrative offset as provided in 7 CFR 
part 792 or part 1403.
    (d) These regulations do not apply to debts or claims arising under 
the Internal Revenue Code of 1954 (26 U.S.C. 1 et seq.); the tariff 
laws of the United States; or to any case where collection of a debt by 
salary offset is explicitly provided for or prohibited by another 
statute (e.g. travel advances in 5 U.S.C. 5705 or employee training 
expense in 5 U.S.C. 4108).
    (e) These regulations identify the types of salary offset available 
to USDA, as well as certain rights provided to the employee, which 
include a written notice before deductions begin and the opportunity to 
petition for a hearing and to receive a written decision if a hearing 
is granted. The rights provided by this section do not extend to:
    (1) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a Federal benefits program 
requiring periodic deductions from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (2) A routine intra-agency adjustment of pay that is made to 
correct an overpayment of pay attributable to clerical or 
administrative errors or delays in processing pay documents, if the 
overpayment occurred within the four pay periods preceding the 
adjustment and, at the time of such adjustment, or as soon thereafter 
as practical, the individual is provided written notice of the nature 
and the amount of the adjustment and point of contact for contesting 
such adjustment; or
    (3) Any adjustment to collect a debt amounting to $50 or less, if, 
at the time of such adjustment, or as soon thereafter as practical, the 
individual is provided written notice of the nature and the amount of 
the adjustment and a point of contact for contesting such adjustment.
    (f) These regulations do not preclude an employee from:
    (1) Requesting waiver of an erroneous overpayment under 5 U.S.C. 
5584, 10 U.S.C. 2774, or 32 U.S.C. 716;
    (2) Requesting waiver of any other type of debt, if waiver is 
available by statute; or
    (3) Questioning the amount or validity of a debt, in the manner 
prescribed by this part.
    (g) Nothing in these regulations precludes the compromise, 
suspension or termination of collection actions where appropriate under 
USDA regulations contained elsewhere.


Sec.  3.71  Definitions.

    As used in this subpart the following definitions shall apply:
    Agency means an executive department or agency; a military 
department; the United States Postal Service; the Postal Rate 
Commission; the United States Senate; the United States House of 
Representatives; any court, court administrative office, or 
instrumentality in the judicial or legislative branches of the 
government; or a government corporation.
    Debt means:
    (1) An amount owed to the United States from sources which include, 
but are not limited to, insured or guaranteed loans, fees, leases, 
rents, royalties, services, sales of real or personal property, 
overpayments, penalties, damages, interest, fines and forfeitures 
(except those arising under the Uniform Code of Military Justice).
    (2) An amount owed to the United States by an employee for 
pecuniary losses where the employee has been determined to be liable 
due to his or her negligent, willful, unauthorized or illegal acts, 
including but not limited to:
    (i) Theft, misuse, or loss of government funds;
    (ii) False claims for services and travel;
    (iii) Illegal, unauthorized obligations and expenditures of 
government appropriations;
    (iv) Using or authorizing the use of government-owned or leased 
equipment, facilities, supplies, and services for other than official 
or approved purposes;
    (v) Lost, stolen, damaged, or destroyed government property;
    (vi) Erroneous entries on accounting records or reports; and
    (vii) Deliberate failure to provide physical security and control 
procedures for accountable officers, if such failure is determined to 
be the proximate cause for a loss of government funds.
    Disposable pay means that part of current basic pay, special pay, 
incentive pay, retired pay, retainer pay, or in the case of an employee 
not entitled to basic pay, other authorized pay remaining after the 
deduction of any amount required by law to be withheld (other than 
deductions to execute garnishment orders in accordance with 5 CFR parts 
581 and 582). Among the legally required deductions that must be 
applied first to determine disposable pay are levies pursuant to the 
Internal Revenue Code (title 26, United States Code) and deductions 
described in section 581.105(b) through (f) of part 5 of this title.
    Employee means a current employee of an agency, including a current 
member of the Armed Forces or a Reserve of the Armed Forces, but does 
not include a FSA county executive director or county office employee.
    Hearing official means a USDA administrative law judge or some 
other

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individual not under the control of the Secretary.
    Salary offset means a reduction of a debt by offset(s) from the 
disposable pay of an employee without his or her consent.
    Waiver means the cancellation, remission, forgiveness, or non-
recovery of a debt owed by an employee to an agency as permitted or 
required by 5 U.S.C. 5584, 10 U.S.C. 2774, or 32 U.S.C. 716, 5 U.S.C. 
8346(b) or any other law.


Sec.  3.72  Coordinating offset with another Federal agency.

    (a) When USDA is owed the debt. When USDA is owed a debt by an 
employee of another agency, the other agency shall not initiate the 
requested offset until USDA provides the agency with a written 
certification that the debtor owes USDA a debt (including the amount 
and basis of the debt and the due date of the payment) and that USDA 
has complied with these regulations.
    (b) When another agency is owed the debt. USDA may use salary 
offset against one of its employees who is indebted to another agency, 
if requested to do so by that agency. Such a request must be 
accompanied by a certification by the requesting agency that the person 
owes the debt (including the amount and basis of the debt and the due 
date of the payment) and that the agency has complied with its 
regulations required by 5 U.S.C. 5514 and 5 CFR part 550, subpart K.
    (c) Mandatory centralized administrative offset. Debts may be 
referred to Treasury under Sec.  3.44 for collection through salary 
offset in accordance with 31 CFR 285.7.


Sec.  3.73  Determination of indebtedness.

    (a) In determining that an employee is indebted to USDA and that 31 
CFR parts 900 through 904 have been satisfied and that salary offset is 
appropriate, USDA will review the debt to make sure that it is valid 
and past due.
    (b) If USDA determines that any of the requirements of paragraph 
(a) of this section have not been met, no determination of indebtedness 
shall be made and salary offset will not proceed until USDA is assured 
that the requirements have been met.


Sec.  3.74  Notice requirements before offset.

    Except as provided in paragraph (b) of this section, salary offset 
will not be made unless USDA first provides the employee with a minimum 
of 30 days written notice. This Notice of Intent to Offset Salary will 
state:
    (a) That USDA has reviewed the records relating to the debt and has 
determined that a debt is owed, the amount of the debt, and the facts 
giving rise to the debt;
    (b) USDA's intention to collect the debt by means of deduction from 
the employee's current disposable pay until the debt and all 
accumulated interest are paid in full;
    (c) The approximate beginning date, frequency, and amount of the 
intended deduction (stated as a fixed dollar amount or as a percentage 
of pay, not to exceed 15 percent of disposable pay) and; and the 
intention to continue the deductions until the debt is paid in full or 
otherwise resolved;
    (d) An explanation of USDA requirements concerning interest, 
penalties and administrative costs; unless such payments are waived in 
accordance with 31 U.S.C. 3717 and Sec.  3.17;
    (e) The employee's right to inspect and copy USDA records relating 
to the debt;
    (f) The employee's right to enter into a written agreement with 
USDA for a repayment schedule differing from that proposed by USDA, so 
long as the terms of the repayment schedule proposed by the employee 
are agreeable to USDA;
    (g) The employee's right to a hearing conducted by a hearing 
official on USDA's determination of the debt, the amount of the debt, 
or percentage of disposable pay to be deducted each pay period, so long 
as a petition is filed by the employee as prescribed by USDA;
    (h) That the timely filing of a petition for hearing will stay the 
collection proceedings;
    (i) That a final decision on the hearing will be issued at the 
earliest practical date, but not later than 60 days after the filing of 
the petition requesting the hearing, unless the employee requests, and 
the hearing officer grants, a delay in the proceedings;
    (j) That any knowingly false or frivolous statements, 
representations, or evidence may subject the employee to:
    (1) Disciplinary procedures appropriate under 5 U.S.C. chapter 75, 
5 CFR part 752, or any other applicable statutes or regulations;
    (2) Penalties under the False Claims Act, 31 U.S.C. 3729-3731, or 
any other applicable statutory authority; or
    (3) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002 or 
any other applicable statutory authority;
    (k) Any other rights and remedies available to the employee under 
statutes or regulations governing the program for which the collection 
is being made;
    (l) That amounts paid on or deducted for the debt which are later 
waived or found not owed to the United States will be promptly refunded 
to the employee, unless there are applicable contractual or statutory 
provisions to the contrary;
    (m) The method and time period for requesting a hearing; and
    (n) The name and address of an official of USDA to whom 
communications must be directed.


Sec.  3.75  Request for a hearing.

    (a) Except as provided in paragraph (c) of this section, an 
employee must file a petition for a hearing that is received by USDA 
not later than 30 days from the date of the USDA notice described in 
Sec.  3.74, if an employee wants a hearing concerning:
    (1) The existence or amount of the debt; or
    (2) USDA's proposed offset schedule (including percentage).
    (b) The petition must be signed by the employee and must identify 
and explain with reasonable specificity and brevity the facts, evidence 
and witnesses which the employee believes support his or her position. 
If the employee objects to the percentage of disposable pay to be 
deducted from each check, the petition must state the objection and the 
reasons for it.
    (c) If the employee files a petition for a hearing later than the 
30 days as described in paragraph (a) of this section, the hearing 
officer may accept the request if the employee can show that the delay 
was because of circumstances beyond his or her control or because of 
failure to receive notice of the filing deadline (unless the employee 
has actual notice of the filing deadline).


Sec.  3.76  Result if employee fails to meet deadlines.

    An employee will not be granted a hearing and will have his or her 
disposable pay offset in accordance with USDA's offset schedule if the 
employee:
    (a) Fails to file a petition for a hearing as prescribed in Sec.  
3.75; or
    (b) Is scheduled to appear and fails to appear at the hearing.


Sec.  3.77  Hearing.

    (a) If an employee timely files a petition for a hearing under 
section 3.75, USDA shall select the time, date, and location for the 
hearing.
    (b)(1) Hearings shall be conducted by the hearing official 
designated in accordance with 5 CFR 550.1107; and
    (2) Rules of evidence shall not be adhered to, but the hearing 
official shall consider all evidence that he or she determines to be 
relevant to the debt that is the subject of the hearing and weigh it 
accordingly, given all of the facts and circumstances surrounding the 
debt.

[[Page 16]]

    (c) USDA will have the burden of going forward to prove the 
existence of the debt.
    (d) The employee requesting the hearing shall bear the ultimate 
burden of proof.
    (e) The evidence presented by the employee must prove that no debt 
exists or cast sufficient doubt such that reasonable minds could differ 
as to the existence of the debt.


Sec.  3.78  Written decision following a hearing.

    Written decisions provided after a hearing will include:
    (a) A statement of the facts presented at the hearing to support 
the nature and origin of the alleged debt and those presented to refute 
the debt;
    (b) The hearing officer's analysis, findings, and conclusions, 
considering all the evidence presented and the respective burdens of 
the parties, in light of the hearing;
    (c) The amount and validity of the alleged debt determined as a 
result of the hearing;
    (d) The payment schedule (including percentage of disposable pay), 
if applicable;
    (e) The determination that the amount of the debt at this hearing 
is the final agency action on this matter regarding the existence and 
amount of the debt for purposes of executing salary offset under 5 
U.S.C. 5514. However, even if the hearing official determines that a 
debt may not be collected by salary offset, but the creditor agency 
finds that the debt is still valid, the creditor agency may still seek 
collection of the debt by other means authorized by this part; and
    (f) Notice that the final determination by the hearing official 
regarding the existence and amount of a debt is subject to referral to 
Treasury under Sec.  3.33 in the same manner as any other delinquent 
debt.


Sec.  3.79  Review of USDA records related to the debt.

    (a) Notification by employee. An employee who intends to inspect or 
copy USDA records related to the debt must send a letter to USDA 
stating his or her intention. The letter must be received by USDA 
within 30 days of the date of the Notice of Intent to Offset Salary.
    (b) USDA response. In response to the timely notice submitted by 
the debtor as described in paragraph (a) of this section, USDA will 
notify the employee of the location and time when the employee may 
inspect and copy USDA records related to the debt.


Sec.  3.80  Written agreement to repay debts as alternative to salary 
offset.

    (a) Notification by employee. The employee may propose, in response 
to a Notice of Intent to Offset Salary, a written agreement to repay 
the debt as an alternative to salary offset. Any employee who wishes to 
do this must submit a proposed written agreement to repay the debt that 
is received by USDA within 30 days of the date of the Notice of Intent 
to Offset Salary or 15 days after the date of a hearing decision issued 
under Sec.  3.78.
    (b) USDA response. USDA will notify the employee whether the 
employee's proposed written agreement for repayment is acceptable. USDA 
may accept a repayment agreement instead of proceeding by offset. In 
making this determination, USDA will balance the USDA interest in 
collecting the debt against hardship to the employee. If the debt is 
delinquent and the employee has not disputed its existence or amount, 
USDA will accept a repayment agreement, instead of offset, for good 
cause such as, if the employee is able to establish that offset would 
result in undue financial hardship or would be against equity and good 
conscience.


Sec.  3.81  Procedures for salary offset: when deductions may begin.

    (a) Deductions to liquidate an employee's debt will be by the 
method and in the amount stated in USDA's Notice of Intent to Offset 
Salary to collect from the employee's current pay.
    (b) If the employee filed a petition for a hearing with USDA before 
the expiration of the period provided for in Sec.  3.75, then 
deductions will begin after the hearing officer has provided the 
employee with a hearing, and a final written decision has been rendered 
in favor of USDA.
    (c) If an employee retires or resigns before collection of the 
amount of the indebtedness is completed, the remaining indebtedness 
will be collected according to the procedures for administrative offset 
(see subpart D of this part).


Sec.  3.82  Procedures for salary offset: types of collection.

    A debt will be collected in a lump-sum or in installments. 
Collection will be by lump-sum collection unless the employee is 
financially unable to pay in one lump-sum, or if the amount of the debt 
exceeds 15 percent of disposable pay for an ordinary pay period. In 
these cases, deduction will be by installments, as set forth in Sec.  
3.83.


Sec.  3.83  Procedures for salary offset: methods of collection.

    (a) General. A debt will be collected by deductions at officially-
established pay intervals from an employee's current pay account, 
unless the employee and USDA agree to alternative arrangements for 
repayment under Sec.  3.80.
    (b) Installment deductions. Installment deductions will be made 
over a period not greater than the anticipated period of employment. 
The size and frequency of installment deductions will bear a reasonable 
relation to the size of the debt and the employee's ability to pay. 
However, the amount deducted for any period will not exceed 15 percent 
of the disposable pay from which the deduction is made, unless the 
employee has agreed in writing to the deduction of a greater amount. If 
possible, the installment payment will be sufficient in size and 
frequency to liquidate the debt in no more than three years. 
Installment payments of less than $25 per pay period or $50 a month 
will be accepted only in the most unusual circumstances.
    (c) Sources of deductions. USDA will make deductions only from 
basic pay, special pay, incentive pay, retired pay, retainer pay, or in 
the case of an employee not entitled to basic pay, other authorized 
pay.


Sec.  3.84  Procedures for salary offset: Imposition of interest, 
penalties, and administrative costs.

    Interest, penalties and administrative costs will be charged in 
accordance with Sec.  3.17.


Sec.  3.85  Non-waiver of rights.

    So long as there are no statutory or contractual provisions to the 
contrary, no employee payment (or all or portion of a debt) collected 
under these regulations will be interpreted as a waiver of any rights 
that the employee may have under 5 U.S.C. 5514.


Sec.  3.86  Refunds.

    USDA will refund promptly to the appropriate individual amounts 
offset under these regulations when:
    (a) A debt is waived or otherwise found not owed to the United 
States (unless expressly prohibited by statute or regulation); or
    (b) USDA is directed by an administrative or judicial order to 
refund amounts deducted from the employee's current pay.


Sec.  3.87  Agency regulations.

    USDA agencies may issue regulations or policies not inconsistent 
with OPM regulations (5 CFR part 550, subpart K) and regulations in 
this subpart

[[Page 17]]

governing the collection of a debt by salary offset.

Subpart H--Cooperation With the Internal Revenue Service

    Authority: 26 U.S.C. 61; 31 U.S.C. 3720A; I TFRM 4055.50.


Sec.  3.90  Reporting discharged debts to the Internal Revenue Service.

    When USDA discharges a debt, whether for the full value or less, it 
will report the discharge to the Internal Revenue Service (IRS) in 
accordance with current IRS instructions.

    Signed at Washington, DC on December 20, 2007.
Charles F. Conner,
Acting Secretary of Agriculture.
 [FR Doc. E7-25388 Filed 12-31-07; 8:45 am]
BILLING CODE 3410-KS-P