[Federal Register Volume 87, Number 157 (Tuesday, August 16, 2022)]
[Rules and Regulations]
[Pages 50246-50250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17117]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

[Docket No. Fiscal-2021-0007]
RIN 1530-AA21


Debt Collection Authorities Under the Debt Collection Improvement 
Act of 1996

AGENCY: Bureau of the Fiscal Service, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations of the Department of 
the Treasury (``Treasury''), Bureau of the Fiscal Service (``Fiscal 
Service''), regarding the Treasury Offset Program (``TOP'') and the 
Cross-Servicing program. The primary reason for amending the regulation 
is to inform the public about how Fiscal Service will use Social 
Security numbers in mailings, as required by the Social Security Number 
Fraud Prevention Act of 2017, which requires Fiscal Service to have 
final regulations in place by September 15, 2022.

DATES: This rule is effective September 15, 2022.

FOR FURTHER INFORMATION CONTACT: Tawanna Edmonds, Director, Receivables 
Management & Debt Services Division, Debt Management Services, Bureau 
of the Fiscal Service at (202) 874-6810.

SUPPLEMENTARY INFORMATION:

I. Background

    Legal Authorities. The Debt Collection Improvement Act of 1996 
(``DCIA''), Public Law 104-134, 110 Stat. 1321-358 et seq. (April 26, 
1996), authorized Federal agencies to refer Federal nontax debt to 
Treasury for collection services, among other things. See 31 U.S.C. 
3711(g). The DCIA authorized Federal disbursing officials to withhold 
eligible Federal nontax payments to pay the payee's delinquent nontax 
debt owed to the United States. See 31 U.S.C. 3716(c). The DCIA also 
provided that Federal nontax payments may be offset to collect 
delinquent debt owed to States, including past-due support, and that 
payments made by States may be offset to collect delinquent nontax debt 
owed to the United States. See 31 U.S.C. 3716(h). Further, Federal tax 
refund payments may be offset to collect nontax debt owed to the United 
States and debt owed to States, including past-due support. See 26 
U.S.C. 6402, 31 U.S.C. 3720A, and 42 U.S.C. 664.

[[Page 50247]]

    Cross-Servicing program. Fiscal Service administers the Cross-
Servicing program, through which it provides delinquent nontax debt 
collection services to Federal agencies under 31 U.S.C. 3711(g).
    Centralized Receivables Service. Fiscal Service administers the 
Centralized Receivables Service, or CRS, through which it provides 
invoicing and early delinquent debt collection services to Federal 
agencies under 31 U.S.C. 3711(g).
    Treasury Offset Program. Fiscal Service administers a centralized 
offset program, known as the Treasury Offset Program, or TOP, through 
which it offsets payments to collect debts.
    Revision of Regulations. Fiscal Service promulgated 31 CFR 285.12 
to implement 31 U.S.C. 3711(g). Among other things, the regulation 
codified at 31 CFR 285.12 describes the procedures and criteria for 
transferring delinquent debt to Treasury. It also explains the 
statutory exceptions to this requirement and the standards under which 
the Secretary of the Treasury (``Secretary'') will determine whether to 
grant exemptions to this requirement.
    Fiscal Service promulgated 31 CFR part 285, subpart A to implement 
the centralized offset of payments through TOP, pursuant to the Debt 
Collection Improvement Act of 1996.
    On March 2, 2022, Fiscal Service published a Notice of Proposed 
Rulemaking (``NPRM'') at 87 FR 11660 to revise the regulations codified 
at 31 CFR part 285, subpart A, and 31 CFR 285.12 (the ``existing 
regulations''). The primary reason for revising these regulations is to 
inform the public about how Fiscal Service will use Social Security 
numbers in mailings, as required by the Social Security Number Fraud 
Prevention Act of 2017, which requires Fiscal Service to have final 
regulations in place by September 15, 2022. The revisions also add 
definitions for previously undefined terms and reword certain 
provisions for clarity, consistent with the requirements of the Plain 
Writing Act of 2010 and Executive Order 12866 (Sept. 1993). This final 
rule implements the revisions proposed by the NPRM, without change, 
except to correct a typographical error by moving ``and'' from the end 
of Sec.  285.3(m)(2) to the end of Sec.  285.3(m)(3).

II. Analysis of Comments

    Fiscal Service received comments from two non-profit organizations 
in response to the NPRM.
    One comment addressed the definition of ``legally enforceable'' and 
suggested that debts should not be referred to Fiscal Service for 
collection until administrative appeals and other challenges are 
resolved. As stated in the NPRM, the term ``legally enforceable'' is 
used in the existing regulations, and the description of the meaning of 
that term in the existing regulations is in Sec.  285.12(c)(3). The 
definition of this term, as proposed by the NPRM, is consistent with 
the existing meaning. The proposed definition provides agencies with 
necessary flexibility to determine when it is appropriate to refer 
debts to Fiscal Service's Cross-Servicing program. The Cross-Servicing 
program collects a wide variety of debts (ranging from defaulted loans 
and benefit overpayments to complex audit disallowances and enforcement 
findings), and the appropriate level of review before determining a 
debt to be ``legally enforceable'' can differ significantly depending 
on the type of debt. Each agency is best equipped to determine the 
appropriate level of review for its debts.
    The comment also expressed concern that ``in the absence of some 
independent prohibition, agencies will be required to refer debts to'' 
the Cross-Servicing program. Fiscal Service does not agree that this is 
a necessary consequence of the statement in the NPRM that a pending 
appeal does not preclude the agency from referring a debt to the Cross-
Servicing program. Some agencies provide debtors with dispute 
opportunities beyond what is required by Fiscal Service's rules. Only 
after the agency provides at least the level of due process required by 
Fiscal Service's rules may the agency refer the debt to the Cross-
Servicing program. An agency would not be required to refer the debt to 
the Cross-Servicing program if it had not yet completed its required 
reviews. Moreover, agencies may suspend debt collection activity 
(including referring debts to the Cross-Servicing program) if the 
debtor has requested a waiver or review of the debt. 31 CFR 903.2. As 
such, Fiscal Service does not believe any change is necessary to the 
definition of ``legally enforceable.''
    One comment urged Fiscal Service to preserve and expand all 
existing provisions that allow for suspension of collection. This 
comment is outside the scope of this NPRM, as it addresses possible 
changes to a separate regulation, specifically 31 CFR 903.2. 
Nevertheless, for clarity, Fiscal Service notes that nothing proposed 
by the NPRM is intended to narrow the existing provisions that allow 
for the suspension of collection under 31 U.S.C. 3711(a)(3) and the 
associated regulations, including 31 CFR 903.2.
    One comment asserted that the NPRM does not sufficiently address 
the current debt collection system's impact on communities of color and 
recommended that Fiscal Service suspend the operation of TOP until 
``critical issues are resolved.'' This comment is outside the scope of 
the targeted changes proposed by the NPRM. Nevertheless, Fiscal Service 
notes that it is conducting an equity review in a separate forum. See 
Treasury's Equity Action Plan: One Year Progress Report (April 2022), 
available at https://home.treasury.gov/system/files/136/Treasury-EquityActionPlan-OneYearProgress.pdf.
    One comment recommended that Fiscal Service consider limiting the 
amounts that can be collected through offset of benefit and tax refund 
payments. This comment is outside the scope of the targeted changes 
proposed by the NPRM. This comment also made various recommendations 
regarding the collection of student loan debts owed to the Department 
of Education. Fiscal Service does not have regulatory responsibilities 
over student loan debts and would not be authorized or empowered to 
implement some of the recommended changes.
    One comment stated that Fiscal Service should exempt means-tested 
tax credits from offset. This comment is outside the scope of the 
targeted changes proposed by the NPRM. Moreover, Fiscal Service lacks 
the statutory authority to exempt federal tax payments from offset. The 
Secretary has limited authority to exempt federal nontax payments from 
offset under 31 U.S.C. 3716(c)(3)(B), including means-tested payments. 
The Secretary has no such authority with regard to federal tax 
payments.
    One comment asserted that Fiscal Service should increase the dollar 
threshold for debts that agencies must refer for collections. This 
comment is outside the scope of the changes contemplated by the NPRM. 
Nevertheless, Treasury notes that a change to the regulation to 
accomplish this change is not required, as the existing regulation set 
the threshold at more than $25, ``or such other amount as Fiscal 
Service may determine.'' 31 CFR 285.5(d)(3)(i)(C), 285.12(c)(4). Fiscal 
Service can, at any time it deems appropriate, increase this threshold 
without the need for regulatory action, through its regular guidance 
for or communications with its creditor agencies. Moreover, under 31 
CFR 903.3(a)(3), agencies may terminate collection when the costs of 
collection are anticipated to exceed the amount recoverable. 
Termination of collection action would excuse the agencies from

[[Page 50248]]

the general requirement to refer debts to the Cross-Servicing program 
or the Treasury Offset Program. Relatedly, 31 CFR 901.10 states that 
agencies should periodically evaluate the cost-effectiveness of 
collection techniques and establish guideline with respect to points at 
which costs of further collection efforts are likely to exceed 
recoveries. Collection costs in this regard are likely to be a 
significant factor for small dollar debts.
    One comment urged Fiscal Service to look at all its regulations 
impacting debt collection to mitigate harm to debtors and to advance 
racial equity including, for example, its administrative wage 
garnishment regulation. This comment is out of scope and is not 
addressed here.

III. Procedural Analyses

    This rule is not a significant rule for purposes of Executive Order 
12866 and has not been reviewed by the Office of Management and Budget.
    Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), 
it is hereby certified that the rule will not have a significant 
economic impact on a substantial number of small entities because this 
rule only impacts persons who receive payments from Federal agencies or 
States and who are delinquent on debts owed to Federal agencies or 
States. Accordingly, a regulatory flexibility analysis under the 
Regulatory Flexibility Act is not required.

List of Subjects in 31 CFR Part 285

    Administrative practice and procedure, Black lung benefits, Child 
support, Child welfare, Claims, Credit, Debts, Disability benefits, 
Federal employees, Garnishment of wages, Hearing and appeal procedures, 
Income taxes, Loan programs, Payments, Privacy, Railroad retirement, 
Railroad unemployment insurance, Salaries, Social Security benefits, 
Supplemental Security Income, Taxes, Unemployment compensation, 
Veteran's benefits, Wages.

    For the reasons set forth in this preamble, Fiscal Service amends 
31 CFR part 285 as follows:

PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION 
IMPROVEMENT ACT OF 1996

0
1. The authority citation for part 285 continues to read as follows:

    Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 
3711, 3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61 
FR 51763, 3 CFR, 1996 Comp., p. 216.


0
2. In Sec.  285.1, add paragraph (q) to read as follows:


Sec.  285.1  Collection of past-due support by administrative offset.

* * * * *
    (q) Social Security numbers. Fiscal Service will ensure that an 
individual's Social Security number will not be visible on the outside 
of any package it sends by mail. In addition, Fiscal Service generally 
will redact or partially redact Social Security numbers in documents it 
sends by mail; however, to administer administrative offset, Fiscal 
Service (and other disbursing officials) may include Social Security 
numbers in mailed documents, including, for example:
    (1) In interoffice and interagency communications;
    (2) In notices, including notices to the debtor or payee that an 
offset has or will occur, when the Social Security number is (or is 
embedded in) a creditor agency's account number, debt identification 
number, or debtor identification number;
    (3) In response to a request of a debtor or a debtor's 
representative for records of Fiscal Service's offset activities; and
    (4) When required by law.

0
3. In Sec.  285.3, add paragraph (m) to read as follows:


Sec.  285.3  Offset of tax refund payments to collect past-due support.

* * * * *
    (m) Social Security numbers. Fiscal Service will ensure that an 
individual's Social Security number will not be visible on the outside 
of any package it sends by mail. In addition, Fiscal Service generally 
will redact or partially redact Social Security numbers in documents it 
sends by mail; however, to administer the tax refund offset program, 
Fiscal Service (and other disbursing officials) may include Social 
Security numbers in mailed documents, including, for example:
    (1) In interoffice and interagency communications;
    (2) In notices, including notices to the debtor or payee that an 
offset has or will occur, when the Social Security number is (or is 
embedded in) a creditor agency's account number, debt identification 
number, or debtor identification number;
    (3) In response to a request of a debtor or a debtor's 
representative for records of Fiscal Service's offset activities; and
    (4) When required by law.

0
4. In Sec.  285.5, add paragraph (l) to read as follows:


Sec.  285.5  Centralized offset of Federal payments to collect nontax 
debts owed to the United States.

* * * * *
    (l) Social Security numbers. Fiscal Service will ensure that an 
individual's Social Security number will not be visible on the outside 
of any package it sends by mail. In addition, Fiscal Service generally 
will redact or partially redact Social Security numbers in documents it 
sends by mail; however, to administer the Treasury Offset Program, 
Fiscal Service (and other disbursing officials) may include Social 
Security numbers in mailed documents, including, for example:
    (1) In interoffice and interagency communications;
    (2) In notices, including notices to the debtor or payee that an 
offset has or will occur, when the Social Security number is (or is 
embedded in) a creditor agency's account number, debt identification 
number, or debtor identification number;
    (3) In response to a request of a debtor or a debtor's 
representative for records of Fiscal Service's offset activities; and
    (4) When required by law.

0
5. In Sec.  285.6, add paragraph (n) to read as follows:


Sec.  285.6  Administrative offset under reciprocal agreements with 
states.

* * * * *
    (n) Social Security numbers. Fiscal Service will ensure that an 
individual's Social Security number will not be visible on the outside 
of any package it sends by mail. In addition, Fiscal Service generally 
will redact or partially redact Social Security numbers in documents it 
sends by mail; however, to administer administrative offset, Fiscal 
Service (and other disbursing officials) may include Social Security 
numbers in mailed documents, including, for example:
    (1) In interoffice and interagency communications;
    (2) In notices, including notices to the debtor or payee that an 
offset has or will occur, when the Social Security number is (or is 
embedded in) a creditor agency's account number, debt identification 
number, or debtor identification number;
    (3) In response to a request of a debtor or a debtor's 
representative for records of Fiscal Service's offset activities; and
    (4) When required by law.

0
6. In Sec.  285.8, add paragraph (k) to read as follows:


Sec.  285.8  Offset of tax refund payments to collect certain debts 
owed to States.

* * * * *
    (k) Social Security numbers. Fiscal Service will ensure that an 
individual's

[[Page 50249]]

Social Security number will not be visible on the outside of any 
package it sends by mail. In addition, Fiscal Service generally will 
redact or partially redact Social Security numbers in documents it 
sends by mail; however, to administer the tax refund offset program, 
Fiscal Service (and other disbursing officials) may include Social 
Security numbers in mailed documents, including, for example:
    (1) In interoffice and interagency communications;
    (2) In notices, including notices to the debtor or payee that an 
offset has or will occur, when the Social Security number is (or is 
embedded in) a creditor agency's account number, debt identification 
number, or debtor identification number;
    (3) In response to a request of a debtor or a debtor's 
representative for records of Fiscal Service's offset activities; and
    (4) When required by law.

0
7. Section 285.12(a) is amended by:
0
a. Removing the words ``an agency'' and ``An agency'' wherever they 
appear and adding in their place the words ``a Federal agency'' and ``A 
Federal agency'', respectively;
0
b. Removing the words ``the agency'' and ``the agency's'' wherever they 
appear and adding in their place the words ``the Federal agency'' and 
``the Federal agency's'', respectively;
0
c. In paragraph (a):
0
i. Removing the definition for ``Agency'',
0
ii. Adding in alphabetical order definitions for ``Centralized 
Receivables Service,'' ``Cross-Servicing program,'' and ``Days 
delinquent'';
0
iii. Removing the words ``Secretary of the Treasury'' and adding in 
their place the words ``Secretary'' in the definition for ``Debt 
collection center'';
0
iv. Adding in alphabetical order definitions for ``Debtor,'' 
``Delinquent or past-due,'' ``Federal agency,'' and ``Legally 
enforceable''; and
0
v. Removing the words ``a Federal agency'' and adding in their place 
the words ``the United States or a Federal agency'' in the definition 
for ``Person'';
0
d. Revising paragraphs (b), (c), and (d)(1)(iii);
0
e. Removing the word ``or'' at the end of paragraph (d)(1)(v);
0
f. Redesignating paragraph (d)(1)(vi) as paragraph (d)(1)(vii);
0
g. Adding a new paragraph (d)(1)(vi);
0
h. Revising paragraphs (d)(4);
0
i. Adding (d)(5) introductory text;
0
j. Removing paragraph (d)(6);
0
k. Removing and reserving paragraph (e);
0
l. In paragraph (i), removing the words ``delegatee'' and ``agency'' 
and adding in their place the words ``delegate'' and ``the debt'', 
respectively;
0
m. Revising paragraph (j); and
0
n. Adding paragraph (k).
    The revisions and additions read as follows:


Sec.  285.12  Transfer of debts to Treasury for collection.

    (a) * * *
    Centralized Receivables Service means the program through which 
Fiscal Service provides servicing, pursuant to 31 U.S.C. 3711(g), for 
Federal nontax debt from the point at which a creditor agency 
establishes a debt until the debt is paid, otherwise resolved, or 
referred to the Cross-Servicing program for further action.
* * * * *
    Cross-Servicing program means the program through which Fiscal 
Service provides delinquent nontax debt collection services pursuant to 
31 U.S.C. 3711(g).
    Days delinquent refers to the number of days that a debt has been 
in a delinquent status. For administrative debts (e.g., debts arising 
from fines, penalties, and overpayments), the first day of delinquency 
generally is the date of the creditor agency's initial written demand 
for payment. For debts that arise from the extension of credit through 
direct loans, loan guarantees, or insurance, the date of delinquency 
generally is the due date specified in the applicable agreement or 
instrument.
* * * * *
    Debtor means a person who owes a debt.
    Delinquent or past-due refers to the status of a debt and means a 
debt has not been paid by the date specified in the creditor agency's 
initial written demand for payment, or other applicable agreement or 
instrument, unless other payment arrangements satisfactory to the 
creditor agency have been made.
    Federal agency means a department, agency, court, court 
administrative office, or instrumentality in the executive, judicial, 
or legislative branch of the Federal Government, including government 
corporations.
* * * * *
    Legally enforceable refers to a characteristic of a debt and means 
there has been a final agency determination that the debt, in the 
amount stated, is due, and there are no legal bars to collection. A 
debt would not be legally enforceable, for example, if the debt is:
    (1) The subject of a pending administrative review required by a 
statute or regulation that prohibits collection action during the 
review process; or
    (2) Governed by a statute that precludes collection.
    (b) In general. Fiscal Service and other debt collection centers 
may take debt collection action on behalf of one or more Federal 
agencies or a unit or subagency thereof. Fiscal Service provides these 
services through its Cross-Servicing program and its Centralized 
Receivables Service.
* * * * *
    (c) Mandatory transfer of debts to Fiscal Service's Cross-Servicing 
program. (1) A debt is considered eligible for transfer to the Cross-
Servicing program only if it is past due and is legally enforceable.
    (2) Except as set forth in paragraphs (c)(3) and (d) of this 
section, a creditor agency must transfer any eligible debt that is over 
$25 (or such other amount as Fiscal Service may determine) to the 
Cross-Servicing program by no later than 120 days delinquent if the 
creditor agency relies on the Cross-Servicing program to submit the 
transferred debts for centralized offset on the creditor agency's 
behalf or, otherwise, by no more than 180 days delinquent.
    (3) If a final agency determination resulting from an 
administrative appeal or review process is not made until after the 
time specified in paragraph (c)(2) of this section, the creditor agency 
must transfer such debt to the Cross-Servicing program within 30 days 
after the date of the final decision.
    (4) For accounting and reporting purposes, the debt remains on the 
books and records of the Federal agency, which transferred the debt.
    (5) On behalf of the creditor agency, Fiscal Service will take 
appropriate action to collect or compromise the transferred debt, or to 
suspend or terminate collection action thereon. Appropriate action to 
collect a debt may include referral to another debt collection center, 
a private collection contractor, or the Department of Justice for 
litigation. The creditor agency must advise Fiscal Service, in writing, 
of any specific statutory or regulatory requirements pertaining to its 
debt and will agree, in writing, to a collection strategy, which 
includes parameters for entering into compromise and repayments 
agreements with debtors.
* * * * *
    (d) * * *
    (1) * * *
    (iii) Is at a private collection contractor if the debt has been 
referred to a private collection contractor for a period of time 
determined by the Secretary;
* * * * *
    (vi) Is being serviced and/or collected in accordance with 
applicable statutes

[[Page 50250]]

and/or regulations by third parties, such as private lenders or 
guaranty agencies; or
* * * * *
    (4) A debt is being collected by internal offset if a creditor 
agency expects the debt to be collected in full within three (3) years 
from the date of delinquency through the withholding of funds payable 
to the debtor by the creditor agency, or if the creditor agency has 
issued notice to the debtor of the creditor agency's intent to offset 
such funds.
    (5) The Secretary may exempt classes of debt from mandatory 
referral.
* * * * *
    (j) Fees. Fiscal Service and other debt collection centers may 
charge Federal agencies fees sufficient to cover the full cost of 
providing debt collection services authorized by this section. Fiscal 
Service and other debt collection centers may calculate fees in any 
manner designed to cover up to the full cost of providing these 
services, including based on a percentage of collections received on 
account of a debt while it was being serviced under this section or a 
flat fee based on actions taken under this section by Fiscal Service or 
another debt collection center with regard to a debt or group of debts. 
Such fees may be determined based on overall program costs and need not 
be based on costs related to the collection of a specific debt. Fiscal 
Service and debt collection centers are authorized to retain fees from 
amounts collected and may deposit and use such fees in accordance with 
31 U.S.C. 3711(g). Fees charged by Fiscal Service and other debt 
collection centers may be added to the debt as an administrative cost 
if authorized under 31 U.S.C. 3717(e).
    (k) Social Security numbers. When conducting activities for or 
related to its Centralized Receivables Service or Cross-Servicing 
program, Fiscal Service will ensure that an individual's Social 
Security number will not be visible on the outside of any package it 
sends by physical mail or in the subject line of an email. In addition, 
Fiscal Service generally will redact or partially redact Social 
Security numbers in documents it sends by mail; however, to administer 
these programs, Fiscal Service may include Social Security numbers in 
mailed documents, including, for example:
    (1) In interoffice and interagency communications;
    (2) In communications with private collection contractor and agents 
that assist Fiscal Service in its debt collection activities;
    (3) In notices and letters, including demand letters and notices to 
employers regarding wage garnishment, when the Social Security number 
is (or is embedded in) a creditor agency's account number, debt 
identification number, or debtor identification number;
    (4) In notices to employers regarding wage garnishment;
    (5) In response to a request of a debtor or a debtor's 
representative for records of Fiscal Service's collection activities; 
and
    (6) When required by law.

David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2022-17117 Filed 8-15-22; 8:45 am]
BILLING CODE 4810-AS-P