82_FR_6265 82 FR 6253 - Student Assistance General Provisions

82 FR 6253 - Student Assistance General Provisions

DEPARTMENT OF EDUCATION

Federal Register Volume 82, Issue 12 (January 19, 2017)

Page Range6253-6259
FR Document2017-00972

The Secretary amends the Student Assistance General Provisions regulations governing participation in the student financial assistance programs authorized under Title IV of the Higher Education Act of 1965, as amended (title IV, HEA programs). The amended regulations update the Department's hearing procedures for actions to establish liability against an institution of higher education, and establish procedural rules governing recovery proceedings under the Department's borrower defense regulations.

Federal Register, Volume 82 Issue 12 (Thursday, January 19, 2017)
[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)]
[Rules and Regulations]
[Pages 6253-6259]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-00972]


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DEPARTMENT OF EDUCATION

34 CFR Part 668

RIN 1840-AD22
[Docket ID ED-2015-OPE-0103]


Student Assistance General Provisions

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Final rule with request for comments.

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SUMMARY: The Secretary amends the Student Assistance General Provisions 
regulations governing participation in the student financial assistance 
programs authorized under Title IV of the Higher Education Act of 1965, 
as amended (title IV, HEA programs). The amended regulations update the 
Department's hearing procedures for actions to establish liability 
against an institution of higher education, and establish procedural 
rules governing recovery proceedings under the Department's borrower 
defense regulations.

DATES: Effective date: These regulations are effective January 19, 
2017.
    Comment due date: We will accept comments on or before March 20, 
2017. We may consider the comments received and may conduct additional 
rulemaking based on the comments.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
    If you are submitting comments electronically, we strongly 
encourage you to submit any comments or attachments in Microsoft Word 
format. If you must submit a comment in Portable Document Format (PDF), 
we strongly encourage you to convert the PDF to print-to-PDF format or 
to use some other commonly used searchable text format. Please do not 
submit the PDF in a scanned format. Using a print-to-PDF format allows 
the U.S. Department of Education (the Department) to electronically 
search and copy certain portions of your submissions.

[[Page 6254]]

     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
Regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Help.''
     Postal Mail, Commercial Delivery, or Hand Delivery: The 
Department strongly encourages commenters to submit their comments 
electronically. However, if you mail or deliver your comments about 
these regulations, address them to Jean-Didier Gaina, U.S. Department 
of Education, 400 Maryland Ave. SW., Room 6W232B, Washington, DC 20202.

    Privacy Note:  The Department's policy is to make all comments 
received from members of the public available for public viewing in 
their entirety on the Federal eRulemaking Portal at 
www.regulations.gov. Therefore, commenters should be careful to 
include in their comments only information that they wish to make 
publicly available.


FOR FURTHER INFORMATION CONTACT: Annmarie Weisman, U.S. Department of 
Education, 400 Maryland Avenue SW., Room 6W425, Washington, DC 20202-
6244. Telephone: (202) 453-6712 or by email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: 

Invitation To Comment

    As discussed below, these regulations do not establish substantive 
policy, but instead establish procedures that must be followed. As 
procedural regulations, there is no requirement for a comment period. 
Although these regulations are final regulations, we are interested in 
whether you think we should make any changes in these regulations and 
thus we are inviting your comments. We will consider these comments in 
determining whether to revise the regulations. To ensure that your 
comments have maximum effect, we urge you to identify clearly the 
specific section or sections of the regulations that each of your 
comments addresses and to arrange your comments in the same order as 
the regulations. See ADDRESSES for instructions on how to submit 
comments.
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirements of reducing regulatory burden that might result from these 
regulations. Please let us know of any further ways we could reduce 
potential costs or increase potential benefits while preserving the 
effective and efficient administration of the Department's programs and 
activities.
    During and after the comment period, you may inspect all public 
comments about these regulations by accessing Regulations.gov. You may 
also inspect the comments in person in room 6W245, 400 Maryland Avenue 
SW., Washington, DC, between the hours of 8:30 a.m. and 4:00 p.m., 
Eastern time, Monday through Friday of each week except Federal 
holidays. If you want to schedule time to inspect comments, please 
contact the person listed under FOR FURTHER INFORMATION CONTACT.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking 
Record

    On request, we will supply an appropriate accommodation or 
auxiliary aid to an individual with a disability who needs assistance 
to review the comments or other documents in the public rulemaking 
record for these regulations. If you want to schedule an appointment 
for this type of accommodation or auxiliary aid, please contact the 
person listed under FOR FURTHER INFORMATION CONTACT.

Background

    On November 1, 2016, the Department of Education promulgated new 
regulations governing the William D. Ford Federal Direct Loan Program 
to establish a new Federal standard and a process for determining 
whether a borrower has a defense to repayment on a loan based on an act 
or omission of a school (the borrower defense regulations). If the 
Department determines that a borrower is eligible for relief under the 
borrower defense regulations, it has the authority to recover losses 
stemming from such borrower relief from the institution whose conduct 
gave rise to the borrower defense. These regulations establish the 
procedural rules that would govern such borrower defense and 
institutional recovery proceedings, and are designed to ensure that 
institutions are afforded a full and fair opportunity to defend 
themselves in such proceedings.
    These regulations amend the Department's existing regulations 
governing proceedings to assess a fine, limitation, suspension, or 
termination against an institution by adding procedures for a recovery 
proceeding under the borrower defense regulations. Such a proceeding 
may be used when pursuing an action under either the Department's new 
borrower defense regulation at 34 CFR 685.222 or its precursor at 34 
CFR 685.206. These regulations are designed to balance important 
interests by ensuring that institutions are protected by due process of 
law prior to the imposition of any monetary liability under the 
borrower defense regulations, while also ensuring that determinations 
of the validity of borrower defense claims asserted against 
institutions are resolved fairly, efficiently, and expeditiously for 
all parties. In addition, these regulations clarify and update the 
procedural provisions more broadly applicable to fine, limitation, 
suspension, and termination proceedings.
    Under the borrower defense regulations at 34 CFR 685.222, effective 
July 1, 2017, the applicable process for filing and reviewing claims 
will depend on whether a borrower's application is considered by the 
Department as an individual claim or if the Department identifies the 
application as factually similar to other applications such that the 
Department identifies a group of borrowers (potentially including 
borrowers who have not submitted applications) with similar claims. The 
process will also depend on whether the relevant institution is 
``open'' or ``closed'', as those terms are described in the 
regulations. See 34 CFR 685.222(g)through(h).
    The Department has the authority to pursue claims for recovery for 
losses that the Department has already incurred in granting individual 
borrower relief, either as stand-alone actions or in combination with 
group proceedings where those individual claims presented the same 
facts and circumstances as the group claims. In those instances, the 
determination of the validity of the individual's discharge claim does 
not depend on the hearing official's decision, and the Department does 
not rescind a discharge already granted to an individual if the 
Department does not succeed in proving the validity of that claim in 
this proceeding.
    Beginning July 1, 2017, the Department will use these procedural 
regulations both to determine the validity of borrower claims the 
Department asserts on behalf of borrowers in group claims against 
``open'' institutions, and to hold the institutions liable for losses 
on those claims in accordance with 34 CFR 685.222(h). In these 
instances, the hearing official determines the validity of the borrower 
claims and, correspondingly, whether relief will be granted to these 
group borrowers. Borrowers may opt out of the group process. When the 
Department seeks to recover for losses for claims approved

[[Page 6255]]

under current authority and before July 1, 2017, the Department will 
use the procedures in these regulations to pursue recovery from the 
institution. As with any other proceedings to recover on claims already 
approved, the outcome of a proceeding brought to recover for claims 
already approved prior to July 1, 2017 will not affect relief already 
granted to borrowers, but only the accountability of the institution. 
At its discretion, the Department may also use these regulations to 
bring actions against ``closed'' institutions, as defined in 34 CFR 
685.222(g), in order to establish an institution's liability for 
damages due to the Department as a result of individual or group 
borrower defense relief.
    The Department bears the burden of proof in any recovery action 
against an institution for all claims the Department asserts. The 
Department must therefore prove the merit of the claims it asserts for 
members of the group. A hearing official will determine the merit of 
the claims, the relief for members of the group, and the liability of 
the institution. The Department must also prove in the hearing process 
the merit of claims it asserts for losses on discharges it has already 
approved as individual claims, although, as previously indicated, 
individual discharges already granted by the Department will not be 
affected if the Department is not successful in proving the claim in 
this proceeding against the institution.
    These regulations are only applicable to actions initiated by the 
Department to fine an institution, to limit, suspend, or terminate the 
eligibility of an institution or servicer, or to recover from an 
institution for losses from borrower defense claims, and do not 
encompass the process by which the Department evaluates individual 
borrower claims or claims for which the Department does not seek to 
obtain a recovery. That process is set forth in the borrower defense 
regulations at 34 CFR 685.222(e). In addition, the Department plans to 
issue a borrower guide before the borrower defense regulations go into 
effect to ensure borrowers understand the application process and 
criteria for seeking debt relief.

Waiver of Proposed Rulemaking, Negotiated Rulemaking, and Delayed 
Effective Date

    Under the Administrative Procedure Act (5 U.S.C. 553), the 
Department generally offers interested parties the opportunity to 
comment on proposed regulations. These regulations only govern the 
procedures for initiating an action against an institution and the 
hearing rules applicable to such a proceeding. As such, these 
regulations make procedural changes only and do not establish 
substantive policy. The regulations are therefore rules of agency 
practice and procedure, and exempt from notice and comment rulemaking 
under 5 U.S.C. 553(b)(A). However, the Department is providing a 60-day 
comment period and invites interested persons to participate in this 
rulemaking by submitting written comments. The Department may consider 
the comments received and may conduct additional rulemaking based on 
the comments.
    The APA also generally requires that regulations be published at 
least 30 days before their effective date, unless the agency has good 
cause to implement its regulations sooner (5 U.S.C. 553(d)(3)). Again, 
because these final regulations are merely rules of agency practice and 
procedure, there is good cause to make them effective on the day they 
are published. For the same reasons, the Secretary has determined, 
under section 492(b)(2) of the HEA, 20 U.S.C. 1098a(b)(2), that these 
regulations should not be subject to negotiated rulemaking.

Executive Orders 12866 and 13563

Regulatory Impact Analysis

    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action'' as an action likely 
to result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy, productivity, competition, 
jobs, the environment, public health or safety, or State, local, or 
tribal governments or communities in a material way (also referred to 
as an ``economically significant'' rule);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This final regulatory action is not a significant regulatory action 
subject to review by OMB under section 3(f) of Executive Order 12866.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--
    (1) Propose or adopt regulations only on a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account--among other things and to the extent practicable--the costs of 
cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or provide 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    We are issuing these final regulations only on a reasoned 
determination that their benefits justify their costs. In choosing 
among alternative regulatory approaches, we selected those approaches 
that maximize net benefits. Based on the analysis that follows, the 
Department believes that these final regulations are consistent with 
the principles in Executive Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, and tribal governments in the exercise of 
their governmental functions.
    In accordance with both Executive orders, the Department has 
assessed the potential costs and benefits, both quantitative and 
qualitative, of this regulatory action. The potential costs associated 
with this regulatory action

[[Page 6256]]

are those resulting from statutory requirements and those we have 
determined as necessary for administering the Department's programs and 
activities. There are no costs additional to those described under 
Regulatory Impact Analysis in the notice of final regulations for the 
borrower defense regulations published in the Federal Register on 
November 1, 2016 (81 FR 75926). These regulations will benefit 
institutions by ensuring that, in any action to fine an institution, to 
limit, suspend, or terminate the eligibility of an institution to 
participate in the title IV, HEA programs, or to determine the validity 
of claims against the institution, there are established procedures 
that provide both due process as well as an efficient process for the 
timely resolution of claims.

Clarity of the Regulations

    Executive Order 12866 and the Presidential memorandum ``Plain 
Language in Government Writing'' require each agency to write 
regulations that are easy to understand.
    The Secretary invites comments on how to make these regulations 
easier to understand, including answers to questions such as the 
following:
     Are the requirements in the regulations clearly stated?
     Do the regulations contain technical terms or other 
wording that interferes with their clarity?
     Does the format of the regulations (grouping and order of 
sections, use of headings, paragraphing, etc.) aid or reduce their 
clarity?
     Would the regulations be easier to understand if we 
divided them into more (but shorter) sections? (A ``section'' is 
preceded by the symbol ``Sec.  '' and a numbered heading; for example, 
Sec.  668.81.)
     Could the description of the regulations in the 
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in 
making the regulations easier to understand? If so, how?
     What else could we do to make the regulations easier to 
understand?
    To send any comments that concern how the Department could make 
these regulations easier to understand, see the instructions in the 
ADDRESSES section.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
The small entities that are affected by these regulations are small 
postsecondary institutions. These regulations do not have a significant 
economic impact on these entities because all substantive rules that 
govern determinations of liability have already been established in the 
Department's borrower defense regulations promulgated November 1, 2016.

Paperwork Reduction Act of 1995

    The Paperwork Reduction Act of 1995 does not require you to respond 
to a collection of information unless it displays a valid OMB control 
number. We display the valid OMB control number assigned to a 
collection of information in final regulations at the end of the 
affected section of the regulations.

Intergovernmental Review

    This program is not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    The Secretary particularly requests comments on whether these 
regulations require transmission of information that any other agency 
or authority of the United States gathers or makes available.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
Internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.thefederalregister.org/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or PDF. To use PDF you must have Adobe Acrobat 
Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

(Catalog of Federal Domestic Assistance Number: 84.268, Federal 
Direct Student Loans)

List of Subjects in 34 CFR Part 668

    Administrative practice and procedure, Aliens, Colleges and 
universities, Consumer protection, Grant programs--education, Loan 
programs--education, Reporting and recordkeeping requirements, 
Selective Service System, Student aid, Vocational education.

    Dated: January 11, 2017.
John B. King, Jr.,
Secretary of Education.

    For the reasons discussed, the Secretary amends part 668 of title 
34 of the Code of Federal Regulations as follows:

PART 668--STUDENT ASSISTANCE GENERAL PROVISIONS

0
1. The authority citation for part 668 continues to read as follows:

    Authority: 20 U.S.C. 1001-1003, 1070a, 1070g, 1085, 1087b, 
1087d, 1087e, 1088, 1091, 1092, 1094, 1099c, 1099c-1, 1221e-3, and 
3474, unless otherwise noted.


0
 2. Section 668.81 is amended by:
0
A. Adding paragraph (a)(5).
0
B. Adding paragraphs (e) through (g).
0
C. Revising the authority citation.
    The additions and revision read as follows:


Sec.  668.81  Scope and special definitions.

    (a) * * *
    (5) The determination of--
    (i) Borrower defense to repayment claims that are brought by the 
Department against an institution under Sec.  685.206 or Sec.  685.222; 
and
    (ii) Liability of an institution to the Secretary for losses to the 
Secretary arising from these claims.
* * * * *
    (e) The proceedings described in this subpart provide the 
institution's sole opportunity for a hearing on the existence and 
amount of the debt that is required by applicable law prior to the 
Department collecting the debt from any available funds, including but 
not limited to offsetting the debt or any liability against funds to be 
provided to an institution pursuant to any Title IV, HEA program in 
which that institution participates.
    (f) Nothing contained in this subpart limits the right of the 
Department to gather information, including by subpoena, or conduct any 
examination, audit, program review, investigation, or other review 
authorized by other applicable law.
    (g) Unless directed by a court of competent jurisdiction, the 
hearing official, or the Secretary for good cause, if a collateral 
attack is brought in any court concerning all or any part of any 
proceeding under this subpart, the challenged proceeding shall continue 
without regard to the pendency of that court proceeding. No default or 
other failure to timely act as directed in a proceeding authorized by 
this subpart shall be excused based on the pendency of such court 
proceeding.

[[Page 6257]]


(Authority: 20 U.S.C. 1094)


Sec.  668.83  [Amended]

0
 3. In Sec.  668.83(f)(1), remove ``Sec.  668.90(c)'' and add, in its 
place, ``Sec.  668.91(c)''.

0
 4. In Sec.  668.84 revise paragraphs (b)(3) and (b)(4) to read as 
follows:


Sec.  668.84  Fine proceedings.

* * * * *
    (b) * * *
    (3) If the institution or servicer requests a hearing by the time 
specified in paragraph (b)(1)(iii) of this section, the designated 
department official transmits the request for hearing and response to 
the Office of Hearings and Appeals, which sets the date and the place. 
The date is at least 15 days after the designated department official 
receives the request.
    (4) A hearing official conducts a hearing in accordance with Sec.  
668.89.
* * * * *

0
 5. Section 668.85 is amended by:
0
A. In paragraph (b)(1)(iii), removing ``Sec.  668.90(b)(2)'' and 
adding, in its place, ``Sec.  668.91(b)(2)''.
0
B. Revising paragraph (b)(3).
0
C. In paragraph (b)(4), removing ``Sec.  668.88'' and adding, in its 
place, ``Sec.  668.89''.
    The revision reads as follows:


Sec.  668.85  Suspension proceedings.

* * * * *
    (b) * * *
    (3) If the institution or servicer requests a hearing by the time 
specified in paragraph (b)(1)(iii) of this section, the designated 
department official transmits the request for hearing and response to 
the Office of Hearings and Appeals, which sets the date and the place. 
The date is at least 15 days after the designated department official 
receives the request. The suspension does not take place until the 
requested hearing is held.
* * * * *

0
 6. Section 668.86 is amended by:
0
A. In paragraph (a)(3), removing ``Sec. Sec.  668.93 and 668.94'' and 
adding, in its place, ``Sec. Sec.  668.94 and 668.95''.
0
B. Revising paragraphs (b)(3) and (b)(4).
    The revisions read as follows:


Sec.  668.86  Limitation or termination proceedings.

* * * * *
    (b) * * *
    (3) If the institution or servicer requests a hearing by the time 
specified in paragraph (b)(1)(iii) of this section, the designated 
department official transmits the request for hearing and response to 
the Office of Hearings and Appeals, which sets the date and place. The 
date is at least 15 days after the designated department official 
receives the request. The limitation or termination does not take place 
until after the requested hearing is held.
    (4) A hearing official conducts a hearing in accordance with Sec.  
668.89.
* * * * *


Sec. Sec.  668.87 through 668.98  [Redesignated as Sec. Sec.  668.88 
through 668.99]

0
 7. Redesignate Sec. Sec.  668.87 through 668.98 as Sec. Sec.  668.88 
through 668.99.

0
 8. Add Sec.  668.87 to read as follows:


Sec.  668.87  Borrower defense and recovery proceedings.

    (a) Procedures. (1) A designated department official begins a 
borrower defense and recovery proceeding against an institution by 
sending the institution a notice by certified mail, return receipt 
requested. This notice--
    (i) Informs the institution of the Secretary's intent--
    (A) To determine the validity of borrower defense claims on behalf 
of a group under Sec.  685.222(h), to demonstrate the validity of 
borrower defense claims already approved, or both, as applicable; and
    (B) To recover from the institution by offset, by claim on a letter 
of credit or other protection provided by the institution, or 
otherwise, for losses on account of borrower defense claims asserted on 
behalf of the group and borrower defense claims already approved, as 
applicable;
    (ii) Includes a statement of facts and law sufficient to show that 
the Department is entitled to grant any borrower defense relief 
asserted within the statement, and recover for the amount of losses to 
the Secretary caused by the granting of such relief;
    (iii) Specifies the date on which the Secretary intends to take 
action to recover the amount of losses arising from the granting of 
such relief, which date will be at least 20 days from mailing of the 
notice of intent and informs the institution that the Secretary will 
not take action to recover the amount of such loss on the date 
specified if the designated department official receives, by that date, 
a written response from the institution indicating why the Secretary 
should not recover. The notice shall also inform the institution that 
if it wishes to request a hearing pursuant to this subpart, the 
institution must include such a request with its written response; and
    (iv) Informs the institution whether the designated Department 
official intends to proceed with--
    (A) A single action; or
    (B) An action in two phases--
    (1) The determination whether the institution's act or omission 
gave rise to valid borrower defense claims; and
    (2) The determination of the amount of borrower defense relief.
    (2) Although the hearing official shall have the discretion to 
bifurcate proceedings with, or without, a motion of either party, any 
decision by the designated department official to bifurcate the 
proceeding in accordance with paragraph (a)(1)(iv)(B) of this section 
may only be modified on motion with good cause shown.
    (3) A hearing official conducts a hearing in accordance with Sec.  
668.89.
    (b) Effect of a response by the institution. (1) If the institution 
submits a written response, but does not therein request a hearing, the 
designated department official, after considering that material, 
notifies the institution whether the Secretary will take the proposed 
recovery action for borrower defense claims and, if so, the date of 
such action and the amount of losses.
    (2) If the institution submits a response and requests a hearing by 
the time specified in the notice under paragraph (a)(1)(iii) of this 
section, the designated department official may, in that official's 
sole discretion, withdraw the notice or transmit the response and 
request for hearing to the Office of Hearings and Appeals, which sets 
the date and the place for the hearing. The date of the hearing is at 
least 15 days after the designated department official receives the 
request. No liability shall be imposed on the institution prior to the 
hearing.
    (c) Limitations on participation. The parties in any borrower 
defense and recovery proceeding are the Department and the 
institution(s) against which the Department seeks to recover losses 
caused to the Department as a result of borrower defense relief. 
Borrowers are not permitted to intervene or appear in this proceeding, 
either on their own behalf or on behalf of any purported group, except 
as witnesses put forth by either party. However, nothing in this 
section limits the rights available to borrowers under other 
regulations, including 34 CFR 685.206 and 685.222.
    (d) Effect on the borrower. No proceeding under this subpart 
imposes liability on any borrower who has already obtained a discharge 
in an individual proceeding under 34 CFR 685.206(c) or 34 CFR 
685.222(e). A borrower defense and recovery proceeding may determine 
whether and how much relief is due to, and whether and how much of a 
loan remains owing by, a borrower participating in a group

[[Page 6258]]

process proceeding as defined in 34 CFR 685.222(f) through (h).

(Authority: 20 U.S.C. 1087a et seq., 1094)



0
 9. Revise newly redesignated Sec.  668.88 to read as follows:


Sec.  668.88  Prehearing conference and motion practice.

    (a) A hearing official may convene a prehearing conference if he or 
she thinks that the conference would be useful, or if the conference is 
requested by--
    (1) The designated department official who brought a proceeding 
against an institution or third-party servicer under this subpart; or
    (2) The institution or servicer, as applicable.
    (b) The purpose of a prehearing conference is to allow the parties 
to settle or narrow the dispute.
    (c) If the hearing official, the designated department official, 
and the institution, or servicer, as applicable, agree, a prehearing 
conference may consist of--
    (1) A conference telephone call;
    (2) An informal meeting; or
    (3) The submission and exchange of written material.
    (d) A non-dispositive motion shall be made, if at all, consistent 
with any procedures set forth by the hearing official. In the absence 
of such procedures, non-dispositive motions shall be permitted, and 
responses to such motions shall be permitted though not required.
    (e)(1) A party may make a motion for summary disposition asserting 
that the undisputed facts, admissions, affidavits, stipulations, 
documentary evidence, matters as to which official notice may be taken, 
and any other evidentiary materials properly submitted in connection 
with a motion for summary disposition establish that--
    (i) There is no genuine issue as to any material fact; and
    (ii) The moving party is entitled to a decision in its favor as a 
matter of law.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by evidence 
that the moving party contends support his or her position. The motion 
must be accompanied by a brief containing the points and authorities 
supporting the motion.


Any party may oppose such a motion by filing a response setting forth 
those material facts as to which he or she contends a genuine dispute 
exists. Such response must be supported by evidence of the same type as 
may be submitted in support of a motion for summary disposition and a 
brief containing the points and authorities in support of the 
contention that summary disposition would be inappropriate.
    (f) A motion under consideration by the Secretary or the hearing 
official shall not stay proceedings before the hearing official unless 
the Secretary or the hearing official, as appropriate, so orders.

(Authority: 20 U.S.C. 1094)



0
10. Revise newly redesignated Sec.  668.89 to read as follows:


Sec.  668.89  Hearing.

    (a) A hearing is an orderly presentation of arguments and evidence 
conducted by a hearing official. At the discretion of the hearing 
official, any right to a hearing may be satisfied by one or more of the 
following: Summary disposition pursuant to Sec.  668.88(e), with or 
without oral argument; an oral evidentiary hearing conducted in person, 
by telephone, by video conference, or any combination thereof; or a 
review limited to written evidence.
    (b)(1) Notwithstanding any provision to the contrary, the hearing 
official sets the procedures to be used in the hearing, and may take 
steps to expedite the proceeding as appropriate.
    (2) The formal rules of evidence and procedures applicable to 
proceedings in a court of law are not applicable. However, discussions 
of settlement between the parties or the terms of settlement offers are 
not admissible to prove the validity or invalidity of any claim or 
defense.
    (3)(i) The proponent of any factual proposition has the burden of 
proof with respect thereto.
    (ii) The designated department official has the burden of 
persuasion in any fine, suspension, limitation, or termination 
proceeding under this subpart.
    (iii) The designated department official has the burden of 
persuasion in a borrower defense and recovery action; however, for a 
borrower defense claim based on a substantial misrepresentation under 
Sec.  682.222(d), the designated department official has the burden of 
persuasion regarding the substantial misrepresentation, and the 
institution has the burden of persuasion in establishing any offsetting 
value of the education under Sec.  685.222(i)(2)(i).
    (4) Discovery, as provided for under the Federal Rules of Civil 
Procedure, is not permitted.
    (5) The hearing official accepts only evidence that is relevant and 
material to the proceeding and is not unduly repetitious.
    (6) The hearing official may restrict the number of witnesses or 
exclude witnesses to avoid undue delay or presentation of cumulative 
evidence. Any witness permitted to appear may do so via telephonic, 
video, or other means, with the approval of the hearing official.
    (7) Either party may call qualified expert witnesses. Each party 
will be limited to calling three expert witnesses, as a matter of 
right, including any rebuttal or surrebuttal witnesses. Additional 
expert witnesses shall be allowed only by order of the hearing 
official, granted only upon a showing of good cause.
    (i) At a date set by the hearing official, each party shall serve 
the other with any report prepared by each of its expert witnesses. 
Each party shall serve the other party with a list of any rebuttal 
expert witnesses and a rebuttal report prepared by each such witness 
not later than 60 days after the deadline for service of expert 
reports, unless another date is set by the hearing official. A rebuttal 
report shall be limited to rebuttal of matters set forth in the expert 
report for which it is offered in rebuttal. If material outside the 
scope of fair rebuttal is presented, a party may file a motion not 
later than five days after the deadline for service of rebuttal 
reports, seeking appropriate relief with the hearing official, 
including striking all or part of the report, leave to submit a 
surrebuttal report by the party's own experts, or leave to call a 
surrebuttal witness and to submit a surrebuttal report by that witness.
    (ii) No party may call an expert witness at the hearing unless the 
party has listed the expert and has provided reports as required by 
this section.
    (iii) Each report shall be signed by the expert and contain a 
complete statement of all opinions to be expressed and the basis and 
reasons therefor; the data, materials, or other information considered 
by the witness in forming the opinions; any exhibits to be used as a 
summary of or support for the opinions; the qualifications of the 
witness, including a list of all publications authored or co-authored 
by the witness within the preceding ten years; the compensation to be 
paid for the study and testimony; and a listing of any other cases in 
which the witness has testified or sought to testify as an expert at 
trial or hearing, or by deposition, within the preceding four years. A 
rebuttal or surrebuttal report need not include any information already 
included in the initial report of the witness.
    (8)(i) Except as provided in paragraph (b)(8)(ii) of this section, 
if an institution

[[Page 6259]]

has been required through compulsory process under section 490A of the 
HEA or other applicable law to submit to the United States or to the 
Department material regarding an express or an implied representation, 
the institution cannot thereafter, in any proceeding under this subpart 
in which it is alleged that the representation was false, erroneous, or 
misleading, and for any purpose relating to the defense of such 
allegation, introduce into the record, either directly or indirectly 
through references contained in documents or oral testimony, any 
material of any type that was required to be but was not timely 
submitted in response to that compulsory process.
    (ii) The hearing official shall, upon motion at any stage, exclude 
all material that was required to be but was not timely submitted in 
response to a compulsory process described in paragraph (b)(8)(i) of 
this section, or any reference to such material, unless the institution 
demonstrates, and the hearing official finds, that by the exercise of 
due diligence the material could not have been timely submitted in 
response to the compulsory process, and the institution notified the 
Department or such other party that issued the order to produce, of the 
existence of the material immediately upon its discovery. The hearing 
official shall specify with particularity the evidence relied upon.
    (9) When issues not raised in the notice of proposed action are 
tried without objection at the hearing, they will be treated in all 
respects as if they had been raised in the notice of proposed action, 
and no formal amendments are required.
    (c) The hearing official makes a transcribed record of the 
proceeding and makes a copy of the record available to the designated 
Department official and to the institution or servicer.

(Authority: 20 U.S.C. 1094)



0
11. Newly redesignated Sec.  668.91 is amended by:
0
A. Redesignating paragraph (a)(2) as paragraph (a)(2)(i).
0
B. In newly redesignated paragraph (a)(2)(i) adding ``or recovery'' 
after ``fine, limitation, suspension, or termination''.
0
C. Adding paragraph (a)(2)(ii).
0
D. Removing the second sentence in paragraph (a)(4).
0
E. Adding paragraph (c)(2)(x).
    The additions read as follows:


Sec.  668.91  Initial and final decisions.

    (a) * * *
    (2)(i) * * *
    (ii) In a borrower defense and recovery proceeding conducted in two 
phases under Sec.  668.87(a)(1)(iv)(B), the hearing official's initial 
decision determines whether the institution is liable for the act or 
omission described in the notice of intent to recover, and the hearing 
official issues an initial decision on liability only.
* * * * *
    (c) * * *
    (2) * * *
    (x) In a borrower defense and recovery proceeding conducted in two 
phases under Sec.  668.87(a)(1)(iv)(B), if a party appeals an initial 
decision of the hearing official in the first phase, the Secretary may 
affirm, modify, or reverse the initial decision, or may remand the case 
to the hearing official for further proceedings consistent with the 
Secretary's decision.
* * * * *


Sec.  668.96  [Amended]

0
12. Newly redesignated Sec.   668.96 is amended by:
0
A. In paragraph (a) removing the word ``The'' and adding, in its place, 
the words ``In an action to fine an institution or servicer, or to 
limit, suspend, or terminate the participation of an institution or the 
eligibility of a servicer, the''.
0
B. In paragraph (b), after the words ``The corrective action'', adding 
the words ``under paragraph (a) of this section''.
0
C. In paragraph (c), after the word ``decision'', adding the words ``in 
any action under this subpart''.


Sec.  668.99  [Amended]

0
13. In newly redesignated paragraph (c) of Sec.  668.99, remove ``Sec.  
668.91(a)(4)'' and add, in its place, ``Sec.  668.92(a)(4)''.

[FR Doc. 2017-00972 Filed 1-18-17; 8:45 am]
 BILLING CODE 4000-01-P



                                                                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations                                                6253

                                                     (5) Identify and assess available                    number of small entities. These                        Office’’ and adding, in its place, ‘‘Office
                                                  alternatives to direct regulation,                      regulations contain technical changes to               of the Chief Privacy Officer’’.
                                                  including economic incentives—such as                   current regulations. The changes will                  [FR Doc. 2017–00958 Filed 1–18–17; 8:45 am]
                                                  user fees or marketable permits—to                      not have a significant economic impact                 BILLING CODE 4000–01–P
                                                  encourage the desired behavior, or                      on any of the entities affected because
                                                  provide information that enables the                    the regulations do not impose excessive
                                                  public to make choices.                                 burdens or require unnecessary Federal                 DEPARTMENT OF EDUCATION
                                                     Executive Order 13563 also requires                  supervision.
                                                  an agency ‘‘to use the best available                                                                          34 CFR Part 668
                                                  techniques to quantify anticipated                      Paperwork Reduction Act of 1995
                                                                                                                                                                 RIN 1840–AD22
                                                  present and future benefits and costs as                  These regulations do not contain any
                                                  accurately as possible.’’ The Office of                 information collection requirements.                   [Docket ID ED–2015–OPE–0103]
                                                  Information and Regulatory Affairs of                   Intergovernmental Review
                                                  OMB has emphasized that these                                                                                  Student Assistance General Provisions
                                                  techniques may include ‘‘identifying                       This program is not subject to
                                                                                                                                                                 AGENCY:  Office of Postsecondary
                                                  changing future compliance costs that                   Executive Order 12372 and the
                                                                                                                                                                 Education, Department of Education.
                                                  might result from technological                         regulations in 34 CFR part 79.
                                                                                                             Accessible Format: Individuals with                 ACTION: Final rule with request for
                                                  innovation or anticipated behavioral                                                                           comments.
                                                  changes.’’                                              disabilities may obtain this document in
                                                     We are issuing these final regulations               an alternative format (e.g., braille, large            SUMMARY:    The Secretary amends the
                                                  only on a reasoned determination that                   print, audiotape, or compact disc) on                  Student Assistance General Provisions
                                                  their benefits justify their costs. In                  request to the contact person listed                   regulations governing participation in
                                                  choosing among alternative regulatory                   under FOR FURTHER INFORMATION                          the student financial assistance
                                                  approaches, we selected those                           CONTACT.                                               programs authorized under Title IV of
                                                  approaches that maximize net benefits.                     Electronic Access to This Document:                 the Higher Education Act of 1965, as
                                                  Based on the analysis that follows, the                 The official version of this document is               amended (title IV, HEA programs). The
                                                  Department believes that these final                    the document published in the Federal                  amended regulations update the
                                                  regulations are consistent with the                     Register. Free Internet access to the                  Department’s hearing procedures for
                                                  principles in Executive Order 13563.                    official edition of the Federal Register               actions to establish liability against an
                                                     We also have determined that this                    and the Code of Federal Regulations is                 institution of higher education, and
                                                  regulatory action does not unduly                       available via the Federal Digital System               establish procedural rules governing
                                                  interfere with State, local, and tribal                 at: www.gpo.gov/fdsys. At this site you                recovery proceedings under the
                                                  governments in the exercise of their                    can view this document, as well as all                 Department’s borrower defense
                                                  governmental functions.                                 other documents of this Department                     regulations.
                                                     In accordance with both Executive                    published in the Federal Register, in
                                                                                                          text or Portable Document Format                       DATES: Effective date: These regulations
                                                  orders, the Department has assessed the
                                                                                                          (PDF). To use PDF you must have                        are effective January 19, 2017.
                                                  potential costs and benefits, both
                                                                                                          Adobe Acrobat Reader, which is                            Comment due date: We will accept
                                                  quantitative and qualitative, of this
                                                                                                          available free at the site.                            comments on or before March 20, 2017.
                                                  regulatory action. The potential costs
                                                                                                             You may also access documents of the                We may consider the comments
                                                  associated with this regulatory action
                                                                                                          Department published in the Federal                    received and may conduct additional
                                                  are those resulting from statutory
                                                                                                          Register by using the article search                   rulemaking based on the comments.
                                                  requirements and those we have
                                                                                                          feature at: www.federalregister.gov.                   ADDRESSES: Submit your comments
                                                  determined as necessary for
                                                  administering the Department’s                          Specifically, through the advanced                     through the Federal eRulemaking Portal
                                                  programs and activities.                                search feature at this site, you can limit             or via postal mail, commercial delivery,
                                                     Upon review of the cost, we have                     your search to documents published by                  or hand delivery. We will not accept
                                                  determined there is no financial or                     the Department.                                        comments submitted by fax or by email
                                                  resource burden associated with these                                                                          or those submitted after the comment
                                                                                                          List of Subjects in 34 CFR Part 99                     period. To ensure that we do not receive
                                                  changes.
                                                                                                            Administrative practice and                          duplicate copies, please submit your
                                                  Waiver of Proposed Rulemaking                           procedure, Privacy, Reporting and                      comments only once. In addition, please
                                                    Under the Administrative Procedure                    recordkeeping requirements, Students.                  include the Docket ID at the top of your
                                                  Act (5 U.S.C. 553), the Department                                                                             comments.
                                                                                                          Denise L. Carter,
                                                  generally offers interested parties the                                                                           If you are submitting comments
                                                                                                          Acting Assistant Secretary for Management.             electronically, we strongly encourage
                                                  opportunity to comment on proposed
                                                  regulations. However, these                               For the reasons discussed in the                     you to submit any comments or
                                                  amendments merely reflect changes in                    preamble, the Secretary amends title 34                attachments in Microsoft Word format.
                                                  internal organization and procedure.                    of the Code of Federal Regulations as                  If you must submit a comment in
                                                  The changes do not establish or affect                  follows:                                               Portable Document Format (PDF), we
                                                  substantive policy. Therefore, under 5                                                                         strongly encourage you to convert the
                                                                                                          PART 99—FAMILY EDUCATIONAL                             PDF to print-to-PDF format or to use
                                                  U.S.C. 553(b)(B), the Secretary has
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                                                                                                          RIGHTS AND PRIVACY ACT                                 some other commonly used searchable
                                                  determined that proposed regulations
                                                  are unnecessary and contrary to the                                                                            text format. Please do not submit the
                                                                                                          ■ 1. The authority citation for part 99
                                                  public interest.                                                                                               PDF in a scanned format. Using a print-
                                                                                                          continues to read as follows:
                                                                                                                                                                 to-PDF format allows the U.S.
                                                  Regulatory Flexibility Act Certification                  Authority: 20 U.S.C. 1232g, unless                   Department of Education (the
                                                    The Secretary certifies that these                    otherwise noted.                                       Department) to electronically search and
                                                  regulations will not have a significant                 ■ 2. Amend § 99.60 paragraph (a) by                    copy certain portions of your
                                                  economic impact on a substantial                        removing ‘‘Family Policy Compliance                    submissions.


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                                                  6254             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations

                                                     • Federal eRulemaking Portal: Go to                  further ways we could reduce potential                 precursor at 34 CFR 685.206. These
                                                  www.regulations.gov to submit your                      costs or increase potential benefits                   regulations are designed to balance
                                                  comments electronically. Information                    while preserving the effective and                     important interests by ensuring that
                                                  on using Regulations.gov, including                     efficient administration of the                        institutions are protected by due process
                                                  instructions for accessing agency                       Department’s programs and activities.                  of law prior to the imposition of any
                                                  documents, submitting comments, and                        During and after the comment period,                monetary liability under the borrower
                                                  viewing the docket, is available on the                 you may inspect all public comments                    defense regulations, while also ensuring
                                                  site under ‘‘Help.’’                                    about these regulations by accessing                   that determinations of the validity of
                                                     • Postal Mail, Commercial Delivery,                  Regulations.gov. You may also inspect                  borrower defense claims asserted
                                                  or Hand Delivery: The Department                        the comments in person in room                         against institutions are resolved fairly,
                                                  strongly encourages commenters to                       6W245, 400 Maryland Avenue SW.,                        efficiently, and expeditiously for all
                                                  submit their comments electronically.                   Washington, DC, between the hours of                   parties. In addition, these regulations
                                                  However, if you mail or deliver your                    8:30 a.m. and 4:00 p.m., Eastern time,                 clarify and update the procedural
                                                  comments about these regulations,                       Monday through Friday of each week                     provisions more broadly applicable to
                                                  address them to Jean-Didier Gaina, U.S.                 except Federal holidays. If you want to                fine, limitation, suspension, and
                                                  Department of Education, 400 Maryland                   schedule time to inspect comments,                     termination proceedings.
                                                  Ave. SW., Room 6W232B, Washington,                      please contact the person listed under                    Under the borrower defense
                                                  DC 20202.                                               FOR FURTHER INFORMATION CONTACT.                       regulations at 34 CFR 685.222, effective
                                                                                                                                                                 July 1, 2017, the applicable process for
                                                    Privacy Note: The Department’s policy is              Assistance to Individuals With
                                                  to make all comments received from
                                                                                                                                                                 filing and reviewing claims will depend
                                                                                                          Disabilities in Reviewing the
                                                  members of the public available for public                                                                     on whether a borrower’s application is
                                                                                                          Rulemaking Record
                                                  viewing in their entirety on the Federal                                                                       considered by the Department as an
                                                  eRulemaking Portal at www.regulations.gov.                On request, we will supply an                        individual claim or if the Department
                                                  Therefore, commenters should be careful to              appropriate accommodation or auxiliary                 identifies the application as factually
                                                  include in their comments only information              aid to an individual with a disability                 similar to other applications such that
                                                  that they wish to make publicly available.              who needs assistance to review the                     the Department identifies a group of
                                                                                                          comments or other documents in the                     borrowers (potentially including
                                                  FOR FURTHER INFORMATION CONTACT:
                                                                                                          public rulemaking record for these                     borrowers who have not submitted
                                                  Annmarie Weisman, U.S. Department of                    regulations. If you want to schedule an                applications) with similar claims. The
                                                  Education, 400 Maryland Avenue SW.,                     appointment for this type of                           process will also depend on whether the
                                                  Room 6W425, Washington, DC 20202–                       accommodation or auxiliary aid, please                 relevant institution is ‘‘open’’ or
                                                  6244. Telephone: (202) 453–6712 or by                   contact the person listed under FOR                    ‘‘closed’’, as those terms are described
                                                  email: annmarie.weisman@ed.gov.                         FURTHER INFORMATION CONTACT.
                                                     If you use a telecommunications                                                                             in the regulations. See 34 CFR
                                                                                                          Background                                             685.222(g)through(h).
                                                  device for the deaf (TDD) or a text
                                                                                                                                                                    The Department has the authority to
                                                  telephone (TTY), call the Federal Relay                    On November 1, 2016, the Department                 pursue claims for recovery for losses
                                                  Service (FRS), toll free, at 1–800–877–                 of Education promulgated new                           that the Department has already
                                                  8339.                                                   regulations governing the William D.                   incurred in granting individual
                                                  SUPPLEMENTARY INFORMATION:                              Ford Federal Direct Loan Program to                    borrower relief, either as stand-alone
                                                                                                          establish a new Federal standard and a                 actions or in combination with group
                                                  Invitation To Comment                                   process for determining whether a                      proceedings where those individual
                                                     As discussed below, these regulations                borrower has a defense to repayment on                 claims presented the same facts and
                                                  do not establish substantive policy, but                a loan based on an act or omission of a                circumstances as the group claims. In
                                                  instead establish procedures that must                  school (the borrower defense                           those instances, the determination of the
                                                  be followed. As procedural regulations,                 regulations). If the Department                        validity of the individual’s discharge
                                                  there is no requirement for a comment                   determines that a borrower is eligible for             claim does not depend on the hearing
                                                  period. Although these regulations are                  relief under the borrower defense                      official’s decision, and the Department
                                                  final regulations, we are interested in                 regulations, it has the authority to                   does not rescind a discharge already
                                                  whether you think we should make any                    recover losses stemming from such                      granted to an individual if the
                                                  changes in these regulations and thus                   borrower relief from the institution                   Department does not succeed in proving
                                                  we are inviting your comments. We will                  whose conduct gave rise to the borrower                the validity of that claim in this
                                                  consider these comments in                              defense. These regulations establish the               proceeding.
                                                  determining whether to revise the                       procedural rules that would govern such                   Beginning July 1, 2017, the
                                                  regulations. To ensure that your                        borrower defense and institutional                     Department will use these procedural
                                                  comments have maximum effect, we                        recovery proceedings, and are designed                 regulations both to determine the
                                                  urge you to identify clearly the specific               to ensure that institutions are afforded               validity of borrower claims the
                                                  section or sections of the regulations                  a full and fair opportunity to defend                  Department asserts on behalf of
                                                  that each of your comments addresses                    themselves in such proceedings.                        borrowers in group claims against
                                                  and to arrange your comments in the                        These regulations amend the                         ‘‘open’’ institutions, and to hold the
                                                  same order as the regulations. See                      Department’s existing regulations                      institutions liable for losses on those
                                                  ADDRESSES for instructions on how to                    governing proceedings to assess a fine,                claims in accordance with 34 CFR
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                                                  submit comments.                                        limitation, suspension, or termination                 685.222(h). In these instances, the
                                                     We invite you to assist us in                        against an institution by adding                       hearing official determines the validity
                                                  complying with the specific                             procedures for a recovery proceeding                   of the borrower claims and,
                                                  requirements of Executive Orders 12866                  under the borrower defense regulations.                correspondingly, whether relief will be
                                                  and 13563 and their overall                             Such a proceeding may be used when                     granted to these group borrowers.
                                                  requirements of reducing regulatory                     pursuing an action under either the                    Borrowers may opt out of the group
                                                  burden that might result from these                     Department’s new borrower defense                      process. When the Department seeks to
                                                  regulations. Please let us know of any                  regulation at 34 CFR 685.222 or its                    recover for losses for claims approved


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                                                                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations                                           6255

                                                  under current authority and before July                 hearing rules applicable to such a                     13563, which supplements and
                                                  1, 2017, the Department will use the                    proceeding. As such, these regulations                 explicitly reaffirms the principles,
                                                  procedures in these regulations to                      make procedural changes only and do                    structures, and definitions governing
                                                  pursue recovery from the institution. As                not establish substantive policy. The                  regulatory review established in
                                                  with any other proceedings to recover                   regulations are therefore rules of agency              Executive Order 12866. To the extent
                                                  on claims already approved, the                         practice and procedure, and exempt                     permitted by law, Executive Order
                                                  outcome of a proceeding brought to                      from notice and comment rulemaking                     13563 requires that an agency—
                                                  recover for claims already approved                     under 5 U.S.C. 553(b)(A). However, the                    (1) Propose or adopt regulations only
                                                  prior to July 1, 2017 will not affect relief            Department is providing a 60-day                       on a reasoned determination that their
                                                  already granted to borrowers, but only                  comment period and invites interested                  benefits justify their costs (recognizing
                                                  the accountability of the institution. At               persons to participate in this rulemaking              that some benefits and costs are difficult
                                                  its discretion, the Department may also                 by submitting written comments. The                    to quantify);
                                                  use these regulations to bring actions                  Department may consider the comments                      (2) Tailor its regulations to impose the
                                                  against ‘‘closed’’ institutions, as defined             received and may conduct additional                    least burden on society, consistent with
                                                  in 34 CFR 685.222(g), in order to                       rulemaking based on the comments.                      obtaining regulatory objectives and
                                                  establish an institution’s liability for                  The APA also generally requires that                 taking into account—among other things
                                                  damages due to the Department as a                      regulations be published at least 30 days              and to the extent practicable—the costs
                                                  result of individual or group borrower                  before their effective date, unless the                of cumulative regulations;
                                                  defense relief.                                         agency has good cause to implement its                    (3) In choosing among alternative
                                                     The Department bears the burden of                   regulations sooner (5 U.S.C. 553(d)(3)).               regulatory approaches, select those
                                                  proof in any recovery action against an                 Again, because these final regulations                 approaches that maximize net benefits
                                                  institution for all claims the Department               are merely rules of agency practice and                (including potential economic,
                                                  asserts. The Department must therefore                  procedure, there is good cause to make                 environmental, public health and safety,
                                                  prove the merit of the claims it asserts                them effective on the day they are                     and other advantages; distributive
                                                  for members of the group. A hearing                     published. For the same reasons, the                   impacts; and equity);
                                                  official will determine the merit of the                Secretary has determined, under section                   (4) To the extent feasible, specify
                                                  claims, the relief for members of the                   492(b)(2) of the HEA, 20 U.S.C.                        performance objectives, rather than the
                                                  group, and the liability of the                         1098a(b)(2), that these regulations                    behavior or manner of compliance a
                                                  institution. The Department must also                   should not be subject to negotiated                    regulated entity must adopt; and
                                                  prove in the hearing process the merit                  rulemaking.                                               (5) Identify and assess available
                                                  of claims it asserts for losses on                                                                             alternatives to direct regulation,
                                                                                                          Executive Orders 12866 and 13563                       including economic incentives—such as
                                                  discharges it has already approved as
                                                  individual claims, although, as                         Regulatory Impact Analysis                             user fees or marketable permits—to
                                                  previously indicated, individual                          Under Executive Order 12866, the                     encourage the desired behavior, or
                                                  discharges already granted by the                       Secretary must determine whether this                  provide information that enables the
                                                  Department will not be affected if the                  regulatory action is ‘‘significant’’ and,              public to make choices.
                                                  Department is not successful in proving                                                                           Executive Order 13563 also requires
                                                                                                          therefore, subject to the requirements of
                                                  the claim in this proceeding against the                the Executive order and subject to                     an agency ‘‘to use the best available
                                                  institution.                                            review by the Office of Management and                 techniques to quantify anticipated
                                                     These regulations are only applicable                Budget (OMB). Section 3(f) of Executive                present and future benefits and costs as
                                                  to actions initiated by the Department to               Order 12866 defines a ‘‘significant                    accurately as possible.’’ The Office of
                                                  fine an institution, to limit, suspend, or              regulatory action’’ as an action likely to             Information and Regulatory Affairs of
                                                  terminate the eligibility of an institution             result in a rule that may—                             OMB has emphasized that these
                                                  or servicer, or to recover from an                        (1) Have an annual effect on the                     techniques may include ‘‘identifying
                                                  institution for losses from borrower                    economy of $100 million or more, or                    changing future compliance costs that
                                                  defense claims, and do not encompass                    adversely affect a sector of the economy,              might result from technological
                                                  the process by which the Department                     productivity, competition, jobs, the                   innovation or anticipated behavioral
                                                  evaluates individual borrower claims or                 environment, public health or safety, or               changes.’’
                                                  claims for which the Department does                    State, local, or tribal governments or                    We are issuing these final regulations
                                                  not seek to obtain a recovery. That                     communities in a material way (also                    only on a reasoned determination that
                                                  process is set forth in the borrower                    referred to as an ‘‘economically                       their benefits justify their costs. In
                                                  defense regulations at 34 CFR                           significant’’ rule);                                   choosing among alternative regulatory
                                                  685.222(e). In addition, the Department                   (2) Create serious inconsistency or                  approaches, we selected those
                                                  plans to issue a borrower guide before                  otherwise interfere with an action taken               approaches that maximize net benefits.
                                                  the borrower defense regulations go into                or planned by another agency;                          Based on the analysis that follows, the
                                                  effect to ensure borrowers understand                     (3) Materially alter the budgetary                   Department believes that these final
                                                  the application process and criteria for                impacts of entitlement grants, user fees,              regulations are consistent with the
                                                  seeking debt relief.                                    or loan programs or the rights and                     principles in Executive Order 13563.
                                                                                                          obligations of recipients thereof; or                     We also have determined that this
                                                  Waiver of Proposed Rulemaking,                                                                                 regulatory action does not unduly
                                                                                                            (4) Raise novel legal or policy issues
                                                  Negotiated Rulemaking, and Delayed                                                                             interfere with State, local, and tribal
                                                                                                          arising out of legal mandates, the
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                                                  Effective Date                                                                                                 governments in the exercise of their
                                                                                                          President’s priorities, or the principles
                                                    Under the Administrative Procedure                    stated in the Executive order.                         governmental functions.
                                                  Act (5 U.S.C. 553), the Department                        This final regulatory action is not a                   In accordance with both Executive
                                                  generally offers interested parties the                 significant regulatory action subject to               orders, the Department has assessed the
                                                  opportunity to comment on proposed                      review by OMB under section 3(f) of                    potential costs and benefits, both
                                                  regulations. These regulations only                     Executive Order 12866.                                 quantitative and qualitative, of this
                                                  govern the procedures for initiating an                   We have also reviewed these                          regulatory action. The potential costs
                                                  action against an institution and the                   regulations under Executive Order                      associated with this regulatory action


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                                                  6256             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations

                                                  are those resulting from statutory                      rules that govern determinations of                    Service System, Student aid, Vocational
                                                  requirements and those we have                          liability have already been established                education.
                                                  determined as necessary for                             in the Department’s borrower defense                     Dated: January 11, 2017.
                                                  administering the Department’s                          regulations promulgated November 1,                    John B. King, Jr.,
                                                  programs and activities. There are no                   2016.                                                  Secretary of Education.
                                                  costs additional to those described
                                                                                                          Paperwork Reduction Act of 1995                          For the reasons discussed, the
                                                  under Regulatory Impact Analysis in the
                                                  notice of final regulations for the                       The Paperwork Reduction Act of 1995                  Secretary amends part 668 of title 34 of
                                                  borrower defense regulations published                  does not require you to respond to a                   the Code of Federal Regulations as
                                                  in the Federal Register on November 1,                  collection of information unless it                    follows:
                                                  2016 (81 FR 75926). These regulations                   displays a valid OMB control number.
                                                                                                          We display the valid OMB control                       PART 668—STUDENT ASSISTANCE
                                                  will benefit institutions by ensuring                                                                          GENERAL PROVISIONS
                                                  that, in any action to fine an institution,             number assigned to a collection of
                                                  to limit, suspend, or terminate the                     information in final regulations at the                ■ 1. The authority citation for part 668
                                                  eligibility of an institution to participate            end of the affected section of the                     continues to read as follows:
                                                  in the title IV, HEA programs, or to                    regulations.
                                                                                                                                                                   Authority: 20 U.S.C. 1001–1003, 1070a,
                                                  determine the validity of claims against                Intergovernmental Review                               1070g, 1085, 1087b, 1087d, 1087e, 1088,
                                                  the institution, there are established                                                                         1091, 1092, 1094, 1099c, 1099c–1, 1221e–3,
                                                  procedures that provide both due                          This program is not subject to                       and 3474, unless otherwise noted.
                                                  process as well as an efficient process                 Executive Order 12372 and the
                                                                                                          regulations in 34 CFR part 79.                         ■ 2. Section 668.81 is amended by:
                                                  for the timely resolution of claims.                                                                           ■ A. Adding paragraph (a)(5).
                                                  Clarity of the Regulations                              Assessment of Educational Impact                       ■ B. Adding paragraphs (e) through (g).
                                                                                                             The Secretary particularly requests                 ■ C. Revising the authority citation.
                                                     Executive Order 12866 and the                                                                                 The additions and revision read as
                                                  Presidential memorandum ‘‘Plain                         comments on whether these regulations
                                                                                                                                                                 follows:
                                                  Language in Government Writing’’                        require transmission of information that
                                                  require each agency to write regulations                any other agency or authority of the                   § 668.81   Scope and special definitions.
                                                  that are easy to understand.                            United States gathers or makes                            (a) * * *
                                                     The Secretary invites comments on                    available.                                                (5) The determination of—
                                                  how to make these regulations easier to                    Accessible Format: Individuals with                    (i) Borrower defense to repayment
                                                  understand, including answers to                        disabilities can obtain this document in               claims that are brought by the
                                                  questions such as the following:                        an accessible format (e.g., braille, large             Department against an institution under
                                                     • Are the requirements in the                        print, audiotape, or compact disc) on                  § 685.206 or § 685.222; and
                                                  regulations clearly stated?                             request to the program contact person                     (ii) Liability of an institution to the
                                                     • Do the regulations contain technical               listed under FOR FURTHER INFORMATION                   Secretary for losses to the Secretary
                                                  terms or other wording that interferes                  CONTACT.                                               arising from these claims.
                                                  with their clarity?                                        Electronic Access to This Document:                 *       *    *      *     *
                                                     • Does the format of the regulations                 The official version of this document is                  (e) The proceedings described in this
                                                  (grouping and order of sections, use of                 the document published in the Federal                  subpart provide the institution’s sole
                                                  headings, paragraphing, etc.) aid or                    Register. Free Internet access to the                  opportunity for a hearing on the
                                                  reduce their clarity?                                   official edition of the Federal Register               existence and amount of the debt that is
                                                     • Would the regulations be easier to                 and the Code of Federal Regulations is                 required by applicable law prior to the
                                                  understand if we divided them into                      available via the Federal Digital System               Department collecting the debt from any
                                                  more (but shorter) sections? (A                         at: www.gpo.gov/fdsys. At this site you                available funds, including but not
                                                  ‘‘section’’ is preceded by the symbol                   can view this document, as well as all                 limited to offsetting the debt or any
                                                  ‘‘§ ’’ and a numbered heading; for                      other documents of this Department                     liability against funds to be provided to
                                                  example, § 668.81.)                                     published in the Federal Register, in                  an institution pursuant to any Title IV,
                                                     • Could the description of the                       text or PDF. To use PDF you must have                  HEA program in which that institution
                                                  regulations in the SUPPLEMENTARY                        Adobe Acrobat Reader, which is                         participates.
                                                  INFORMATION section of this preamble be                 available free at the site.                               (f) Nothing contained in this subpart
                                                  more helpful in making the regulations                     You may also access documents of the                limits the right of the Department to
                                                  easier to understand? If so, how?                       Department published in the Federal                    gather information, including by
                                                     • What else could we do to make the                  Register by using the article search                   subpoena, or conduct any examination,
                                                  regulations easier to understand?                       feature at: www.federalregister.gov.                   audit, program review, investigation, or
                                                     To send any comments that concern                    Specifically, through the advanced                     other review authorized by other
                                                  how the Department could make these                     search feature at this site, you can limit             applicable law.
                                                  regulations easier to understand, see the               your search to documents published by                     (g) Unless directed by a court of
                                                  instructions in the ADDRESSES section.                  the Department.                                        competent jurisdiction, the hearing
                                                                                                          (Catalog of Federal Domestic Assistance                official, or the Secretary for good cause,
                                                  Regulatory Flexibility Act Certification                                                                       if a collateral attack is brought in any
                                                                                                          Number: 84.268, Federal Direct Student
                                                    The Secretary certifies that these                    Loans)                                                 court concerning all or any part of any
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                                                  regulations will not have a significant                                                                        proceeding under this subpart, the
                                                  economic impact on a substantial                        List of Subjects in 34 CFR Part 668                    challenged proceeding shall continue
                                                  number of small entities. The small                       Administrative practice and                          without regard to the pendency of that
                                                  entities that are affected by these                     procedure, Aliens, Colleges and                        court proceeding. No default or other
                                                  regulations are small postsecondary                     universities, Consumer protection,                     failure to timely act as directed in a
                                                  institutions. These regulations do not                  Grant programs—education, Loan                         proceeding authorized by this subpart
                                                  have a significant economic impact on                   programs—education, Reporting and                      shall be excused based on the pendency
                                                  these entities because all substantive                  recordkeeping requirements, Selective                  of such court proceeding.


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                                                                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations                                           6257

                                                  (Authority: 20 U.S.C. 1094)                             response to the Office of Hearings and                    (A) A single action; or
                                                                                                          Appeals, which sets the date and place.                   (B) An action in two phases—
                                                  § 668.83   [Amended]                                    The date is at least 15 days after the                    (1) The determination whether the
                                                  ■  3. In § 668.83(f)(1), remove                         designated department official receives                institution’s act or omission gave rise to
                                                  ‘‘§ 668.90(c)’’ and add, in its place,                  the request. The limitation or                         valid borrower defense claims; and
                                                  ‘‘§ 668.91(c)’’.                                        termination does not take place until                     (2) The determination of the amount
                                                                                                          after the requested hearing is held.                   of borrower defense relief.
                                                  ■ 4. In § 668.84 revise paragraphs (b)(3)
                                                                                                             (4) A hearing official conducts a                      (2) Although the hearing official shall
                                                  and (b)(4) to read as follows:                                                                                 have the discretion to bifurcate
                                                                                                          hearing in accordance with § 668.89.
                                                  § 668.84   Fine proceedings.                                                                                   proceedings with, or without, a motion
                                                                                                          *      *    *     *     *
                                                  *      *      *     *     *                                                                                    of either party, any decision by the
                                                     (b) * * *                                            §§ 668.87 through 668.98 [Redesignated as              designated department official to
                                                     (3) If the institution or servicer                   §§ 668.88 through 668.99]                              bifurcate the proceeding in accordance
                                                  requests a hearing by the time specified                ■ 7. Redesignate §§ 668.87 through                     with paragraph (a)(1)(iv)(B) of this
                                                  in paragraph (b)(1)(iii) of this section,               668.98 as §§ 668.88 through 668.99.                    section may only be modified on motion
                                                  the designated department official                                                                             with good cause shown.
                                                                                                          ■ 8. Add § 668.87 to read as follows:
                                                                                                                                                                    (3) A hearing official conducts a
                                                  transmits the request for hearing and
                                                                                                          § 668.87 Borrower defense and recovery                 hearing in accordance with § 668.89.
                                                  response to the Office of Hearings and                                                                            (b) Effect of a response by the
                                                                                                          proceedings.
                                                  Appeals, which sets the date and the                                                                           institution. (1) If the institution submits
                                                  place. The date is at least 15 days after                 (a) Procedures. (1) A designated
                                                                                                          department official begins a borrower                  a written response, but does not therein
                                                  the designated department official                                                                             request a hearing, the designated
                                                  receives the request.                                   defense and recovery proceeding against
                                                                                                          an institution by sending the institution              department official, after considering
                                                     (4) A hearing official conducts a                                                                           that material, notifies the institution
                                                  hearing in accordance with § 668.89.                    a notice by certified mail, return receipt
                                                                                                          requested. This notice—                                whether the Secretary will take the
                                                  *      *      *     *     *                               (i) Informs the institution of the                   proposed recovery action for borrower
                                                  ■ 5. Section 668.85 is amended by:                      Secretary’s intent—                                    defense claims and, if so, the date of
                                                  ■ A. In paragraph (b)(1)(iii), removing                   (A) To determine the validity of                     such action and the amount of losses.
                                                  ‘‘§ 668.90(b)(2)’’ and adding, in its place,            borrower defense claims on behalf of a                    (2) If the institution submits a
                                                  ‘‘§ 668.91(b)(2)’’.                                     group under § 685.222(h), to                           response and requests a hearing by the
                                                  ■ B. Revising paragraph (b)(3).                         demonstrate the validity of borrower                   time specified in the notice under
                                                  ■ C. In paragraph (b)(4), removing                      defense claims already approved, or                    paragraph (a)(1)(iii) of this section, the
                                                  ‘‘§ 668.88’’ and adding, in its place,                  both, as applicable; and                               designated department official may, in
                                                  ‘‘§ 668.89’’.                                             (B) To recover from the institution by               that official’s sole discretion, withdraw
                                                     The revision reads as follows:                       offset, by claim on a letter of credit or              the notice or transmit the response and
                                                                                                          other protection provided by the                       request for hearing to the Office of
                                                  § 668.85   Suspension proceedings.                                                                             Hearings and Appeals, which sets the
                                                                                                          institution, or otherwise, for losses on
                                                  *      *      *     *     *                             account of borrower defense claims                     date and the place for the hearing. The
                                                     (b) * * *                                            asserted on behalf of the group and                    date of the hearing is at least 15 days
                                                     (3) If the institution or servicer                   borrower defense claims already                        after the designated department official
                                                  requests a hearing by the time specified                approved, as applicable;                               receives the request. No liability shall be
                                                  in paragraph (b)(1)(iii) of this section,                 (ii) Includes a statement of facts and               imposed on the institution prior to the
                                                  the designated department official                      law sufficient to show that the                        hearing.
                                                  transmits the request for hearing and                   Department is entitled to grant any                       (c) Limitations on participation. The
                                                  response to the Office of Hearings and                  borrower defense relief asserted within                parties in any borrower defense and
                                                  Appeals, which sets the date and the                    the statement, and recover for the                     recovery proceeding are the Department
                                                  place. The date is at least 15 days after               amount of losses to the Secretary caused               and the institution(s) against which the
                                                  the designated department official                      by the granting of such relief;                        Department seeks to recover losses
                                                  receives the request. The suspension                      (iii) Specifies the date on which the                caused to the Department as a result of
                                                  does not take place until the requested                 Secretary intends to take action to                    borrower defense relief. Borrowers are
                                                  hearing is held.                                        recover the amount of losses arising                   not permitted to intervene or appear in
                                                  *      *      *     *     *                             from the granting of such relief, which                this proceeding, either on their own
                                                  ■ 6. Section 668.86 is amended by:                      date will be at least 20 days from                     behalf or on behalf of any purported
                                                  ■ A. In paragraph (a)(3), removing                      mailing of the notice of intent and                    group, except as witnesses put forth by
                                                  ‘‘§§ 668.93 and 668.94’’ and adding, in                 informs the institution that the                       either party. However, nothing in this
                                                  its place, ‘‘§§ 668.94 and 668.95’’.                    Secretary will not take action to recover              section limits the rights available to
                                                  ■ B. Revising paragraphs (b)(3) and                     the amount of such loss on the date                    borrowers under other regulations,
                                                  (b)(4).                                                 specified if the designated department                 including 34 CFR 685.206 and 685.222.
                                                     The revisions read as follows:                       official receives, by that date, a written                (d) Effect on the borrower. No
                                                                                                          response from the institution indicating               proceeding under this subpart imposes
                                                  § 668.86 Limitation or termination                      why the Secretary should not recover.                  liability on any borrower who has
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                                                  proceedings.                                            The notice shall also inform the                       already obtained a discharge in an
                                                  *      *      *     *     *                             institution that if it wishes to request a             individual proceeding under 34 CFR
                                                     (b) * * *                                            hearing pursuant to this subpart, the                  685.206(c) or 34 CFR 685.222(e). A
                                                     (3) If the institution or servicer                   institution must include such a request                borrower defense and recovery
                                                  requests a hearing by the time specified                with its written response; and                         proceeding may determine whether and
                                                  in paragraph (b)(1)(iii) of this section,                 (iv) Informs the institution whether                 how much relief is due to, and whether
                                                  the designated department official                      the designated Department official                     and how much of a loan remains owing
                                                  transmits the request for hearing and                   intends to proceed with—                               by, a borrower participating in a group


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                                                  6258             Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations

                                                  process proceeding as defined in 34 CFR                 of the same type as may be submitted                      (6) The hearing official may restrict
                                                  685.222(f) through (h).                                 in support of a motion for summary                     the number of witnesses or exclude
                                                  (Authority: 20 U.S.C. 1087a et seq., 1094)              disposition and a brief containing the                 witnesses to avoid undue delay or
                                                                                                          points and authorities in support of the               presentation of cumulative evidence.
                                                  ■ 9. Revise newly redesignated § 668.88                 contention that summary disposition                    Any witness permitted to appear may
                                                  to read as follows:                                     would be inappropriate.                                do so via telephonic, video, or other
                                                  § 668.88 Prehearing conference and                        (f) A motion under consideration by                  means, with the approval of the hearing
                                                  motion practice.                                        the Secretary or the hearing official shall            official.
                                                                                                          not stay proceedings before the hearing                   (7) Either party may call qualified
                                                     (a) A hearing official may convene a
                                                                                                          official unless the Secretary or the                   expert witnesses. Each party will be
                                                  prehearing conference if he or she
                                                                                                          hearing official, as appropriate, so                   limited to calling three expert witnesses,
                                                  thinks that the conference would be
                                                                                                          orders.                                                as a matter of right, including any
                                                  useful, or if the conference is requested
                                                                                                          (Authority: 20 U.S.C. 1094)                            rebuttal or surrebuttal witnesses.
                                                  by—
                                                                                                                                                                 Additional expert witnesses shall be
                                                     (1) The designated department official               ■ 10. Revise newly redesignated                        allowed only by order of the hearing
                                                  who brought a proceeding against an                     § 668.89 to read as follows:                           official, granted only upon a showing of
                                                  institution or third-party servicer under
                                                                                                          § 668.89    Hearing.                                   good cause.
                                                  this subpart; or                                                                                                  (i) At a date set by the hearing official,
                                                     (2) The institution or servicer, as                     (a) A hearing is an orderly
                                                                                                          presentation of arguments and evidence                 each party shall serve the other with any
                                                  applicable.                                                                                                    report prepared by each of its expert
                                                     (b) The purpose of a prehearing                      conducted by a hearing official. At the
                                                                                                          discretion of the hearing official, any                witnesses. Each party shall serve the
                                                  conference is to allow the parties to                                                                          other party with a list of any rebuttal
                                                  settle or narrow the dispute.                           right to a hearing may be satisfied by
                                                                                                          one or more of the following: Summary                  expert witnesses and a rebuttal report
                                                     (c) If the hearing official, the
                                                                                                          disposition pursuant to § 668.88(e), with              prepared by each such witness not later
                                                  designated department official, and the
                                                                                                          or without oral argument; an oral                      than 60 days after the deadline for
                                                  institution, or servicer, as applicable,                                                                       service of expert reports, unless another
                                                  agree, a prehearing conference may                      evidentiary hearing conducted in
                                                                                                          person, by telephone, by video                         date is set by the hearing official. A
                                                  consist of—                                                                                                    rebuttal report shall be limited to
                                                     (1) A conference telephone call;                     conference, or any combination thereof;
                                                                                                          or a review limited to written evidence.               rebuttal of matters set forth in the expert
                                                     (2) An informal meeting; or
                                                                                                             (b)(1) Notwithstanding any provision                report for which it is offered in rebuttal.
                                                     (3) The submission and exchange of
                                                                                                          to the contrary, the hearing official sets             If material outside the scope of fair
                                                  written material.
                                                                                                          the procedures to be used in the                       rebuttal is presented, a party may file a
                                                     (d) A non-dispositive motion shall be
                                                                                                          hearing, and may take steps to expedite                motion not later than five days after the
                                                  made, if at all, consistent with any
                                                                                                          the proceeding as appropriate.                         deadline for service of rebuttal reports,
                                                  procedures set forth by the hearing
                                                                                                             (2) The formal rules of evidence and                seeking appropriate relief with the
                                                  official. In the absence of such
                                                                                                          procedures applicable to proceedings in                hearing official, including striking all or
                                                  procedures, non-dispositive motions
                                                                                                          a court of law are not applicable.                     part of the report, leave to submit a
                                                  shall be permitted, and responses to
                                                                                                          However, discussions of settlement                     surrebuttal report by the party’s own
                                                  such motions shall be permitted though
                                                                                                          between the parties or the terms of                    experts, or leave to call a surrebuttal
                                                  not required.
                                                                                                          settlement offers are not admissible to                witness and to submit a surrebuttal
                                                     (e)(1) A party may make a motion for
                                                                                                          prove the validity or invalidity of any                report by that witness.
                                                  summary disposition asserting that the                                                                            (ii) No party may call an expert
                                                  undisputed facts, admissions, affidavits,               claim or defense.
                                                                                                             (3)(i) The proponent of any factual                 witness at the hearing unless the party
                                                  stipulations, documentary evidence,                                                                            has listed the expert and has provided
                                                  matters as to which official notice may                 proposition has the burden of proof
                                                                                                          with respect thereto.                                  reports as required by this section.
                                                  be taken, and any other evidentiary                                                                               (iii) Each report shall be signed by the
                                                  materials properly submitted in                            (ii) The designated department official
                                                                                                          has the burden of persuasion in any                    expert and contain a complete statement
                                                  connection with a motion for summary                                                                           of all opinions to be expressed and the
                                                  disposition establish that—                             fine, suspension, limitation, or
                                                                                                          termination proceeding under this                      basis and reasons therefor; the data,
                                                     (i) There is no genuine issue as to any                                                                     materials, or other information
                                                  material fact; and                                      subpart.
                                                                                                             (iii) The designated department                     considered by the witness in forming
                                                     (ii) The moving party is entitled to a                                                                      the opinions; any exhibits to be used as
                                                                                                          official has the burden of persuasion in
                                                  decision in its favor as a matter of law.                                                                      a summary of or support for the
                                                     (2) A motion for summary disposition                 a borrower defense and recovery action;
                                                                                                          however, for a borrower defense claim                  opinions; the qualifications of the
                                                  must be accompanied by a statement of                                                                          witness, including a list of all
                                                                                                          based on a substantial misrepresentation
                                                  the material facts as to which the                                                                             publications authored or co-authored by
                                                                                                          under § 682.222(d), the designated
                                                  moving party contends there is no                                                                              the witness within the preceding ten
                                                                                                          department official has the burden of
                                                  genuine issue. Such motion must be                                                                             years; the compensation to be paid for
                                                                                                          persuasion regarding the substantial
                                                  supported by evidence that the moving                                                                          the study and testimony; and a listing of
                                                                                                          misrepresentation, and the institution
                                                  party contends support his or her                                                                              any other cases in which the witness
                                                                                                          has the burden of persuasion in
                                                  position. The motion must be                                                                                   has testified or sought to testify as an
                                                                                                          establishing any offsetting value of the
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                                                  accompanied by a brief containing the                                                                          expert at trial or hearing, or by
                                                                                                          education under § 685.222(i)(2)(i).
                                                  points and authorities supporting the                      (4) Discovery, as provided for under                deposition, within the preceding four
                                                  motion.                                                 the Federal Rules of Civil Procedure, is               years. A rebuttal or surrebuttal report
                                                  Any party may oppose such a motion by                   not permitted.                                         need not include any information
                                                  filing a response setting forth those                      (5) The hearing official accepts only               already included in the initial report of
                                                  material facts as to which he or she                    evidence that is relevant and material to              the witness.
                                                  contends a genuine dispute exists. Such                 the proceeding and is not unduly                          (8)(i) Except as provided in paragraph
                                                  response must be supported by evidence                  repetitious.                                           (b)(8)(ii) of this section, if an institution


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                                                                   Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Rules and Regulations                                           6259

                                                  has been required through compulsory                    phases under § 668.87(a)(1)(iv)(B), the                the trademark register, the United States
                                                  process under section 490A of the HEA                   hearing official’s initial decision                    Patent and Trademark Office (USPTO or
                                                  or other applicable law to submit to the                determines whether the institution is                  Office) amends its rules concerning the
                                                  United States or to the Department                      liable for the act or omission described               examination of affidavits or declarations
                                                  material regarding an express or an                     in the notice of intent to recover, and                of continued use or excusable nonuse
                                                  implied representation, the institution                 the hearing official issues an initial                 filed pursuant to section 8 of the
                                                  cannot thereafter, in any proceeding                    decision on liability only.                            Trademark Act, or affidavits or
                                                  under this subpart in which it is alleged               *      *     *     *     *                             declarations of use in commerce or
                                                  that the representation was false,                         (c) * * *                                           excusable nonuse filed pursuant to
                                                  erroneous, or misleading, and for any                      (2) * * *                                           section 71 of the Act. Specifically,
                                                  purpose relating to the defense of such                    (x) In a borrower defense and recovery              under the regulations enacted herein,
                                                  allegation, introduce into the record,                  proceeding conducted in two phases                     the USPTO may require the submission
                                                  either directly or indirectly through                   under § 668.87(a)(1)(iv)(B), if a party                of information, exhibits, affidavits or
                                                  references contained in documents or                    appeals an initial decision of the                     declarations, and such additional
                                                  oral testimony, any material of any type                hearing official in the first phase, the               specimens of use as may be reasonably
                                                  that was required to be but was not                     Secretary may affirm, modify, or reverse               necessary for the USPTO to ensure that
                                                  timely submitted in response to that                    the initial decision, or may remand the                the register accurately reflects marks
                                                  compulsory process.                                     case to the hearing official for further               that are in use in commerce in the
                                                     (ii) The hearing official shall, upon                proceedings consistent with the                        United States for all the goods/services
                                                  motion at any stage, exclude all material               Secretary’s decision.                                  identified in the registrations, unless
                                                  that was required to be but was not                     *      *     *     *     *                             excusable nonuse is claimed in whole or
                                                  timely submitted in response to a                                                                              in part. A register that does not
                                                  compulsory process described in                         § 668.96    [Amended]                                  accurately reflect marks in use in
                                                  paragraph (b)(8)(i) of this section, or any             ■  12. Newly redesignated § 668.96 is                  commerce in the United States for the
                                                  reference to such material, unless the                  amended by:                                            goods/services identified in registrations
                                                  institution demonstrates, and the                       ■ A. In paragraph (a) removing the word                imposes costs and burdens on the
                                                  hearing official finds, that by the                     ‘‘The’’ and adding, in its place, the                  public. The amended rules will allow
                                                  exercise of due diligence the material                  words ‘‘In an action to fine an                        the USPTO to require additional proof
                                                  could not have been timely submitted in                 institution or servicer, or to limit,                  of use to verify the accuracy of claims
                                                  response to the compulsory process, and                 suspend, or terminate the participation                that a trademark is in use in commerce
                                                  the institution notified the Department                 of an institution or the eligibility of a              in connection with particular goods/
                                                  or such other party that issued the order               servicer, the’’.                                       services identified in the registration.
                                                  to produce, of the existence of the                     ■ B. In paragraph (b), after the words                 DATES: This rule is effective on February
                                                  material immediately upon its                           ‘‘The corrective action’’, adding the                  17, 2017.
                                                  discovery. The hearing official shall                   words ‘‘under paragraph (a) of this                    FOR FURTHER INFORMATION CONTACT:
                                                  specify with particularity the evidence                 section’’.                                             Catherine Cain, Office of the Deputy
                                                  relied upon.                                            ■ C. In paragraph (c), after the word                  Commissioner for Trademark
                                                     (9) When issues not raised in the                    ‘‘decision’’, adding the words ‘‘in any                Examination Policy, by email at
                                                  notice of proposed action are tried                     action under this subpart’’.                           TMFRNotices@uspto.gov, or by
                                                  without objection at the hearing, they                                                                         telephone at (571) 272–8946.
                                                  will be treated in all respects as if they              § 668.99    [Amended]
                                                                                                                                                                 SUPPLEMENTARY INFORMATION:
                                                  had been raised in the notice of                        ■ 13. In newly redesignated paragraph                     Purpose: The USPTO revises the rules
                                                  proposed action, and no formal                          (c) of § 668.99, remove ‘‘§ 668.91(a)(4)’’             in parts 2 and 7 of title 37 of the Code
                                                  amendments are required.                                and add, in its place, ‘‘§ 668.92(a)(4)’’.             of Federal Regulations to allow the
                                                     (c) The hearing official makes a                     [FR Doc. 2017–00972 Filed 1–18–17; 8:45 am]            USPTO, during the examination of
                                                  transcribed record of the proceeding and                BILLING CODE 4000–01–P                                 affidavits or declarations of continued
                                                  makes a copy of the record available to                                                                        use or excusable nonuse filed pursuant
                                                  the designated Department official and                                                                         to section 8 of the Trademark Act, 15
                                                  to the institution or servicer.                         DEPARTMENT OF COMMERCE                                 U.S.C. 1058, or affidavits or declarations
                                                  (Authority: 20 U.S.C. 1094)                                                                                    of use in commerce or excusable nonuse
                                                  ■ 11. Newly redesignated § 668.91 is                    United States Patent and Trademark                     filed pursuant to section 71 of the
                                                  amended by:                                             Office                                                 Trademark Act, 15 U.S.C. 1141k (section
                                                  ■ A. Redesignating paragraph (a)(2) as                                                                         8 or section 71 affidavits), to require the
                                                  paragraph (a)(2)(i).                                    37 CFR Parts 2 and 7                                   submission of such information,
                                                  ■ B. In newly redesignated paragraph                    [Docket No. PTO–T–2016–0002]                           exhibits, affidavits or declarations, and
                                                  (a)(2)(i) adding ‘‘or recovery’’ after ‘‘fine,                                                                 such additional specimens of use as
                                                                                                          RIN 0651–AD07                                          may be reasonably necessary for the
                                                  limitation, suspension, or termination’’.
                                                  ■ C. Adding paragraph (a)(2)(ii).                                                                              USPTO to verify the accuracy of claims
                                                                                                          Changes in Requirements for
                                                  ■ D. Removing the second sentence in                                                                           that a trademark is in use in commerce
                                                                                                          Affidavits or Declarations of Use,
                                                  paragraph (a)(4).                                                                                              in connection with the goods/services
asabaliauskas on DSK3SPTVN1PROD with RULES




                                                                                                          Continued Use, or Excusable Nonuse
                                                  ■ E. Adding paragraph (c)(2)(x).                                                                               listed in the registration.
                                                                                                          in Trademark Cases                                        This will benefit the public because it
                                                     The additions read as follows:
                                                                                                          AGENCY:  United States Patent and                      will facilitate the USPTO’s ability to
                                                  § 668.91   Initial and final decisions.                 Trademark Office, Commerce.                            assess and promote the integrity of the
                                                    (a) * * *                                             ACTION: Final rule.                                    trademark register by encouraging
                                                    (2)(i) * * *                                                                                                 accuracy in the identification of goods/
                                                    (ii) In a borrower defense and                        SUMMARY: In order to assess and                        services for which use in commerce or
                                                  recovery proceeding conducted in two                    promote the accuracy and integrity of                  continued use is claimed. The accuracy


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Document Created: 2018-02-01 15:16:16
Document Modified: 2018-02-01 15:16:16
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule with request for comments.
DatesEffective date: These regulations are effective January 19, 2017.
ContactAnnmarie Weisman, U.S. Department of Education, 400 Maryland Avenue SW., Room 6W425, Washington, DC 20202- 6244. Telephone: (202) 453-6712 or by email: [email protected]
FR Citation82 FR 6253 
RIN Number1840-AD22
CFR AssociatedAdministrative Practice and Procedure; Aliens; Colleges and Universities; Consumer Protection; Grant Programs-Education; Loan Programs-Education; Reporting and Recordkeeping Requirements; Selective Service System; Student Aid and Vocational Education

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