Claims Collection

[Federal Register Volume 64, Number 18 (Thursday, January 28, 1999)]
[Rules and Regulations]
[Pages 4315-4322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1769]


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CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

45 CFR Part 2506

RIN 3045-AA21


Claims Collection

AGENCY: Corporation for National and Community Service.

ACTION: Interim rule with request for comments.

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SUMMARY: The Corporation for National and Community Service 
(hereinafter the ``Corporation'') is issuing interim regulations to 
govern the collection of debts owed to the Corporation and to other 
federal agencies. These regulations describe a number of actions that 
the Corporation may take to collect debts owed to it. These regulations 
also provide that the Corporation will enter into a cross-servicing 
agreement with the U.S. Department of the Treasury (Treasury) under 
which the Treasury will take authorized action to collect amounts owed 
to the Corporation.

DATES: These regulations are effective on January 28, 1999. Written 
comments must be received on or before March 29, 1999.

ADDRESSES: Send comments to: Corporation for National and Community 
Service, Kenneth L. Klothen, General Counsel, 1201 New York Avenue, 
N.W., Washington, D.C. 20525; telefax number (202) 565-2796.

FOR FURTHER INFORMATION CONTACT: Suzanne Dupre, Associate General 
Counsel, telephone number (202) 606-5000, extension 396.

SUPPLEMENTARY INFORMATION: These regulations describe a number of 
actions that the Corporation may take to collect debts owed to it, 
including: making offsets against amounts (including salary payments) 
owed to the debtor by the Corporation or other federal agencies; making 
offsets against tax refunds owed to the debtor by the Internal Revenue 
Service; referring the debt to a private collection contractor, and 
referring the matter to the U.S. Department of Justice (DOJ) for the 
initiation of an action in a judicial proceeding against the debtor. In 
addition, these regulations describe the actions necessary for the 
Corporation to take collection actions on behalf of another federal 
agency. These actions could include making offsets against the salary 
of a Corporation employee or any other amounts owed by the Corporation.
    The regulations of this part are issued under section 3 of the 
Federal Claims Collection Act of 1966, Public Law 89-508, 80 Stat. 308; 
the Debt Collection Act of 1982, Public Law 97-365, 96 Stat. 1749; the 
Debt Collection Improvement Act of 1996, Public Law 104-134, 110 Stat. 
1321; 31 U.S.C. 3720A; and in conformity with the Federal guidelines 
for agency debt collection issued by the DOJ and the General Accounting 
Office (4 CFR chapter II) and the guidelines of the Office of Personnel 
Management (5 CFR part 550, subpart K) on offsets against Federal 
employee salaries. These regulations also provide that the Corporation 
will enter into a cross-servicing agreement with the Treasury which is 
authorized under the Debt Collection Improvement Act of 1996, to take 
all of the above-listed actions to collect the debt for the 
Corporation. The Corporation anticipates that some of these procedures 
may change when revised Federal Claims Collection Standards are issued 
by the DOJ and the Treasury.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the criteria of the Paperwork Reduction Act of 1980.

[[Page 4316]]

Waiver of Notice of Proposed Rulemaking and 30-Day Delay of 
Effective Date

    Under 5 U.S.C. 553(b)(3)(B) and (d)(3), I find that good cause 
exists for waiving the general notice of proposed rulemaking and for 
making these regulations effective in less than 30 days. The 
Corporation wishes to have these procedures in effect at the earliest 
possible date in order to initiate debt collection action against 
persons who owe money to the Corporation.

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1531, the effect of these regulations on State, local, and tribal 
governments and the private sector has been assessed. Other than by 
incorporating requirements specifically set forth in law, this 
regulation will not compel either the private sector or State, local, 
and tribal governments (in the aggregate) to expend $100 million or 
more in any one year. Therefore, a statement under 2 U.S.C. 1532 is not 
required.

Submission to Congress and the General Accounting Office

    Under 5 U.S.C. 801(a)(1)(A), the Corporation submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
United States before publication of this rule in today's Federal 
Register. This interim rule is not a major rule as defined at 5 U.S.C. 
804(2).

List of Subjects in 45 CFR Part 2506

    Administrative practice and procedure, Claims, Government 
employees, Grants administration, Income taxes, Penalties, Wages.

    For the reasons stated in the preamble, the Corporation amends 45 
CFR Chapter XXV by adding Part 2506 to read as follows:

PART 2506--CLAIMS COLLECTION

Subpart A--Definitions, Authority, Administrative Collection, 
Compromise, Termination, and Referral of Claims

Sec.
2506.1  What definitions apply to the regulations in this Part?
2506.2  What is the Corporation's authority to issue these 
regulations?
2506.3  What other regulations also apply to the Corporation's debt 
collection efforts?
2506.4  Do these regulations apply to claims involving fraud or 
misrepresentation?
2506.5  What is the extent of the Chief Executive Officer's 
authority to compromise debts owed to the Corporation?
2506.6  What notice will I be provided if I owe a debt to the 
Corporation?
2506.7  What interest, penalty, and administrative costs will I have 
to pay on a debt owed to the Corporation?
2506.8  What opportunity do I have to obtain a review of my debt 
within the Corporation?
2506.9  How can I resolve the Corporation's claim through a 
voluntary repayment agreement?
2506.10  How will the Corporation use credit reporting agencies to 
collect its claims?
2506.11  How will the Corporation contract for collection services?
2506.12  When will the Corporation refer claims to the DOJ?
2506.13  Will the Corporation use a cross-servicing agreement with 
the Treasury to collect its claims?

Subpart B--Salary Offset

2506.20  What debts are included or excluded from coverage of these 
regulations on salary offset?
2506.21  May I ask the Corporation to waive an overpayment that 
would otherwise be collected by offsetting my salary as a federal 
employee?
2506.22  What are the Corporation's procedures for salary offset?
2506.23  How will the Corporation coordinate salary offsets with 
other agencies?
2506.24  Under what conditions will the Corporation make a refund of 
amounts collected by salary offset?
2506.25  Will the collection of a claim by salary offset act as a 
waiver of my rights to dispute the claimed debt?

Subpart C--Tax Refund Offset

2506.30  Which debts can the Corporation refer to the Department of 
the Treasury for collection by offsetting tax refunds?
2506.31  What are the Corporation's procedures for collecting debts 
by tax refund offset?

Subpart D--Administrative Offset

2506.40  Under what circumstances will the Corporation collect 
amounts that I owe to the Corporation (or some other federal agency) 
by offsetting the debt against payments that the Corporation (or 
some other federal agency) owes me?
2506.41  How will the Corporation request that my debt to the 
Corporation be collected by offsetting against some payment that 
another federal agency owes me?
2506.42  What procedures will the Corporation use to collect amounts 
I owe to a federal agency by offsetting a payment that the 
Corporation would otherwise make to me?
2506.43  When may the Corporation make an offset in an expedited 
manner?

    Authority: 31 U.S.C. 3711, 3716, 3720A; 42 U.S.C. 12651f.

Subpart A--Definitions, Authority, Administrative Collection, 
Compromise, Termination, and Referral of Claims


Sec. 2506.5  What definitions apply to the regulations in this Part?

    As used in this part:
    (a) Administrative offset means the withholding of funds payable by 
the United States to any person (including funds payable to the United 
States on behalf of a State government), or the withholding of funds 
held by the United States for any person, in order to satisfy a debt 
owed to the United States.
    (b) Agency means an executive department or agency, the United 
States Postal Service, the Postal Rate Commission, the United States 
Senate, the United States House of Representatives, and any court, 
court administrative office, or instrumentality in the judicial or 
legislative branches of the Government, and Government corporations.
    (c) Corporation means the Corporation for National and Community 
Service.
    (d) Certification means a written debt claim form received from a 
creditor agency which requests the paying agency to offset the salary 
of an employee.
    (e) Chief Executive Officer means the Chief Executive Officer of 
the Corporation for National and Community Service, or his or her 
designee.
    (f) Creditor agency means an agency of the Federal Government to 
which the debt is owed.
    (g) Debt  means money owed by a person to the United States, 
including a debt owed to the Corporation or to any other Federal 
agency.
    (h) Debtor means a person who owes a debt. Uses of the terms ``I'', 
``you,'' ``me,'' and similar references to the reader of the 
regulations in this part are meant to apply to debtors as defined in 
this paragraph (h).
    (i) Delinquent debt means a debt that has not been paid within the 
time limit prescribed by the Corporation.
    (j) Disposable pay means that part of current basic pay, special 
pay, incentive pay, retirement pay, retainer pay, or, in the case of an 
employee not entitled to basic pay, other authorized pay remaining 
after the deduction of any amount required by law to be withheld, 
excluding any garnishment under 5 CFR parts 581 and 582. The 
Corporation will deduct the following items in determining the amount 
of disposable pay that will be subject to salary offset:
    (1) Federal Social Security and Medicare taxes;

[[Page 4317]]

    (2) Federal, state, and local income taxes, but no more than would 
be the case if the employee claimed all dependents to which he or she 
is entitled and any additional amounts for which the employee presents 
evidence of a tax obligation supporting the additional withholding;
    (3) Health insurance premiums;
    (4) Normal retirement contributions as set forth in 5 CFR 
581.105(e);
    (5) Normal life insurance premiums, excluding optional life 
insurance premiums; and
    (6) Levies pursuant to the Internal Revenue Code, as defined in 5 
U.S.C. 5514(d).
    (k) Employee means a current employee of an agency, including a 
current member of the Armed Forces or Reserve of the Armed Forces of 
the United States.
    (l) Federal Claims Collection Standards means the standards 
published at 4 CFR chapter II.
    (m) Paying agency means the agency of the Federal Government that 
employs the individual who owes a debt to the United States. In some 
cases, the Corporation may be both the creditor agency and the paying 
agency.
    (n) Payroll office means the payroll office in the paying agency 
that is primarily responsible for the payroll records and the 
coordination of pay matters with the appropriate personnel office with 
respect to an employee.
    (o) Person includes a natural person or persons, profit or non-
profit corporation, partnership, association, trust, estate, 
consortium, State and local government, or other entity that is capable 
of owing a debt to the United States Government; however, agencies of 
the United States are excluded.
    (p) Private collection contractor means a private debt collector 
under contract with an agency to collect a non-tax debt owed to the 
United States.
    (q) Salary offset means a payroll procedure to collect a debt under 
5 U.S.C. 5514 by deduction(s) at one or more officially established pay 
intervals from the current pay account of an employee, without his or 
her consent.
    (r) Tax refund offset means the reduction of a tax refund by the 
amount of a past-due legally enforceable debt owed to the Corporation 
or any other Federal agency.
    (s) Waiver means the cancellation, remission, forgiveness, or non-
recovery of a debt allegedly owed by a person to the Corporation or any 
other Federal agency as permitted or required by 5 U.S.C. 5584 or 
8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or any other law.


Sec. 2506.2  What is the Corporation's authority to issue these 
regulations?

    The Corporation is issuing regulations in this part under 42 U.S.C. 
12651f and 31 U.S.C. 3711, 3716, and 3720A. The Corporation is also 
issuing the regulations in this part in conformity with the Federal 
Claims Collection Standards, 4 CFR chapter II, which prescribe 
standards for the handling of the federal government's claims for money 
or property, including standards for administrative collection, 
compromise, termination of agency collection action, and referral to 
the U.S. Department of Justice (DOJ) for litigation.


Sec. 2506.3  What other regulations also apply to the Corporation's 
debt collection efforts?

    All provisions of the Federal Claims Collection Standards also 
apply to the regulations in this part. This part supplements the 
Federal Claims Collection Standards by prescribing procedures and 
directives necessary and appropriate for operations of the Corporation.


Sec. 2506.4  Do these regulations apply to claims involving fraud or 
misrepresentation?

    The Federal Claims Collection Standards and this part do not apply 
to any claim as to which there is an indication of fraud or 
misrepresentation, as described in the Federal Claims Collection 
Standards, unless returned to the Corporation by the DOJ to the 
Corporation for handling.


Sec. 2506.5  What is the extent of the Chief Executive Officer's 
authority to compromise debts owed to the Corporation?

    The Chief Executive Officer may exercise his or her compromise 
authority for those debts not exceeding $100,000, excluding interest, 
in conformity with the Federal Claims Collection Act of 1966, as 
amended; the Federal Claims Collection Standards issued thereunder; and 
this part, except where standards are established by other statutes or 
authorized regulations issued pursuant to them.


Sec. 2506.6  What notice will I be provided if I owe a debt to the 
Corporation?

    (a) When the Chief Executive Officer determines that you owe a debt 
to the Corporation, he or she will send you a written notice. The 
notice will be hand-delivered or sent to you by certified mail, return 
receipt requested at the most current address known to the Corporation. 
The notice will inform you of the following:
    (1) The amount, nature, and basis of the debt, and that a 
designated Corporation official has reviewed the claim and has 
determined that the debt is valid;
    (2) That payment of your debt is due as of the date of the notice, 
and that the debt will be considered delinquent if you do not pay it 
within 30 days of the date the notice is mailed or hand-delivered;
    (3) The Corporation's policy concerning interest, penalties, and 
administrative costs, including a statement that such assessments must 
be made against you unless excused in accordance with the Federal 
Claims Collection Standards and this part;
    (4) That you have the right to inspect and copy Corporation records 
pertaining to your debt, or to receive copies of those records if 
personal inspection is impractical;
    (5) That you have the opportunity to enter into an agreement, in 
writing and signed by both you and the Chief Executive Officer, for 
voluntary repayment of the debt; and
    (6) The address, telephone number, and name of the Corporation 
official available to discuss the debt.
    (b) Notice of possible collection actions. The notice provided by 
the Chief Executive Officer under paragraph (a) of this section will 
also advise you that, if your debt (including any interest, penalties 
and administrative costs) is not paid within 60 days of the date of the 
notice, or you do not enter into a voluntary repayment agreement within 
60 days of the date of the notice, the Corporation may enforce the 
collection of the debt by any or all of the following methods:
    (1) Referral to a credit reporting agency (See Sec. 2506.10), a 
collection agency (See Sec. 2506.11), or the DOJ (See Sec. 2506.12);
    (2) If you are a Corporation employee, by deducting money from your 
disposable pay account (in the amount and with the frequency, 
approximate beginning date and duration specified by the Corporation) 
until the debt (and all accumulated interest, penalties, and 
administrative costs) is paid in full, and that such proceedings with 
respect to the debt are governed by 5 U.S.C. 5514;
    (3) If you are an employee of a federal agency other than the 
Corporation, by initiating certification procedures to implement a 
salary offset by the federal agency, as appropriate (which may not 
exceed 15 percent of the employee's disposable pay), and that such 
proceedings with respect to the debt are governed by 5 U.S.C. 5514;
    (4) By referring the debt to the U.S. Department of the Treasury 
(Treasury) for offset against any refund of overpayment of tax (see 
Subpart C of this part); or

[[Page 4318]]

    (5) By administrative offset (see Subpart D of this part).
    (c) Notice of opportunity for review. The notice provided by the 
Chief Executive Officer under paragraph (a) of this section will also 
advise you of the opportunity to obtain a review within the Corporation 
concerning the existence or amount of the debt, the proposed schedule 
for offset of federal employee salary payments, or whether the debt is 
past due or legally enforceable. The notice shall also advise you:
    (1) Of the name, address, and telephone number of an officer or 
employee of the Corporation who may be contacted concerning procedures 
for requesting a review;
    (2) Of the method and time period for requesting a review;
    (3) That the timely filing of a request for a review on or before 
the 60th calendar day following the date of the notice to the debtor 
will stay the commencement of collection proceedings;
    (4) Of the name and address of the officer or employee of the 
Corporation to whom you should send the request for a review;
    (5) That a final decision on the review (if one is requested) will 
be issued at the earliest practical date, but not later than 60 days 
after the receipt of the request for a review, unless you request, and 
the review official grants, a delay in the proceedings;
    (6) That any knowingly false or frivolous statements, 
representations, or evidence may subject you to:
    (i) Disciplinary procedures appropriate under 5 U.S.C. chapter 75, 
5 CFR part 752, or any other applicable statute or regulations;
    (ii) Penalties under the False Claims Act, 31 U.S.C. 3729-3733, or 
any other applicable statutory authority; and
    (iii) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 102, 
or any other applicable statutory authority;
    (7) Of any other rights available to you to dispute the validity of 
the debt or to have recovery of the debt waived, or remedies available 
to you under statutes or regulations governing the program for which 
the collection is being made; and
    (8) That unless there are applicable contractual or statutory 
provisions to the contrary, amounts paid on or deducted for the debt 
which are later waived or found not owed will be promptly refunded to 
you.
    (d) The Corporation will respond promptly to communications from 
you.


Sec. 2506.7  What interest, penalty, and administrative costs will I 
have to pay on a debt owed to the Corporation?

    (a) Interest. (1) The Corporation will assess interest on all 
delinquent debts unless prohibited by statute, regulation, or contract.
    (2) Interest begins to accrue on all debts from the date that the 
debt becomes delinquent. The Corporation will not recover interest if 
you pay the debt within 30 days of the date on which interest begins to 
accrue. Unless otherwise established in a contract, repayment 
agreement, or by statute, the Corporation shall assess interest at the 
rate established annually by the Secretary of the Treasury under 31 
U.S.C. 3717, unless a different rate is necessary to protect the 
interests of the Corporation. The Corporation will notify you of the 
basis for its finding when a different rate is necessary to protect the 
Corporation's interests.
    (3) The Chief Executive Officer may extend the 30-day period for 
payment without interest where he or she determines that such action is 
in the best interest of the Corporation. A decision to extend or not to 
extend the payment period is final and is not subject to further 
review.
    (b) Penalty. The Corporation will assess a penalty charge, not to 
exceed six percent a year, on any portion of a debt that is delinquent 
for more than 90 days.
    (c) Administrative costs. The Corporation will assess charges to 
cover administrative costs incurred as a result of your failure to pay 
a debt before it becomes delinquent. Administrative costs include the 
additional costs incurred in processing and handling the debt because 
it became delinquent, such as costs incurred in obtaining a credit 
report, or in using a private collection contractor, or service fees 
charged by a Federal agency for collection activities undertaken on 
behalf of the Corporation.
    (d) Allocation of payments. A partial payment by a debtor will be 
applied first to outstanding administrative costs, second to penalty 
assessments, third to accrued interest, and then to the outstanding 
debt principal.
    (e) Waiver. (1) The Chief Executive Officer may (without regard to 
the amount of the debt) waive collection of all or part of accrued 
interest, penalty, or administrative costs, if he or she determines 
that collection of these charges would be against equity and good 
conscience or not in the best interest of the Corporation.
    (2) A decision to waive interest, penalty charges, or 
administrative costs may be made at any time before a debt is paid. 
However, where these charges have been collected before the waiver 
decision, they will not be refunded. The Chief Executive Officer's 
decision to waive or not waive collection of these charges is final and 
is not subject to further review.


Sec. 2506.8  What opportunity do I have to obtain a review of my debt 
within the Corporation.

    (a) Request for review. If you desire a review within the 
Corporation concerning the existence or amount of the debt, the 
proposed schedule for offset of federal employee salary payments, or 
whether the debt is past due or legally enforceable, you must send such 
a request to the Corporation office designated in the notice to debtor. 
(See Sec. 2506.6(c)).
    (1) Your request for review must be signed by you and fully 
identify and explain with reasonable specificity all the facts and 
evidence that support your position.
    (2) The request for review must be received by the designated 
office on or before the 60th calendar day following the date of the 
notice. Timely filing will stay the commencement of collection 
procedures. If you file a request for a review after the expiration of 
the 60 day period provided for in this section, the Corporation will 
accept the request if you can show that the delay was the result of 
circumstances beyond his or her control or because you did not receive 
notice of the filing deadline (unless you had actual notice of the 
filing deadline).
    (b) Review of Corporation records related to the debt. (1) In 
accordance with Sec. 2506.6, if you want to inspect or copy Corporation 
records related to the debt, you must send a letter to the official 
designated in the notice to the debtor stating his or her intention. 
Your letter must be received within 30 calendar days after the date of 
the notice to debtor.
    (2) In response to a timely request submitted by the debtor, the 
designated official will notify you of the location and time when you 
may inspect and copy records related to the debt.
    (3) If personal inspection is impractical, reasonable arrangements 
will be made to send you copies of those records.
    (c) Review official. The Chief Executive Officer shall designate an 
officer or employee of the Corporation (who was not involved in the 
determination of the debt) as the review official. When required by law 
or regulation, the Corporation may request an administrative law judge 
to conduct the review, or may obtain a review

[[Page 4319]]

official who is an official, employee, or agent of the United States 
(but who is not under the supervision or control of the Chief Executive 
Officer). However, unless the review is conducted by an official or 
employee of the Corporation, any unresolved dispute you have regarding 
whether all or part of the debt is past due or legally enforceable (for 
purposes of collection by tax refund offset under Sec. 2506.31), must 
be referred to the Chief Executive Officer for ultimate administrative 
disposition, and the Chief Executive Officer must directly notify you 
of his or her determination.
    (d) Review procedure. After you request a review, the reviewing 
official will notify you of the form of the review to be provided. The 
reviewing official shall determine the type of review to be conducted 
(i.e. whether an oral hearing is required), and shall conduct the 
review in accordance with the standards included in 4 CFR 102.3(c). If 
the review will include an oral hearing, the notice will set forth the 
date, time, and location of the hearing. If the review will be on a 
written record, you will be notified that you should submit arguments 
and evidence in writing to the review official by a specified date 
after which the record will be closed. This date will give you 
reasonable time to submit documentation.
    (e) Date of decision. The reviewing official will issue a written 
decision, based upon either the written record or documentary evidence 
and information developed at an oral hearing, as soon as practical, but 
not later than 60 days after the date on which the Corporation received 
your request for a review, unless you request and the review official 
grants a delay in the proceedings.
    (f) Content of review decision. The review official shall prepare a 
written decision that will include:
    (1) A statement of the facts presented to support the origin, 
nature, and amount of the debt;
    (2) The reviewing official's findings, analysis, and conclusions; 
and
    (3) The terms of any repayment schedules, if applicable.
    (g) Interest, penalty, and administrative cost accrual during 
review period. During the review period, interest, penalties, and 
administrative costs authorized by law will continue to accrue.


Sec. 2506.9  How can I resolve the Corporation's claim through a 
voluntary repayment agreement?

    In response to a notice of a debt owed to the Corporation, you may 
propose to the Corporation you be allowed to repay a debt through a 
voluntary payment agreement in lieu of the Corporation taking other 
collection actions under this part.
    (a) Your request to enter into a voluntary repayment must:
    (1) Admit the existence of the debt; and
    (2) Either propose payment of the debt (together with interest, 
penalties, and administrative costs) in a lump sum, or set forth a 
proposed repayment schedule.
    (b) The Corporation will consider a request to enter into a 
voluntary repayment agreement consistent with the standards in 4 CFR 
102.11. The Chief Executive Officer may request additional information 
from you in order to make a determination of whether to accept a 
voluntary repayment agreement, including requesting financial 
statements if you request to make payments in installments. It is 
within the Chief Executive Officer's discretion to accept a repayment 
agreement instead of proceeding with other debt collection actions 
under this part, and to set the necessary terms of any voluntary 
repayment agreement. At the Corporation's option, you may be required 
to enter into a confess-judgment note or bond of indemnity with surety 
as part of an agreement to make payments in installments. 
Notwithstanding the provisions of this section, any reduction or 
compromise of a claim will be governed by 31 U.S.C. 3711.


Sec. 2506.10  How will the Corporation use credit reporting agencies to 
collect its claims?

    (a) The Corporation may report delinquent debts to appropriate 
credit reporting agencies by providing the following information:
    (1) A statement that the debt is valid and is overdue;
    (2) The name, address, taxpayer identification number, and any 
other information necessary to establish the identity of the debtor;
    (3) The amount, status, and history of the debt; and
    (4) The program or pertinent activity under which the debt arose.
    (b) Before disclosing debt information to a credit reporting 
agency, the Corporation will:
    (1) Take reasonable action to locate the debtor if a current 
address is not available; and
    (2) If a current address is available, provide the notice required 
under Sec. 2506.6.
    (c) At the time debt information is submitted to a credit reporting 
agency, the Corporation will provide a written statement to the 
reporting agency that all required actions have been taken. In 
addition, the Corporation will, thereafter, ensure that the credit 
reporting agency is promptly informed of any substantive change in the 
conditions or amount of the debt, and promptly verify or correct 
information relevant to the claim.
    (d) If a debtor disputes the validity of the debt, the credit 
reporting agency will refer the matter to the appropriate Corporation 
official. The credit reporting agency will exclude the debt from its 
reports until the Corporation certifies in writing that the debt is 
valid.


Sec. 2506.11  How will the Corporation contract for collection 
services?

    The Corporation will use the services of a private collection 
contractor where it determines that such use is in the best interest of 
the Corporation. When the Corporation determines that there is a need 
to contract for collection services, it will--
    (a) Retain sole authority to:
    (1) Resolve any dispute with the debtor regarding the validity of 
the debt;
    (2) Compromise the debt;
    (3) Suspend or terminate collection action;
    (4) Refer the debt to the DOJ for litigation; and
    (5) Take any other action under this part which does not result in 
full collection of the debt;
    (b) Require the contractor to comply with the Privacy Act of 1974, 
as amended, to the extent specified in 5 U.S.C. 552a(m), with 
applicable Federal and State laws pertaining to debt collection 
practices (e.g., the Fair Debt Collection Practices Act (15 U.S.C. 
1692-1692o)), and with applicable regulations of the Corporation in 
this chapter;
    (c) Require the contractor to account accurately and fully for all 
amounts collected; and
    (d) Require the contractor to provide to the Corporation, upon 
request, all data and reports contained in its files relating to its 
collection actions on a debt.


Sec. 2506.12  When will the Corporation refer claims to the DOJ?

    The Chief Executive Officer will refer to the DOJ for litigation 
all claims on which aggressive collection actions have been taken but 
which could not be collected, compromised, suspended, or terminated. 
Referrals will be made as early as possible, consistent with aggressive 
Corporation collection action, and within the period for bringing a 
timely suit against the debtor.

[[Page 4320]]

Sec. 2506.13  Will the Corporation use a cross-servicing agreement with 
the Treasury to collect its claims?

    Yes. The Corporation will enter into a cross-servicing agreement 
with the Treasury which will authorize the Treasury to take all of the 
debt collection actions described in this part. These debt collection 
services will be provided to the Corporation in accordance with 31 
U.S.C. Chapter 37.

Subpart B--Salary Offset


Sec. 2506.20  What debts are included or excluded from coverage of 
these regulations on salary offset?

    (a) The regulations in this subpart provide Corporation procedures 
for the collection by salary offset of a federal employee's pay to 
satisfy certain debts owed to the Corporation or to other federal 
agencies.
    (b) The regulations in this subpart apply to collections by the 
Chief Executive Officer, from:
    (1) Federal employees who owe debts to the Corporation; and
    (2) Employees of the Corporation who owe debts to other federal 
agencies.
    (c) The regulations in subpart A and this subpart do not apply to 
debts arising under the Internal Revenue Code of 1986, as amended 
(title 26, United States Code); the Social Security Act (42 U.S.C. 301 
et seq.); the tariff laws of the United States; or to any case where 
collection of a debt by salary offset is explicitly provided for or 
prohibited by another statute (e.g., travel advances in 5 U.S.C. 5705 
and employee training expenses in 5 U.S.C. 4108).
    (d) Nothing in the regulations in this subpart precludes the 
compromise, suspension, or termination of collection actions under the 
standards implementing the Federal Claims Collection Act (31 U.S.C. 
3711 et seq., 4 CFR parts 101-105, 38 CFR 1.900-1.994).
    (e) A levy pursuant to the Internal Revenue Code takes precedence 
over a salary offset under this subpart, as provided in 5 U.S.C. 
5514(d).
    (f) This subpart does not apply to any adjustment to pay arising 
out of an employee's election of coverage or a change in coverage under 
a Federal benefits program requiring periodic deductions from pay, if 
the amount to be recovered was accumulated over four or fewer pay 
periods.


Sec. 2506.21  May I ask the Corporation to waive an overpayment that 
would otherwise be collected by offsetting my salary as a federal 
employee?

    Yes, the regulations in this subpart do not preclude an employee 
from requesting waiver of an overpayment under 5 U.S.C. 5584 or 
8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or under other statutory 
provisions pertaining to the particular debts being collected.


Sec. 2506.22  What are the Corporation's procedures for salary offset?

    (a) The Corporation will coordinate salary deductions under this 
subpart as appropriate.
    (b) The Corporation's payroll office will determine the amount of 
an employee's disposable pay and will implement the salary offset.
    (c) Deductions will begin within three official pay periods 
following receipt by the Corporation's payroll office of certification 
of debt from the creditor agency.
    (d) Types of collection--
    (1) Lump-sum offset. If the amount of the debt is equal to or less 
than 15 percent of disposable pay, the debt generally will be collected 
through one lump-sum offset.
    (2) Installment deductions. Installment deductions will be made 
over a period not greater than the anticipated period of employment. 
The size and frequency of installment deductions will bear a reasonable 
relation to the size of the debt and the employee's ability to pay. 
However, the amount deducted from any period will not exceed 15 percent 
of the disposable pay from which the deduction is made unless the 
employee has agreed in writing to the deduction of a greater amount.
    (3) Deductions from final check. A deduction exceeding the 15 
percent disposable pay limitation may be made from any final salary 
payment under 31 U.S.C. 3716 and the Federal Claims Collection 
Standards, in order to liquidate the debt, whether the employee is 
being separated voluntarily or involuntarily.
    (4) Deductions from other sources. If an employee subject to salary 
offset is separated from the Corporation, and the balance of the debt 
cannot be liquidated by offset of the final salary check, the 
Corporation may offset any later payments of any kind against the 
balance of the debt, as allowed by 31 U.S.C. 3716 and the Federal 
Claims Collection Standards.
    (e) Multiple debts. In instances where two or more creditor 
agencies are seeking salary offsets, or where two or more debts are 
owed to a single creditor agency, the Corporation's payroll office may, 
at its discretion, determine whether one or more debts should be offset 
simultaneously within the 15 percent limitation.


Sec. 2506.23  How will the Corporation coordinate salary offsets with 
other agencies?

    (a) Responsibilities of the Corporation as the creditor agency. 
Upon completion of the procedures established in the regulations in 
this subpart and pursuant to 5 U.S.C. 5514, the Corporation must submit 
a debt claim to a paying agency.
    (1) The Corporation must include in its claim a certification, in 
writing, that:
    (i) The employee owes the debt;
    (ii) The amount and basis of the debt;
    (iii) The date the Corporation's right to collect the debt first 
accrued;
    (iv) That the Corporation's regulations in this subpart have been 
approved by the Office of Personnel Management under 5 CFR part 550, 
subpart K;
    (2) If the collection must be made in installments, the 
Corporation's claim will also advise the paying agency of the amount or 
percentage of disposable pay to be collected in each installment. The 
Corporation may also advise the paying agency of the number of 
installments to be collected, and the date of the first installment if 
that date is other than the next officially established pay period.
    (3) The Corporation shall also include in its claim either:
    (i) The employee's written consent to the salary offset;
    (ii) The employee's signed statement acknowledging receipt of the 
procedures required by 5 U.S.C. 5514; or
    (iii) Information regarding the completion of procedures required 
by 5 U.S.C. 5514, including the actions taken and the dates of those 
actions.
    (4) If the employee is in the process of separating and has not 
received a final salary check or other final payment(s) from the paying 
agency, the Corporation must submit its debt claim to the paying agency 
for collection under 31 U.S.C. 3716. The paying agency will (under its 
regulations adopted under 5 U.S.C. 5514 and 5 CFR part 550, subpart K), 
certify the total amount of its collection on the debt and notify the 
employee and the Corporation. If the paying agency's collection does 
not fully satisfy the debt, and the paying agency is aware that the 
debtor is entitled to payments from the Civil Service Retirement and 
Disability Fund or other similar payments that may be due the debtor 
employee from other Federal Government sources, then (under its 
regulations adopted under 5 U.S.C. 5514 and 5 CFR part 550, subpart K), 
the paying agency will provide written notice of the outstanding debt 
to the agency responsible for making the other payments to the debtor 
employee. The written notice will state that the employee owes a debt, 
the amount of the debt, and that the provisions of this

[[Page 4321]]

section have been fully complied with. However, the Corporation must 
submit a properly certified claim under this paragraph (a)(4) to the 
agency responsible for making the payments before the collection can be 
made.
    (5) Separated employee. If the employee is already separated and 
all payments due from his or her former paying agency have been paid, 
the Corporation may request, unless otherwise prohibited, that money 
due and payable to the employee from the Civil Service Retirement and 
Disability Fund (5 CFR part 831, subpart R, or 5 CFR part 845, subpart 
D) or other similar funds, be administratively offset to collect the 
debt.
    (6) Employee transfer. When an employee transfers from one paying 
agency to another paying agency, the Corporation will not repeat the 
due process procedures described in 5 U.S.C. 5514 and this subpart to 
resume the collection. The Corporation will submit a properly certified 
claim to the new paying agency and will subsequently review the debt to 
make sure the collection is resumed by the new paying agency.
    (b) Responsibility of the Corporation as the paying agency. (1) 
Complete claim. When the Corporation receives a certified claim from a 
creditor agency (under the creditor agency's regulations adopted under 
5 U.S.C. 5514 and 5 CFR part 550, subpart K), deductions should be 
scheduled to begin within three officially established pay intervals. 
Before deductions can begin, the employee will receive a written notice 
from the Corporation including:
    (i) A statement that the Corporation has received a certified debt 
claim from the creditor agency;
    (ii) The amount of the debt claim;
    (iii) The date salary offset deductions will begin; and
    (iv) The amount of such deductions.
    (2) Incomplete claim. When the Corporation receives an incomplete 
certification of debt from a creditor agency, the Corporation will 
return the debt claim with a notice that the creditor agency must 
comply with the procedures required under 5 U.S.C. 5514 and 5 CFR part 
550, subpart K, and must properly certify a debt claim to the 
Corporation before the Corporation will take action to collect from the 
employee's current pay account.
    (3) Review. The Corporation is not authorized to review the merits 
of the creditor agency's determination with respect to the amount or 
validity of the debt certified by the creditor agency.
    (4) Employees who transfer from the Corporation to another paying 
agency. If, after the creditor agency has submitted the debt claim to 
the Corporation, the employee transfers from the Corporation to a 
different paying agency before the debt is collected in full, the 
Corporation will certify the total amount collected on the debt and 
notify the employee and the creditor agency in writing. The 
notification to the creditor agency will include information on the 
employee's transfer.


Sec. 2506.24  Under what conditions will the Corporation make a refund 
of amounts collected by salary offset?

    If the Corporation is the creditor agency, it will promptly refund 
any amount deducted under the authority of 5 U.S.C. 5514, when:
    (a) The debt is waived or all or part of the funds deducted are 
otherwise found not to be owed (unless expressly prohibited by statute 
or regulation); or
    (b) An administrative or judicial order directs the Corporation to 
make a refund.
    (c) Unless required or permitted by law or contract, refunds under 
this section will not bear interest.


Sec. 2506.25  Will the collection of a claim by salary offset act as a 
waiver of my rights to dispute the claimed debt?

    Your involuntary payment of all or any portion of a debt being 
collected under this subpart will not be construed as a waiver of any 
rights which you may have under 5 U.S.C. 5514 or any other provisions 
of a written contract or law, unless there are statutory or contractual 
provisions to the contrary.

Subpart C--Tax Refund Offset


Sec. 2506.30  Which debts can the Corporation refer to the Department 
of the Treasury for collection by offsetting tax refunds?

    (a) The regulations in this subpart implement 31 U.S.C. 3720A which 
authorizes the Treasury to reduce a tax refund by the amount of a past-
due legally enforceable debt owed to a Federal agency.
    (b) For purposes of this section, a past-due legally enforceable 
debt referable to the Treasury for tax refund offset is a debt that is 
owed to the Corporation; and:
    (1) Is at least $25.00 dollars;
    (2) Except in the case of a judgment debt, has been delinquent for 
at least three months and will not have been delinquent more than 10 
years at the time the offset is made;
    (3) Cannot be currently collected under the salary offset 
provisions of 5 U.S.C. 5514;
    (4) Is ineligible for administrative offset under 31 U.S.C. 3716(a) 
by reason of 31 U.S.C. 3716(c)(2) or cannot be collected by 
administrative offset under 31 U.S.C. 3716(a) by the Corporation 
against amounts payable to the debtor by the Corporation;
    (5) With respect to which the Corporation has given the debtor at 
least 60 days to present evidence that all or part of the debt is not 
past due or legally enforceable, has considered evidence presented by 
the debtor, and has determined that an amount of the debt is past due 
and legally enforceable;
    (6) Which has been disclosed by the Corporation to a credit 
reporting agency as authorized by 31 U.S.C. 3711(e), unless the credit 
reporting agency would be prohibited from reporting information 
concerning the debt by reason of 15 U.S.C. 1681c;
    (7) With respect to which the Corporation has notified or has made 
a reasonable attempt to notify the debtor that:
    (i) The debt is past due, and
    (ii) Unless repaid within 60 days thereafter, the debt will be 
referred to the Treasury for offset against any refund of overpayment 
of tax; and
    (8) All other requirements of 31 U.S.C. 3720A and the Treasury 
regulations relating to the eligibility of a debt for tax return offset 
have been satisfied (31 CFR 285.2).


Sec. 2506.31  What are the Corporation's procedures for collecting 
debts by tax refund offset?

    (a) The Chief Executive Officer will be the point of contact with 
the Treasury for administrative matters regarding the offset program.
    (b) The Corporation will ensure that the procedures prescribed by 
the Treasury are followed in developing information about past-due 
debts and submitting the debts to the Treasury.
    (c) The Corporation will submit a notification of a taxpayer's 
liability for past-due legally enforceable debt to the Treasury which 
will contain:
    (1) The name and taxpayer identifying number (as defined in section 
6109 of the Internal Revenue Code, 26 U.S.C. 6109) of the person who is 
responsible for the debt;
    (2) The dollar amount of the past-due and legally enforceable debt;
    (3) The date on which the original debt became past due;
    (4) A statement certifying that, with respect to each debt 
reported, all of the requirements of eligibility of the debt for 
referral for the refund offset have been satisfied. (See 
Sec. 2506.30(b)). For purposes of this section, notice that collection 
of the debt is affected by a bankruptcy proceeding involving the 
individual will bar referral of the debt to the Treasury.

[[Page 4322]]

    (d) The Corporation shall promptly notify the Treasury to correct 
Corporation data submitted when it:
    (1) Determines that an error has been made with respect to a debt 
that has been referred;
    (2) Receives or credits a payment on the debt; or
    (3) Receives notice that the person owing the debt has filed for 
bankruptcy under Title 11 of the United States Code or has been 
adjudicated bankrupt and the debt has been discharged.
    (e) When advising debtors of an intent to refer a debt to the 
Treasury for offset, the Corporation will also advise the debtors of 
remedial actions available to defer or prevent the offset from taking 
place.

Subpart D--Administrative Offset


Sec. 2506.40  Under what circumstances will the Corporation collect 
amounts that I owe to the Corporation (or some other federal agency) by 
offsetting the debt against payments that the Corporation (or some 
other federal agency) owes me?

    (a) The regulations in this subpart apply to the collection of any 
debts you owe to the Corporation, or to any request from another 
federal agency that the Corporation collect a debt you owe by 
offsetting your debt against a payment the Corporation owes you. 
Administrative offset is authorized under section 5 of the Federal 
Claims Collection Act of 1966, as amended (31 U.S.C. 3716). The 
Corporation shall carry out administrative offset in accordance with 
the provisions of the Federal Claims Collection Standards; the 
regulations in this subpart are intended only to supplement the 
provisions of the Federal Claims Collection Standards.
    (b) The Chief Executive Officer, after attempting to collect a debt 
you owe to the Corporation under section 3(a) of the Federal Claims 
Collection Act of 1966, as amended (31 U.S.C. 3711(a)), may collect the 
debt by administrative offset, subject to the following:
    (1) The debt you owe is certain in amount; and
    (2) It is in the best interest of the Corporation to collect your 
debt by administrative offset because of the decreased costs of 
collection and acceleration in the payment of the debt.
    (c) The Chief Executive Officer may initiate administrative offset 
with regard to debts you owe to another federal agency. The head of the 
creditor agency, or his or her designee, must submit a written request 
for the offset with a certification that the debt exists and that you 
have been afforded the necessary due process rights.
    (d) The Chief Executive Officer may request another federal agency 
that holds funds payable to you to instead pay those funds to the 
Corporation in settlement of your debt. The Corporation will provide 
certification that:
    (1) The debt exists; and
    (2) You have been afforded the necessary due process rights.
    (e) No collection by administrative offset will be made on any debt 
that has been outstanding for more than 10 years unless facts material 
to the Corporation or a federal agency's right to collect the debt were 
not known, and reasonably could not have been known, by the official or 
officials responsible for discovering and collecting the debt.
    (f) The regulations in this subpart do not apply to:
    (1) A case in which administrative offset of the type of debt 
involved is explicitly provided for or prohibited by another statute; 
or
    (2) Debts owed to the Corporation by federal agencies or by any 
State or local government.


Sec. 2506.41  How will the Corporation request that my debt to the 
Corporation be collected by offsetting against some payment that 
another federal agency owes me?

    The Chief Executive Officer may request that funds due and payable 
to you by another federal agency instead be paid to the Corporation in 
payment of a debt you owe to the Corporation. In requesting 
administrative offset, the Corporation, as creditor, will certify in 
writing to the federal agency that is holding funds for you:
    (a) That you owe the debt;
    (b) The amount and basis of the debt; and
    (c) That the Corporation has complied with the requirements of 31 
U.S.C. 3716, its own administrative offset regulations in this subpart, 
and the applicable provisions of the Federal Claims Collection 
Standards with respect to providing the debtor with due process.


Sec. 2506.42  What procedures will the Corporation use to collect 
amounts I owe to a federal agency by offsetting a payment that the 
Corporation would otherwise make to me?

    Any federal agency may request that the Corporation 
administratively offset funds due and payable to you in order to 
collect a debt you owe to that agency. The Corporation will initiate 
the requested offset only:
    (a) Upon receipt of written certification from the creditor agency 
stating:
    (1) That you owe the debt;
    (2) The amount and basis of the debt;
    (3) That the agency has prescribed regulations for the exercise of 
administrative offset; and
    (4) That the agency has complied with its own administrative offset 
regulations and with the applicable provisions of the Federal Claims 
Collection Standards, including providing you with any required hearing 
or review; and
    (b) Upon a determination by the Chief Executive Officer that 
offsetting funds payable to you by the Corporation in order to collect 
a debt owed by you would be in the best interest of the United States 
as determined by the facts and circumstances of the particular case, 
and that such an offset would not otherwise be contrary to law.


Sec. 2506.43  When may the Corporation make an offset in an expedited 
manner?

    The Corporation may effect an administrative offset against a 
payment to be made to you before completion of the procedures required 
by Secs. 2506.41 and 2506.42 if failure to take the offset would 
substantially jeopardize the Corporation's ability to collect the debt 
and the time before the payment is to be made does not reasonably 
permit the completion of those procedures. An expedited offset will be 
promptly followed by the completion of those procedures. Amounts 
recovered by offset, but later found not to be owed to the Corporation, 
will be promptly refunded.

    Dated: January 15, 1999.
Kenneth L. Klothen,
General Counsel.
[FR Doc. 99-1769 Filed 1-27-99; 8:45 am]
BILLING CODE 6050-28-U