Rule2022-01496
Threshold for Reporting VA Debts to Consumer Reporting Agencies
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 2, 2022
Effective
March 4, 2022
Issuing agencies
Veterans Affairs Department
Abstract
The Department of Veterans Affairs (VA) amends its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRA). The Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020 provides the Secretary authority to prescribe regulations that establish the minimum amount of a benefits or medical debt that the Secretary will report to the CRA. This change will establish the methodology for determining a minimum threshold for debts reported to CRA.
Full Text
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<title>Federal Register, Volume 87 Issue 22 (Wednesday, February 2, 2022)</title>
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[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Rules and Regulations]
[Pages 5693-5696]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-01496]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 1
RIN 2900-AR20
Threshold for Reporting VA Debts to Consumer Reporting Agencies
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
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SUMMARY: The Department of Veterans Affairs (VA) amends its regulations
around the conditions by which VA benefits debts or medical debts are
reported to consumer reporting agencies (CRA). The Johnny Isakson and
David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of
2020 provides the Secretary authority to prescribe regulations that
establish the minimum amount of a benefits or medical debt that the
Secretary will report to the CRA. This change will establish the
methodology for determining a minimum threshold for debts reported to
CRA.
DATES: This rule is effective March 4, 2022.
FOR FURTHER INFORMATION CONTACT: Jason Hoge, Director of Operations,
Debt Management Center, Office of Management, 189, 1 Federal Drive,
Suite 4500, Fort Snelling, MN 55111, (612) 725-4337. (This is not a
toll-free telephone number.)
SUPPLEMENTARY INFORMATION: On July 23, 2021 (86 FR 38958), VA published
a proposed rule in the Federal Register that would significantly reduce
the amount of VA debts referred to the CRA. VA provided a 60-day
comment period, which ended on September 21, 2021. VA received nine
comments on the proposed rule.
Summary of Regulatory Changes
This final rule amends VA's regulation that governs reporting of
delinquent debts to CRA. This rulemaking would update the regulation to
comply with section 2007 of Public Law 116-315, the Johnny Isakson and
David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of
2020. Section 2007 amends chapter 53 of title 38, United States Code by
adding section 5320 as follows: ``The Secretary shall prescribe
regulations that establish the minimum amount of a claim or debt,
arising from a benefit administered by the Under Secretary for Benefits
or Under Secretary for Health, that the Secretary will report to a
consumer reporting agency under section 3711 of title 31.''
This amendment will establish the methodology for determining the
minimum threshold for reporting certain VA debts to CRA. It will also
exclude from the minimum threshold those debts in which there is an
indication of fraud, misrepresentation, or bad faith on the part of the
debtor.
Background on Governing Statutes
The Debt Collection Improvement Act of 1996 (DCIA), in part,
mandated agencies to report delinquent debts to CRA. 31 U.S.C. 3711(e);
Sec. 31001(k), Public Law 104-134, 110 Stat. 1321. The purpose of the
DCIA includes maximizing collection of delinquent debts by ensuring
quick action to recover debts, use of appropriate collection tools, and
minimizing the costs of debt collection. Sec. 31001(b), Public Law 104-
134.
Section 5320 of title 38, United States Code, authorizes VA to
``establish the minimum amount of a claim or debt, arising from a
benefit administered by the Under Secretary for Benefits or Under
Secretary for Health, that the Secretary will report to a consumer
reporting agency under section 3711 of title 31.'' The intent of
section 5320 is to lessen negative impact of CRA reports on Veterans.
Introduction to Regulatory Changes
As explained in more detail below, we amend 38 CFR 1.916 to comply
with 38 U.S.C. 5320, to establish a minimum threshold for reporting
debts to CRA.
In accordance with 31 U.S.C. 3711(e), the VA Debt Management Center
(DMC) is responsible for reporting delinquent debts to CRA. Prior to
January 5, 2021, DMC reported an average of 5,000 delinquent Veteran
accounts monthly. DMC regularly receives complaints from Veterans whose
accounts have been reported to CRA. Common complaints
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from Veterans include loss of security clearance, inability to obtain
approval for home loans or home refinancing, and difficulty securing
rental housing. This amendment recognizes that the debts described in
38 U.S.C. 5320 are fundamentally different from consumer debt. Debts
arising from a benefit administered by the Under Secretary for Benefits
or the Under Secretary for Health may result from a variety of
scenarios, including overpayments that are not the fault of the
Veteran.
Section 5320 authorizes the Secretary to establish a minimum
threshold that will ultimately reduce the number of debts that will be
reported to CRA. This will, in turn, decrease the number of Veterans
negatively impacted by these reports. The VA's mission is to ``fulfill
President Lincoln's promise `To care for him who shall have borne the
battle, and for his widow, and his orphan' by serving and honoring the
men and women who are America's Veterans.'' Negative credit reports may
cause housing insecurity or job loss, and this result is inconsistent
with VA's mission.
38 CFR 1.916 Disclosure of Debt Information to Consumer Reporting
Agencies (CRA)
We amend 38 CFR 1.916, which sets forth the requirements for
reporting delinquent debts to CRA, by inserting paragraphs (c)(1)
through (3) to provide the methodology used by the Secretary to
establish the minimum threshold. This section would also clarify that
the minimum threshold applies only to a debt of an individual that
arises from a benefit administered by the Under Secretary for Benefits
or Under Secretary for Health.
We add paragraphs (c)(1) through (3) to provide that:
<bullet> The Secretary has established a minimum threshold for a
debt, arising from a benefit administered by the Under Secretary for
Benefits or Under Secretary for Health, that the Secretary will report
to a consumer reporting agency under section 3711 of title 31.
<bullet> VA will only report those debts that meet the following
standards:
[cir] The debt is classified as currently not collectible. For
purposes of this paragraph, the debt is currently not collectible if VA
has exhausted available collection efforts, including, as appropriate,
referrals for administrative offset and enforced collection;
[cir] The debt is not owed by an individual who is determined by VA
to be catastrophically disabled or has reported to VA a gross household
income below the applicable geographically adjusted income limits that
would entitle a VA beneficiary to cost-free health care, medications
and/or beneficiary travel; and
[cir] The outstanding debt amount is over $25, or such higher
amount VA may from time to time prescribe, in accordance with Sec.
1.921 of the part.
<bullet> The minimum threshold set forth in the paragraph will not
apply if there is an indication of fraud, misrepresentation, or bad
faith on the part of the individual in connection with the debt.
Positive Comments
Most commenters were in support of the proposed rule. One commenter
stated that the rule will make life easier for Veterans, particularly
those who have experienced conditions that require them to receive
financial assistance from VA. Another commenter stated the rule
demonstrates that VA recognizes these debts are not like consumer debts
and result from many sources, including some that are of no fault of
the Veteran. The commenter added the proposed rule makes it clear that
VA understands that fraudulent and misrepresented claims should not be
tolerated, and these are exempt from the proposed rule, as they should
be. An additional commenter similarly mentioned that these debts should
be recognized differently from consumer debts as many times it is not
the fault of the Veteran, and we should be protecting those who serve
us.
VA thanks the commenters for their support of the rule. We are not
making any changes based on these comments.
Comments on Referral of Medical Debts
One commenter stated there should never be a time Veteran medical
debts should be reported to a credit reporting agency. The commenter
added that reporting Veterans for non-payment or delinquent status of a
medical debt can further add to the mental and emotional turmoil most
are already dealing with.
Another commenter suggested expanding reporting restrictions to
Veterans in priority groups one through seven. The commenter states the
proposed criteria would effectively exclude Veterans in VA health care
priority groups four and five but leave several categories of Veterans
unprotected. The commenter added Veterans should be as insulated as
possible from the negative consequences of having medical debt included
in their credit reports and urged the VA to exclude all delinquent
debts held by Veterans in priority groups one through seven.
VA acknowledges and understands the concern with reporting medical
debts to CRA. However, the proposed rule states VA will only report
debts that are considered currently not collectible, the debt is not
owed by an individual who is determined catastrophically disabled or
has a gross household income below the applicable geographically
adjusted income limit, and the outstanding debt amount is over $25.
When considering VA medical debts that fall under these conditions, VA
is obligated by the Debt Collection Improvement Act (DCIA) to report
delinquent debts to the CRA. Through VA's analysis and determination of
the referral conditions, the current rule is projected to result in a
significant reduction in referred debts while continuing to comply with
DCIA. Therefore, VA is not making changes based on these comments.
Comment on Minimum Threshold Amount
Several commenters voiced concern over the $25 minimum threshold
amount. One commenter suggested the $25 threshold be increased to
$1,000 since this would more likely represent a common loan borrowed on
the regular marketplace. The commenter also stated a significant amount
of Veterans face housing and job insecurity, even with benefits
extended to them, so the proposed threshold requirement should be
higher.
Another commenter stated by setting a low monetary threshold of
$25, it is hard to imagine there will be a significant reduction in
debt reporting. The same commenter suggested the VA set the minimum
threshold at the 10 percent rating monthly rate.
One commenter suggested to substantially increase the proposed
dollar amount from $25 to a higher threshold that would follow various
characteristics about Veterans' delinquent debt, such as the median
medical collections tradeline provided by Consumer Financial Protection
Bureau (CFPB). The commenter further explains the CFPB reports that the
addition of any paid or unpaid collections tradeline can significantly
reduce a credit score and may even preclude individuals from accessing
the credit market altogether.
VA considered several different threshold amounts and after
thorough analysis came to the threshold as proposed in the rule which
includes four criteria: (1) The debt is classified as currently not
collectible; (2) The debt is not owed by an individual who is
determined by VA to be catastrophically disabled or has reported to VA
a gross household income below the applicable geographically adjusted
income limits; (3) The outstanding debt amount is over
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$25.00; and (4) There is no indication of fraud, misrepresentation, or
bad faith on the part of the individual in connection with the debt.
Based on the comprehensive impact of the criteria in addition to the
dollar amount, VA is not making changes based on these comments.
Comments on Definition of Catastrophically Disabled Veteran
One commenter suggested expanding its exemptions to all totally and
permanently disabled Veterans as an additional way to lessen the impact
of CRA reporting. Another commenter stated VA should align the
``catastrophically disabled'' rule to meet the Department of
Education's Total and Permanent Disability Discharge program. The
commenter states VA's use of ``catastrophically disabled'' in the
proposed rule places a significantly higher standard even though a
rating of 100% or a finding of total disability makes it just as
unreasonable to expect the Veteran to be able to repay the debt. One
commenter made a similar suggestion that VA should consider expanding
its exemptions to all totally and permanently disabled Veterans as an
additional way to lessen the impact of CRA reporting.
As stated in the proposed rule, VA will only report debts to CRA if
the debt is not owed by an individual who is determined to be
catastrophically disabled or has reported to VA a gross household
income below the applicable geographically adjusted income limits. Due
to the requirements of the DCIA and the Johnny Isakson and David P.
Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020, VA
is not making changes based on these comments.
Comments on Veteran Benefits
One commenter stated benefits or entitlements for Veterans should
not end once they are no longer in the service due to medical issues or
disabilities caused by their time in the military. It was also
suggested that all Veterans should have a counselor of some sort to
inform them of their financial responsibilities in connection with
receiving services. Another commenter stated Veterans need more support
and access to benefits than what is currently available, and the
benefits that are available should not be allowed to negatively impact
Veterans on the housing and job market.
VA acknowledges the concerns addressed in these comments; however,
the comments do not directly correlate with the proposed rulemaking so
VA will not be making any changes based on these comments.
Comment on Referral of Education Debts
One commenter stated the proposed rule should be revised to exempt,
or at a minimum, specifically restrict the reporting of educational
overpayment debts to a CRA since most of these debts are caused by
error or delay by VA or an institution.
Effective January 5, 2021, Public Law 116-315 section 1019 was
enacted, making the school, instead of the student, financially liable
for payments such as tuition, fees, and Yellow Ribbon paid directly to
a school. Therefore, any educational overpayment debt owed to the VA
would be a books and supplies or housing debt. Students currently
enrolled in school would have their debts offset by their VA benefits
so there should be very few debts classified as currently not
collectible in this category. Due to the fact that reporting
educational overpayment debts to CRA is a rare occurrence, VA is not
making changes based on this comment.
Comment on Referral of Debts Under Dispute by a Veteran
One commenter suggested the VA should prohibit reporting of any
debt to a CRA that is being disputed until an individual's dispute or
appeal is resolved. The commenter states if the dispute is found in
favor of the Veteran, the inaccurate negative credit report may have
caused irreversible financial harm, such as the loss of a security
clearance, inability to obtain credit for the purchase of a home or
vehicle, and inability to secure rental housing.
When an individual timely disputes or appeals his or her VA debt,
VA pauses collection on the debt, and the debt would not be referred to
CRA until the dispute or appeal has been resolved. The determination of
currently not collectible would come well after any resolution of a
dispute. VA is not making changes based on this comment.
Based on the rationale set forth in the SUPPLEMENTARY INFORMATION
to the proposed rule and in this final rule, VA is adopting the
proposed rule with no changes.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, and other advantages; distributive impacts;
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The Office of Information and Regulatory Affairs has determined that
this rule is not a significant regulatory action under Executive Order
12866. The Regulatory Impact Analysis associated with this rulemaking
can be found as a supporting document at <a href="http://www.regulations.gov">www.regulations.gov</a>.
Regulatory Flexibility Act
The Secretary hereby certifies that this rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-
612). The regulations established by this rulemaking do not impose
burdens or otherwise regulate the activities of any small entities
outside of VA. Therefore, pursuant to 5 U.S.C. 605(b), the initial and
final regulatory flexibility analysis requirements of 5 U.S.C. 603 and
604 do not apply.
Paperwork Reduction Act
This rule contains no provisions constituting a collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.
1532, that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any one year. This final rule will have no such effect on
State, local, and tribal governments, or on the private sector.
Congressional Review Act
Pursuant to Subtitle E of the Small Business Regulatory Enforcement
Fairness Act of 1996 (known as the Congressional Review Act) (5 U.S.C.
801 et seq.), the Office of Information and Regulatory Affairs
designated this rule as not a major rule, as defined by 5 U.S.C.
804(2).
List of Subjects in 38 CFR Part 1
Administrative practice and procedure, Archives and records,
Cemeteries, Claims, Courts, Crime, Flags, Freedom of information,
Government contracts, Government employees, Government property,
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Infants and children, Inventions and patents, Parking, Penalties,
Postal Service, Privacy, Reporting and recordkeeping requirements,
Seals and insignia, Security measures, Wages.
Signing Authority
Denis McDonough, Secretary of Veterans Affairs, approved this
document on December 2, 2021, and authorized the undersigned to sign
and submit the document to the Office of the Federal Register for
publication electronically as an official document of the Department of
Veterans Affairs.
Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of
General Counsel, Department of Veterans Affairs.
For the reasons stated in the preamble, the Department of Veterans
Affairs amends 38 CFR part 1 as set forth below:
PART 1--GENERAL PROVISIONS
0
1. The authority citation for part 1 is revised to read as follows:
Authority: 31 U.S.C. 3711(e); 38 U.S.C. 501, 5701(g) and (i);
38 U.S.C. 5320.
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2. Amend Sec. 1.916 by revising paragraph (c) to read as follows:
Sec. 1.916 Disclosure of debt information to consumer reporting
agencies (CRA).
* * * * *
(c) Subject to the conditions set forth in this paragraph (c) and
paragraph (d) of this section, information concerning individuals may
be disclosed to consumer reporting agencies for inclusion in consumer
reports pertaining to the individual, or for the purpose of locating
the individual. Disclosure of the fact of indebtedness will be made if
the individual fails to respond in accordance with written demands for
repayment, or refuses to repay a debt to the United States. In making
any disclosure under this section, VA will provide consumer reporting
agencies with sufficient information to identify the individual,
including the individual's name, address, if known, date of birth, VA
file number, and Social Security number.
(1) The Secretary has established a minimum threshold for a debt,
arising from a benefit administered by the Under Secretary for Benefits
or Under Secretary for Health, that the Secretary will report to a
consumer reporting agency under 31 U.S.C. 3711.
(2) VA will only report those debts that meet the following
standards:
(i) The debt is classified as currently not collectible. For
purposes of this paragraph (c)(2)(i), the debt is currently not
collectible if VA has exhausted available collection efforts,
including, as appropriate, referrals for administrative offset and
enforced collection;
(ii) The debt is not owed by an individual who is determined by VA
to be catastrophically disabled or has reported to VA a gross household
income below the applicable geographically adjusted income limits that
would entitle a VA beneficiary to cost-free health care, medications
and/or beneficiary travel; and
(iii) The outstanding debt amount is over $25, or such higher
amount VA may from time to time prescribe, in accordance with Sec.
1.921.
(3) The minimum threshold set forth in this paragraph (c) will not
apply if there is an indication of fraud, misrepresentation, or bad
faith on the part of the individual in connection with the debt.
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[FR Doc. 2022-01496 Filed 2-1-22; 8:45 am]
BILLING CODE 8320-01-P
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</html>Indexed from Federal Register on February 2, 2022.
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