Rule2022-17117
Debt Collection Authorities Under the Debt Collection Improvement Act of 1996
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
August 16, 2022
Effective
September 15, 2022
Issuing agencies
Treasury DepartmentFiscal Service
Abstract
This final rule amends the regulations of the Department of the Treasury ("Treasury"), Bureau of the Fiscal Service ("Fiscal Service"), regarding the Treasury Offset Program ("TOP") and the Cross-Servicing program. The primary reason for amending the regulation is to inform the public about how Fiscal Service will use Social Security numbers in mailings, as required by the Social Security Number Fraud Prevention Act of 2017, which requires Fiscal Service to have final regulations in place by September 15, 2022.
Full Text
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<title>Federal Register, Volume 87 Issue 157 (Tuesday, August 16, 2022)</title>
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[Federal Register Volume 87, Number 157 (Tuesday, August 16, 2022)]
[Rules and Regulations]
[Pages 50246-50250]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-17117]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 285
[Docket No. Fiscal-2021-0007]
RIN 1530-AA21
Debt Collection Authorities Under the Debt Collection Improvement
Act of 1996
AGENCY: Bureau of the Fiscal Service, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: This final rule amends the regulations of the Department of
the Treasury (``Treasury''), Bureau of the Fiscal Service (``Fiscal
Service''), regarding the Treasury Offset Program (``TOP'') and the
Cross-Servicing program. The primary reason for amending the regulation
is to inform the public about how Fiscal Service will use Social
Security numbers in mailings, as required by the Social Security Number
Fraud Prevention Act of 2017, which requires Fiscal Service to have
final regulations in place by September 15, 2022.
DATES: This rule is effective September 15, 2022.
FOR FURTHER INFORMATION CONTACT: Tawanna Edmonds, Director, Receivables
Management & Debt Services Division, Debt Management Services, Bureau
of the Fiscal Service at (202) 874-6810.
SUPPLEMENTARY INFORMATION:
I. Background
Legal Authorities. The Debt Collection Improvement Act of 1996
(``DCIA''), Public Law 104-134, 110 Stat. 1321-358 et seq. (April 26,
1996), authorized Federal agencies to refer Federal nontax debt to
Treasury for collection services, among other things. See 31 U.S.C.
3711(g). The DCIA authorized Federal disbursing officials to withhold
eligible Federal nontax payments to pay the payee's delinquent nontax
debt owed to the United States. See 31 U.S.C. 3716(c). The DCIA also
provided that Federal nontax payments may be offset to collect
delinquent debt owed to States, including past-due support, and that
payments made by States may be offset to collect delinquent nontax debt
owed to the United States. See 31 U.S.C. 3716(h). Further, Federal tax
refund payments may be offset to collect nontax debt owed to the United
States and debt owed to States, including past-due support. See 26
U.S.C. 6402, 31 U.S.C. 3720A, and 42 U.S.C. 664.
[[Page 50247]]
Cross-Servicing program. Fiscal Service administers the Cross-
Servicing program, through which it provides delinquent nontax debt
collection services to Federal agencies under 31 U.S.C. 3711(g).
Centralized Receivables Service. Fiscal Service administers the
Centralized Receivables Service, or CRS, through which it provides
invoicing and early delinquent debt collection services to Federal
agencies under 31 U.S.C. 3711(g).
Treasury Offset Program. Fiscal Service administers a centralized
offset program, known as the Treasury Offset Program, or TOP, through
which it offsets payments to collect debts.
Revision of Regulations. Fiscal Service promulgated 31 CFR 285.12
to implement 31 U.S.C. 3711(g). Among other things, the regulation
codified at 31 CFR 285.12 describes the procedures and criteria for
transferring delinquent debt to Treasury. It also explains the
statutory exceptions to this requirement and the standards under which
the Secretary of the Treasury (``Secretary'') will determine whether to
grant exemptions to this requirement.
Fiscal Service promulgated 31 CFR part 285, subpart A to implement
the centralized offset of payments through TOP, pursuant to the Debt
Collection Improvement Act of 1996.
On March 2, 2022, Fiscal Service published a Notice of Proposed
Rulemaking (``NPRM'') at 87 FR 11660 to revise the regulations codified
at 31 CFR part 285, subpart A, and 31 CFR 285.12 (the ``existing
regulations''). The primary reason for revising these regulations is to
inform the public about how Fiscal Service will use Social Security
numbers in mailings, as required by the Social Security Number Fraud
Prevention Act of 2017, which requires Fiscal Service to have final
regulations in place by September 15, 2022. The revisions also add
definitions for previously undefined terms and reword certain
provisions for clarity, consistent with the requirements of the Plain
Writing Act of 2010 and Executive Order 12866 (Sept. 1993). This final
rule implements the revisions proposed by the NPRM, without change,
except to correct a typographical error by moving ``and'' from the end
of Sec. 285.3(m)(2) to the end of Sec. 285.3(m)(3).
II. Analysis of Comments
Fiscal Service received comments from two non-profit organizations
in response to the NPRM.
One comment addressed the definition of ``legally enforceable'' and
suggested that debts should not be referred to Fiscal Service for
collection until administrative appeals and other challenges are
resolved. As stated in the NPRM, the term ``legally enforceable'' is
used in the existing regulations, and the description of the meaning of
that term in the existing regulations is in Sec. 285.12(c)(3). The
definition of this term, as proposed by the NPRM, is consistent with
the existing meaning. The proposed definition provides agencies with
necessary flexibility to determine when it is appropriate to refer
debts to Fiscal Service's Cross-Servicing program. The Cross-Servicing
program collects a wide variety of debts (ranging from defaulted loans
and benefit overpayments to complex audit disallowances and enforcement
findings), and the appropriate level of review before determining a
debt to be ``legally enforceable'' can differ significantly depending
on the type of debt. Each agency is best equipped to determine the
appropriate level of review for its debts.
The comment also expressed concern that ``in the absence of some
independent prohibition, agencies will be required to refer debts to''
the Cross-Servicing program. Fiscal Service does not agree that this is
a necessary consequence of the statement in the NPRM that a pending
appeal does not preclude the agency from referring a debt to the Cross-
Servicing program. Some agencies provide debtors with dispute
opportunities beyond what is required by Fiscal Service's rules. Only
after the agency provides at least the level of due process required by
Fiscal Service's rules may the agency refer the debt to the Cross-
Servicing program. An agency would not be required to refer the debt to
the Cross-Servicing program if it had not yet completed its required
reviews. Moreover, agencies may suspend debt collection activity
(including referring debts to the Cross-Servicing program) if the
debtor has requested a waiver or review of the debt. 31 CFR 903.2. As
such, Fiscal Service does not believe any change is necessary to the
definition of ``legally enforceable.''
One comment urged Fiscal Service to preserve and expand all
existing provisions that allow for suspension of collection. This
comment is outside the scope of this NPRM, as it addresses possible
changes to a separate regulation, specifically 31 CFR 903.2.
Nevertheless, for clarity, Fiscal Service notes that nothing proposed
by the NPRM is intended to narrow the existing provisions that allow
for the suspension of collection under 31 U.S.C. 3711(a)(3) and the
associated regulations, including 31 CFR 903.2.
One comment asserted that the NPRM does not sufficiently address
the current debt collection system's impact on communities of color and
recommended that Fiscal Service suspend the operation of TOP until
``critical issues are resolved.'' This comment is outside the scope of
the targeted changes proposed by the NPRM. Nevertheless, Fiscal Service
notes that it is conducting an equity review in a separate forum. See
Treasury's Equity Action Plan: One Year Progress Report (April 2022),
available at <a href="https://home.treasury.gov/system/files/136/Treasury-EquityActionPlan-OneYearProgress.pdf">https://home.treasury.gov/system/files/136/Treasury-EquityActionPlan-OneYearProgress.pdf</a>.
One comment recommended that Fiscal Service consider limiting the
amounts that can be collected through offset of benefit and tax refund
payments. This comment is outside the scope of the targeted changes
proposed by the NPRM. This comment also made various recommendations
regarding the collection of student loan debts owed to the Department
of Education. Fiscal Service does not have regulatory responsibilities
over student loan debts and would not be authorized or empowered to
implement some of the recommended changes.
One comment stated that Fiscal Service should exempt means-tested
tax credits from offset. This comment is outside the scope of the
targeted changes proposed by the NPRM. Moreover, Fiscal Service lacks
the statutory authority to exempt federal tax payments from offset. The
Secretary has limited authority to exempt federal nontax payments from
offset under 31 U.S.C. 3716(c)(3)(B), including means-tested payments.
The Secretary has no such authority with regard to federal tax
payments.
One comment asserted that Fiscal Service should increase the dollar
threshold for debts that agencies must refer for collections. This
comment is outside the scope of the changes contemplated by the NPRM.
Nevertheless, Treasury notes that a change to the regulation to
accomplish this change is not required, as the existing regulation set
the threshold at more than $25, ``or such other amount as Fiscal
Service may determine.'' 31 CFR 285.5(d)(3)(i)(C), 285.12(c)(4). Fiscal
Service can, at any time it deems appropriate, increase this threshold
without the need for regulatory action, through its regular guidance
for or communications with its creditor agencies. Moreover, under 31
CFR 903.3(a)(3), agencies may terminate collection when the costs of
collection are anticipated to exceed the amount recoverable.
Termination of collection action would excuse the agencies from
[[Page 50248]]
the general requirement to refer debts to the Cross-Servicing program
or the Treasury Offset Program. Relatedly, 31 CFR 901.10 states that
agencies should periodically evaluate the cost-effectiveness of
collection techniques and establish guideline with respect to points at
which costs of further collection efforts are likely to exceed
recoveries. Collection costs in this regard are likely to be a
significant factor for small dollar debts.
One comment urged Fiscal Service to look at all its regulations
impacting debt collection to mitigate harm to debtors and to advance
racial equity including, for example, its administrative wage
garnishment regulation. This comment is out of scope and is not
addressed here.
III. Procedural Analyses
This rule is not a significant rule for purposes of Executive Order
12866 and has not been reviewed by the Office of Management and Budget.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.),
it is hereby certified that the rule will not have a significant
economic impact on a substantial number of small entities because this
rule only impacts persons who receive payments from Federal agencies or
States and who are delinquent on debts owed to Federal agencies or
States. Accordingly, a regulatory flexibility analysis under the
Regulatory Flexibility Act is not required.
List of Subjects in 31 CFR Part 285
Administrative practice and procedure, Black lung benefits, Child
support, Child welfare, Claims, Credit, Debts, Disability benefits,
Federal employees, Garnishment of wages, Hearing and appeal procedures,
Income taxes, Loan programs, Payments, Privacy, Railroad retirement,
Railroad unemployment insurance, Salaries, Social Security benefits,
Supplemental Security Income, Taxes, Unemployment compensation,
Veteran's benefits, Wages.
For the reasons set forth in this preamble, Fiscal Service amends
31 CFR part 285 as follows:
PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION
IMPROVEMENT ACT OF 1996
0
1. The authority citation for part 285 continues to read as follows:
Authority: 5 U.S.C. 5514; 26 U.S.C. 6402; 31 U.S.C. 321, 3701,
3711, 3716, 3719, 3720A, 3720B, 3720D; 42 U.S.C. 664; E.O. 13019, 61
FR 51763, 3 CFR, 1996 Comp., p. 216.
0
2. In Sec. 285.1, add paragraph (q) to read as follows:
Sec. 285.1 Collection of past-due support by administrative offset.
* * * * *
(q) Social Security numbers. Fiscal Service will ensure that an
individual's Social Security number will not be visible on the outside
of any package it sends by mail. In addition, Fiscal Service generally
will redact or partially redact Social Security numbers in documents it
sends by mail; however, to administer administrative offset, Fiscal
Service (and other disbursing officials) may include Social Security
numbers in mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In notices, including notices to the debtor or payee that an
offset has or will occur, when the Social Security number is (or is
embedded in) a creditor agency's account number, debt identification
number, or debtor identification number;
(3) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's offset activities; and
(4) When required by law.
0
3. In Sec. 285.3, add paragraph (m) to read as follows:
Sec. 285.3 Offset of tax refund payments to collect past-due support.
* * * * *
(m) Social Security numbers. Fiscal Service will ensure that an
individual's Social Security number will not be visible on the outside
of any package it sends by mail. In addition, Fiscal Service generally
will redact or partially redact Social Security numbers in documents it
sends by mail; however, to administer the tax refund offset program,
Fiscal Service (and other disbursing officials) may include Social
Security numbers in mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In notices, including notices to the debtor or payee that an
offset has or will occur, when the Social Security number is (or is
embedded in) a creditor agency's account number, debt identification
number, or debtor identification number;
(3) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's offset activities; and
(4) When required by law.
0
4. In Sec. 285.5, add paragraph (l) to read as follows:
Sec. 285.5 Centralized offset of Federal payments to collect nontax
debts owed to the United States.
* * * * *
(l) Social Security numbers. Fiscal Service will ensure that an
individual's Social Security number will not be visible on the outside
of any package it sends by mail. In addition, Fiscal Service generally
will redact or partially redact Social Security numbers in documents it
sends by mail; however, to administer the Treasury Offset Program,
Fiscal Service (and other disbursing officials) may include Social
Security numbers in mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In notices, including notices to the debtor or payee that an
offset has or will occur, when the Social Security number is (or is
embedded in) a creditor agency's account number, debt identification
number, or debtor identification number;
(3) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's offset activities; and
(4) When required by law.
0
5. In Sec. 285.6, add paragraph (n) to read as follows:
Sec. 285.6 Administrative offset under reciprocal agreements with
states.
* * * * *
(n) Social Security numbers. Fiscal Service will ensure that an
individual's Social Security number will not be visible on the outside
of any package it sends by mail. In addition, Fiscal Service generally
will redact or partially redact Social Security numbers in documents it
sends by mail; however, to administer administrative offset, Fiscal
Service (and other disbursing officials) may include Social Security
numbers in mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In notices, including notices to the debtor or payee that an
offset has or will occur, when the Social Security number is (or is
embedded in) a creditor agency's account number, debt identification
number, or debtor identification number;
(3) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's offset activities; and
(4) When required by law.
0
6. In Sec. 285.8, add paragraph (k) to read as follows:
Sec. 285.8 Offset of tax refund payments to collect certain debts
owed to States.
* * * * *
(k) Social Security numbers. Fiscal Service will ensure that an
individual's
[[Page 50249]]
Social Security number will not be visible on the outside of any
package it sends by mail. In addition, Fiscal Service generally will
redact or partially redact Social Security numbers in documents it
sends by mail; however, to administer the tax refund offset program,
Fiscal Service (and other disbursing officials) may include Social
Security numbers in mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In notices, including notices to the debtor or payee that an
offset has or will occur, when the Social Security number is (or is
embedded in) a creditor agency's account number, debt identification
number, or debtor identification number;
(3) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's offset activities; and
(4) When required by law.
0
7. Section 285.12(a) is amended by:
0
a. Removing the words ``an agency'' and ``An agency'' wherever they
appear and adding in their place the words ``a Federal agency'' and ``A
Federal agency'', respectively;
0
b. Removing the words ``the agency'' and ``the agency's'' wherever they
appear and adding in their place the words ``the Federal agency'' and
``the Federal agency's'', respectively;
0
c. In paragraph (a):
0
i. Removing the definition for ``Agency'',
0
ii. Adding in alphabetical order definitions for ``Centralized
Receivables Service,'' ``Cross-Servicing program,'' and ``Days
delinquent'';
0
iii. Removing the words ``Secretary of the Treasury'' and adding in
their place the words ``Secretary'' in the definition for ``Debt
collection center'';
0
iv. Adding in alphabetical order definitions for ``Debtor,''
``Delinquent or past-due,'' ``Federal agency,'' and ``Legally
enforceable''; and
0
v. Removing the words ``a Federal agency'' and adding in their place
the words ``the United States or a Federal agency'' in the definition
for ``Person'';
0
d. Revising paragraphs (b), (c), and (d)(1)(iii);
0
e. Removing the word ``or'' at the end of paragraph (d)(1)(v);
0
f. Redesignating paragraph (d)(1)(vi) as paragraph (d)(1)(vii);
0
g. Adding a new paragraph (d)(1)(vi);
0
h. Revising paragraphs (d)(4);
0
i. Adding (d)(5) introductory text;
0
j. Removing paragraph (d)(6);
0
k. Removing and reserving paragraph (e);
0
l. In paragraph (i), removing the words ``delegatee'' and ``agency''
and adding in their place the words ``delegate'' and ``the debt'',
respectively;
0
m. Revising paragraph (j); and
0
n. Adding paragraph (k).
The revisions and additions read as follows:
Sec. 285.12 Transfer of debts to Treasury for collection.
(a) * * *
Centralized Receivables Service means the program through which
Fiscal Service provides servicing, pursuant to 31 U.S.C. 3711(g), for
Federal nontax debt from the point at which a creditor agency
establishes a debt until the debt is paid, otherwise resolved, or
referred to the Cross-Servicing program for further action.
* * * * *
Cross-Servicing program means the program through which Fiscal
Service provides delinquent nontax debt collection services pursuant to
31 U.S.C. 3711(g).
Days delinquent refers to the number of days that a debt has been
in a delinquent status. For administrative debts (e.g., debts arising
from fines, penalties, and overpayments), the first day of delinquency
generally is the date of the creditor agency's initial written demand
for payment. For debts that arise from the extension of credit through
direct loans, loan guarantees, or insurance, the date of delinquency
generally is the due date specified in the applicable agreement or
instrument.
* * * * *
Debtor means a person who owes a debt.
Delinquent or past-due refers to the status of a debt and means a
debt has not been paid by the date specified in the creditor agency's
initial written demand for payment, or other applicable agreement or
instrument, unless other payment arrangements satisfactory to the
creditor agency have been made.
Federal agency means a department, agency, court, court
administrative office, or instrumentality in the executive, judicial,
or legislative branch of the Federal Government, including government
corporations.
* * * * *
Legally enforceable refers to a characteristic of a debt and means
there has been a final agency determination that the debt, in the
amount stated, is due, and there are no legal bars to collection. A
debt would not be legally enforceable, for example, if the debt is:
(1) The subject of a pending administrative review required by a
statute or regulation that prohibits collection action during the
review process; or
(2) Governed by a statute that precludes collection.
(b) In general. Fiscal Service and other debt collection centers
may take debt collection action on behalf of one or more Federal
agencies or a unit or subagency thereof. Fiscal Service provides these
services through its Cross-Servicing program and its Centralized
Receivables Service.
* * * * *
(c) Mandatory transfer of debts to Fiscal Service's Cross-Servicing
program. (1) A debt is considered eligible for transfer to the Cross-
Servicing program only if it is past due and is legally enforceable.
(2) Except as set forth in paragraphs (c)(3) and (d) of this
section, a creditor agency must transfer any eligible debt that is over
$25 (or such other amount as Fiscal Service may determine) to the
Cross-Servicing program by no later than 120 days delinquent if the
creditor agency relies on the Cross-Servicing program to submit the
transferred debts for centralized offset on the creditor agency's
behalf or, otherwise, by no more than 180 days delinquent.
(3) If a final agency determination resulting from an
administrative appeal or review process is not made until after the
time specified in paragraph (c)(2) of this section, the creditor agency
must transfer such debt to the Cross-Servicing program within 30 days
after the date of the final decision.
(4) For accounting and reporting purposes, the debt remains on the
books and records of the Federal agency, which transferred the debt.
(5) On behalf of the creditor agency, Fiscal Service will take
appropriate action to collect or compromise the transferred debt, or to
suspend or terminate collection action thereon. Appropriate action to
collect a debt may include referral to another debt collection center,
a private collection contractor, or the Department of Justice for
litigation. The creditor agency must advise Fiscal Service, in writing,
of any specific statutory or regulatory requirements pertaining to its
debt and will agree, in writing, to a collection strategy, which
includes parameters for entering into compromise and repayments
agreements with debtors.
* * * * *
(d) * * *
(1) * * *
(iii) Is at a private collection contractor if the debt has been
referred to a private collection contractor for a period of time
determined by the Secretary;
* * * * *
(vi) Is being serviced and/or collected in accordance with
applicable statutes
[[Page 50250]]
and/or regulations by third parties, such as private lenders or
guaranty agencies; or
* * * * *
(4) A debt is being collected by internal offset if a creditor
agency expects the debt to be collected in full within three (3) years
from the date of delinquency through the withholding of funds payable
to the debtor by the creditor agency, or if the creditor agency has
issued notice to the debtor of the creditor agency's intent to offset
such funds.
(5) The Secretary may exempt classes of debt from mandatory
referral.
* * * * *
(j) Fees. Fiscal Service and other debt collection centers may
charge Federal agencies fees sufficient to cover the full cost of
providing debt collection services authorized by this section. Fiscal
Service and other debt collection centers may calculate fees in any
manner designed to cover up to the full cost of providing these
services, including based on a percentage of collections received on
account of a debt while it was being serviced under this section or a
flat fee based on actions taken under this section by Fiscal Service or
another debt collection center with regard to a debt or group of debts.
Such fees may be determined based on overall program costs and need not
be based on costs related to the collection of a specific debt. Fiscal
Service and debt collection centers are authorized to retain fees from
amounts collected and may deposit and use such fees in accordance with
31 U.S.C. 3711(g). Fees charged by Fiscal Service and other debt
collection centers may be added to the debt as an administrative cost
if authorized under 31 U.S.C. 3717(e).
(k) Social Security numbers. When conducting activities for or
related to its Centralized Receivables Service or Cross-Servicing
program, Fiscal Service will ensure that an individual's Social
Security number will not be visible on the outside of any package it
sends by physical mail or in the subject line of an email. In addition,
Fiscal Service generally will redact or partially redact Social
Security numbers in documents it sends by mail; however, to administer
these programs, Fiscal Service may include Social Security numbers in
mailed documents, including, for example:
(1) In interoffice and interagency communications;
(2) In communications with private collection contractor and agents
that assist Fiscal Service in its debt collection activities;
(3) In notices and letters, including demand letters and notices to
employers regarding wage garnishment, when the Social Security number
is (or is embedded in) a creditor agency's account number, debt
identification number, or debtor identification number;
(4) In notices to employers regarding wage garnishment;
(5) In response to a request of a debtor or a debtor's
representative for records of Fiscal Service's collection activities;
and
(6) When required by law.
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2022-17117 Filed 8-15-22; 8:45 am]
BILLING CODE 4810-AS-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.