Debts Included in the Debt Collection Improvement Act (DCIA)
What is a debt (as defined in the DCIA)?
"Debt" or "claim" [used synonymously] means any amount of funds or property that an appropriate official of the federal government has determined is owed to the United States by a person, organization, or entity other than another federal agency. Most of the debt collection provisions of the DCIA apply to non-tax debt.
When is an amount considered a debt?
A debt or receivable is created when a responsible federal official determines that an amount is owed. There is no requirement that an amount be litigated or adjudicated prior to its consideration as a receivable. However, a debt may not be collectible until the amount is fixed (or is otherwise finally adjudicated).
What are the examples of the debts included in the law?
Examples of debts include:
Loans made, insured or guaranteed by the government, including deficiency amounts due after foreclosure or sale of collateral [examples: student direct and guaranteed loans, SBA loans, HUD loans];
Expenditures of non-appropriated funds [example: bounced checks to military commissaries];
Overpayments, including payments disallowed by Inspector General audits [examples: salary or benefit overpayments, duplicate payments, misused grant funds];
Any amount the U.S. Government is authorized by statute to collect for the benefit of any person [example: FTC consumer redress];
The unpaid share of any non-federal partner [i.e., States or local governments] in a program involving a federal payment and a matching or cost-sharing payment by the non-federal partner [example: state share of benefit matching program];
Any fines or penalties assessed by an agency [examples: civil monetary penalties, OSHA fines for mine safety violations];
Other amounts of money or property owed to the government [examples: license fees, FOIA fees].
Is an agency required to include as a receivable the difference between what is received in the sale of a property and the debt owed to the government on the mortgage for that property?
Yes. When an agency sells a property on which it holds a mortgage to satisfy a delinquent debt, the agency must subtract the price it obtained from the amount of the debt owed to it. The difference is a receivable which the debtor owes the government.
What is a delinquent debt?
A debt is delinquent if it has not been paid by the payment date or by the end of any grace period contractually provided. The date of delinquency is the payment due date for an installment payment and the date of mailing of notice for an administrative debt. The date of delinquency starts the clock for the 180-day period contained in the DCIA.
Are any debts exempt from offset (withholding) under the Treasury Offset Program?
Yes. Debts arising under the Internal Revenue Code and the tariff laws of the United States are not included in the Treasury Offset Program. Debts arising under the Social Security Act may be, but are not required to be, included in the Treasury Offset Program. Other statutory authority may preclude collection of certain other types of debt by administrative offset (withholding).
Can the U.S. Government collect money to pay debts owed to a State?
Yes, only by administrative offset of federal payments and under certain circumstances. Under DCIA, administrative offset (i.e., Treasury Offset Program) may be used to collect debts, including funds or property owed by a person to a State (including any past-due support being enforced by the State), the District of Columbia, American Samoa, Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, or the Commonwealth of Puerto Rico.
The Secretary of the Treasury has the discretion to collect debts owed to States by offset;
it is not mandatory. A reciprocal agreement must be made with the State; the appropriate
State official must request the offset; the cost of the collection must not exceed the
amount of the debt; the interests of the U.S. must be protected; and the payments withheld
to pay State debts may not be exempted from offset (withholding). Social Security, Black Lung Benefit
(Part B) and Railroad Retirement Benefit (other than tier 2 benefits) payments may not be
offset to pay State debts (although they are subject to limited offset to pay federal debts).
When must a debtor be provided with notice that a federal payment will be offset or
has been offset to satisfy a federal debt?
Before referring a debt for collection by administrative offset, a creditor agency must provide each debtor with: (a) a written notification of the nature and the amount of the debt, the intention of the agency to collect the debt through administrative offset, and an explanation of the debtor's rights; (b) an opportunity to inspect and copy the records of the agency; (c) an opportunity for review within the agency; and (d) an opportunity to enter into a written repayment agreement.
After the debt has been referred for administrative offset and an offset is taken, the disbursing official conducting the offset must notify the debtor/payee that the offset has occurred (including the amount and type of payment that was used to pay the debt) and the identity of the creditor agency requesting the offset, including a contact name. The timing of the notification is not mandated EXCEPT for periodic benefit payments, where the disbursing official should try to notify the payee no later than the date of the offset (withholding). Regardless of the type of payment, failure of the debtor to receive notice will not affect the legality of the offset (withholding).
Waiver of Computer Matching Requirements of the Privacy Act
The DCIA allows the Secretary of the Treasury to waive the requirements of Sections 552a(o) and 552a (p) for administrative offset (withholding). What are the requirements of Sections 552a(o) and (p) of Title 5?
5 U.S.C. Sections 552a(o) and (p) were enacted as part of the Computer Matching and Privacy Protection Act of 1988, an amendment to the Privacy Act of 1974. Section 552a(o) requires matching agreements for computer matching programs. Section 552a(p) requires that, prior to taking an adverse action against an individual, an agency must independently verify the information acquired by a computer match and provide the individual with an opportunity to contest the findings.
How are these requirements waived for purposes of administrative offset?
Treasury has the authority to waive the requirements of 5 U.S.C., Sections 552a (o) and (p) for administrative offset upon written certification that an agency has complied with the administrative due process notice requirements, namely that the agency has provided the debtor with: (a) written notification of the nature and amount of the debt, the intention of the agency to collect the debt through administrative offset, and an explanation of the debtor's rights; (b) an opportunity to inspect and copy the records of the agency; (c) an opportunity for review within the agency; and (d) an opportunity to enter into a written repayment agreement. This certification will be provided by an agency to Treasury when debts are referred for administrative offset and will not need to be duplicated.
Is the agency's Data Integrity Board required to review Treasury's administrative offset activities?
No. The DCIA requires that Treasury's Data Integrity Board report to OMB on the matching activities conducted for the purposes of administrative offset (withholding). Reporting does not need to be duplicated by the agencies.
Where the Treasury delinquent debtor database is matched with disbursement records of non-Treasury disbursing officials in order to conduct administrative offset, no matching agreement is required since the waiver authority would have already been exercised. [However, such computerized comparisons with other federal and state disbursing records concerning individuals would remain "matching programs" as defined under the Computer Matching and Privacy Protection Act of 1988. Treasury would meet the requirements for publication of notice of the matching program in the Federal Register, for completing a cost benefit analysis for such matches, and for reporting to Congress and OMB].
What does Treasury plan to issue to carry out the requirements of the DCIA? How will agencies be informed?
Treasury will coordinate issuing revised Federal Claims Collection Standards, regulations for benefit payment offset, and standards for federal agency participation in centralized debt collection (Cross-Servicing), including administrative offset (Treasury Offset Program).
Treasury will conduct governmentwide conferences around the country directed at federal employees to train them in the DCIA and its requirements. Treasury will also conduct public awareness campaigns directed at debtors to acquaint them with the DCIA and its impact on them. Treasury will also meet with each individual participating agency to bring their debts and payments into compliance with the DCIA requirements.
Credit Bureau Reports and Reporting to Credit Bureaus
Does the DCIA now authorize agencies to obtain credit reports for debt collection purposes?
Yes. An agency may obtain a credit report or comparable credit information, such as a summary report, on any individual or entity responsible for a delinquent debt.
Does the DCIA now require agencies to report delinquent non-tax debt to credit bureaus?
Yes. The DCIA now requires agencies to report delinquent commercial and consumer non-tax debt to credit bureaus. The DCIA did not change the requirement that an agency must comply with Privacy Act requirements and provide a 60-day notice to the debtor before reporting a delinquent consumer debt.
Did the DCIA make any changes to the requirements for accounts that are current (i.e., not delinquent)?
Yes. The DCIA now authorizes agencies to report non-delinquent consumer and commercial debt to credit bureaus, providing the agency has provided the necessary Privacy Act notices for consumer debt. The agency must ensure that its system of record notices indicates that it may report current accounts before doing so.
What does an agency do if a current account which it is reporting becomes delinquent?
For commercial accounts, the agency would simply change the account status to delinquent. For consumer accounts, the agency must still notify the debtor 60 days in advance of changing the status of the account to delinquent. Treasury is working with the credit bureaus to determine if there is a suitable status for reporting these types of accounts during the notice period. Treasury will keep the agencies advised of any changes.
Does the DCIA require lenders to report to credit bureaus, both delinquent and non-delinquent debts?
Yes. The DCIA now requires lenders to report all extensions of credit, including insured or guaranteed loans, to credit bureaus. Delinquency status is immaterial.
Yes. There are no exceptions under the DCIA. An agency is required to obtain TINs in any case which may give rise to a receivable where the individual or entity is considered to be doing business with the government. Covered under the category of doing business with the government are: lenders and servicers under federal guaranteed or insured loan programs; applicants for and recipients of federal licenses, permits, rights-of-way, grants, or benefit payments; contractors; and entities and individuals owing fines, fees, royalties, or penalties to the agency.
Does this now mean that an agency can deny benefits to someone who refuses to provide her/his TIN?
Yes. Providing a TIN has now become a condition of receiving such a benefit.
Is the TIN required to be included with payment vouchers submitted for disbursement for all payments?
Yes, unless other federal laws prevent disclosure of the TIN. There are no exceptions in the DCIA.
Is there an alternative to charging interest and penalties on delinquent administrative (i.e., non-credit) debt?
Yes. The DCIA allows for increasing an administrative claim by the cost of living adjustment in lieu of charging interest and penalties. This adjustment must be computed annually. It is figured by taking the difference between the Consumer Price Index in June of the year before the adjustment [CPI-1] and comparing it to the Consumer Price Index in June of the calendar year in which the claim was first determined or last adjusted, as the case may be [CPI-2]. The cost of living adjustment becomes the percentage that CPI-1 exceeds CPI-2.
This alternative is only applicable to all debt that is not based on extension of government credit through loans, guarantees, or insurance. Examples of debts where this alternative is applicable are fines, penalties, and overpayments.
May an agency increase its civil monetary penalties for inflation?
An agency must by regulation adjust for inflation its civil monetary penalties 180 days after the date of enactment of the DCIA (due by 10/23/96) and at least once every 4 years after that. This does not apply to penalties under the Internal Revenue Code of 1986, the Tariff Act of 1930, the Occupational Safety and Health Act of 1970 or the Social Security Act. Agencies must publish regulations by 10/23/96 and the first adjustment may not exceed 10% of the penalty.
Must agencies assess interest and penalties on delinquent debt owed by State or local governments?
Yes, agencies must assess interest and penalties on delinquent debt owed by State and local governments. However, the head of the agency may waive the collection of the interest and penalties.
What are the statutory prerequisites to the withholding of credit by a Federal Reserve Bank, at the direction of Treasury, from banks presenting Treasury checks for ultimate charge to the account of the U.S. Treasury to pay debts owed by such presenting banks (Treasury Check Offset)?
Prior to authorizing a Treasury Check Offset by the Federal Reserve Bank, Treasury must first try to collect the claim, and failing collection, Treasury must attempt collection by administrative offset (withholding).
Barring Delinquent Debtors From Receiving Loans/Credit
Does an agency have to deny credit to a debtor in delinquent status? How can the delinquency be resolved or fixed?
Yes, the agency must deny credit to a delinquent debtor unless this requirement is waived by the head of the agency or the Chief Financial Officer. The delinquency can be resolved or fixed by the debtor entering into a repayment plan for collection of the amount of the delinquency or by paying the amount of the delinquency in full.
Are there standards for such waivers by agency heads or CFOs?
Treasury is developing guidelines for the agencies to use in setting their own standards for waivers. These guidelines will include the expectation that an agency will balance whether the denial of credit would be contrary to the purpose of the program under which the credit is being made against the intent of the law to ensure that the federal government does not continue to provide funds to known or repeat delinquent debtors.
Is there any incentive for agencies to increase their collections of delinquent debt?
Yes. The DCIA includes a voluntary "gainsharing" provision that will work as follows, after Treasury issues regulations:
There will be a Debt Collection Improvement Account at Treasury into which an agency may deposit a portion of its collections and from which it may withdraw the money for certain purposes.
To determine the amount that an agency may transfer to the Debt Collection Improvement Account, OMB will work with an agency to determine a baseline to measure the agency's performance in debt collection.
The agency may contribute an amount equal to 5% of its collections in a fiscal year MINUS the agency's baseline. The agency's baseline is equal to the greater of 5% of its collections in the previous year OR 5% of the average annual amount collected in the previous 4 years. So an agency must improve its debt collection performance over its baseline in order to contribute to its Debt Collection Improvement Account from 0% to 5% of collections.
OMB in consultation with Treasury may adjust an agency's contribution amount to reflect the level of effort in credit management by an agency. An indicator of this effort is based on two factors: 1) number of days between a debt being delinquent and referral to Treasury for collection (or an exemption from referral obtained); and 2) the ratio of delinquent debts to total receivables for a given program and the change in the ratio over a period of time.
The amounts transferred to Treasury in the Debt Collection Improvement Account shall be available for Treasury to reimburse agencies for certain expenses for credit management and debt collection in amounts and ways provided in advance in appropriation Acts.
How can an agency spend the "gainsharing" money that it has deposited into the account?
The Secretary of the Treasury may reimburse agencies for "qualified expenses" related to the improvement of credit management, debt collection, and debt recovery activities such as: account servicing; data processing equipment; delinquent debt collection; measures to minimize delinquent debt; sales of delinquent debt; asset disposition; and training of personnel involved in credit and debt management.
If an agency refers its debts for collection to Treasury or another Debt Collection Center, who gets credit for the collection for "gainsharing" purposes?
The agency that refers the debts receives the credit for the collection.
May agencies publish the names of delinquent debtors?
After Treasury has issued regulations in consultation with OMB and other federal agencies, agencies may publish the names of delinquent debtors and the existence of the non-tax debt, for the purpose of collecting non-tax delinquent debt.