Volume I, Part 4, Chapter 4000
Debt Management Services
Collection of Delinquent Nontax Debt
Frequently Asked Questions
These Frequently Asked Questions apply to the Treasury Financial Manual (TFM), Volume I, Part 4, Chapter 4000, Debt Management Services Collection of Delinquent Nontax Debt, published on October 18, 2011. The questions and answers addressed herein provide creditor agencies with clarification and additional details on the TFM Chapter's policies and procedures on debt collection.
1. What is the TFM and where can I find a copy?
The TFM is the Department of the Treasury's (Treasury's) official publication for financial accounting and reporting of all receipts and disbursements of the Federal Government. Treasury's Bureau of the Fiscal Service issues TFM chapters to provide policies, procedures, and instructions for federal agencies and others to follow in carrying out their fiscal responsibilities. On October 18, 2011, the Fiscal Service published I TFM 4-4000, which addresses the Fiscal Service's debt management responsibilities and describes how the Fiscal Service provides delinquent nontax debt collection services to federal agencies. A copy of the TFM Chapter is available at http://tfm.fiscal.treasury.gov/v1/p4/c400.html.
2. Under what authority is TFM Chapter 4000 applicable to federal agencies?
The Debt Collection Improvement Act of 1996 generally requires federal agencies to transfer any nontax debt over 180 days delinquent to the Fiscal Service's Debt Management Services (DMS) for debt collection action (the Cross-Servicing Program). DMS is then authorized to take appropriate action to collect or terminate collection action on the debt. See, e.g., 31 U.S.C. § 3711(g)(10).
3. Is the TFM Chapter binding on federal agencies?
Yes, federal agencies must comply with the provisions of the TFM Chapter. The TFM Chapter is a regulation and carries the weight of law. See I TFM 4-4030—Authority.
4. Are the LOAs still in effect?
No, the Letters of Agreement (LOAs) are no longer in effect. Prior to the publication of the TFM Chapter, LOAs governed the roles and responsibilities of DMS and federal agencies participating in the Cross-Servicing Program. The TFM Chapter replaces and incorporates most of the terms of the former LOAs. For example, the TFM Chapter reiterates DMS's authority to service debts on behalf of agencies on a fee-for-service basis. In addition to incorporating many of the provisions from the former LOAs, the TFM Chapter also clarifies current policies and practices. See I TFM 4-4010—Background.
5. What are some of the more significant changes made by the TFM Chapter?
The TFM Chapter includes provisions that change some of the requirements for participation in the Cross-Servicing Program. These changes will allow DMS to more efficiently and effectively collect delinquent nontax debt owed to the United States. Some of the more significant changes include:
- Full Compromise Authority: DMS has 100 percent authority to compromise agencies' debts, except as prohibited by law. As always, DMS's goal is to collect the full amount of the debt and compromise debts only if it is in the best interest of the government and is consistent with the Federal Claims Collection Standards.
- Proof of Debt Documentation: Agencies are required to supply documentation to support the validity of debts referred to DMS at the time of referral (or within 10 business days of a request by DMS). DMS will work closely with agencies to meet this requirement.
- Use of All Debt Collection Tools: Agencies are generally required to authorize DMS to use all debt collection tools, including administrative wage garnishment (AWG). This is because agencies are required to aggressively pursue collection of their debts, which means using all available tools as appropriate.
6. Explain what it means to certify debts at the time of transfer. Does the TFM Chapter change this requirement?
No, the TFM Chapter did not change the certification process. Agencies are required to certify on behalf of the head of the agency that, among other things, the referred debts are valid, delinquent, and legally enforceable, that there are no bars to collection, and that all required due process has been provided. This certification occurs at the time of referral. Your agency's internal delegations must ensure that the individual referring the debt to DMS has the appropriate authority to refer debts, including compromise authority.
Agencies sign an agreement each year, which sets forth the facts to which they are certifying at the time of referring debts to the Cross-Servicing Program. In 2012, the certification agreements applicable to the Cross-Servicing and Treasury Offset Programs were combined into a single agreement. This agreement should be signed at the Chief Financial Officer (CFO) level.
7. Is a federal agency required to fill out an Agency Profile Form?
Yes, federal agencies are required to fill out all sections of the Agency Profile Form as a prerequisite to participating in the Cross-Servicing Program. The Agency Profile Form provides DMS with basic information about an agency's debt program, and reflects the requirements set forth in the TFM Chapter. Where the same basic debt collection rules apply to all of an agency's debt collection programs, the agency may submit one profile form for all of their programs. However, depending on the debt collection requirements for different debt types, an agency may have a separate Agency Profile Form for each of its programs. All agencies should update their Cross-Servicing Program profiles so that they are consistent with the TFM Chapter. See I TFM 4-4035.10—Complete an Agency Profile Form. DMS will not begin servicing an agency's debts in accordance with the TFM until an agency submits an updated Agency Profile Form.
8. What if an agency's profile is inconsistent with the TFM Chapter provisions?
To the extent that an agency's current profile is inconsistent with the TFM Chapter (e.g., does not give full compromise authority or does not authorize the use of AWG), DMS will work with the federal agency to complete a new Agency Profile Form that is consistent with the TFM Chapter. DMS will initiate contact with agencies whose profiles do not indicate full compromise authority and/or do not authorize AWG.
Statutory exceptions to certain TFM Chapter's requirements may apply to some agencies. DMS has revised its standard Agency Profile Form to allow agencies to provide the legal authorities requiring deviation from the requirements set forth in the TFM Chapter. DMS will evaluate any cited legal authority to determine whether such authority provides a sufficient reason to deviate from the TFM Chapter.
9. Once a federal agency completes or makes updates to an Agency Profile Form, will that new or updated form apply only to newly referred debts?
No. Unless otherwise noted, once an agency completes or updates a profile form, the new profile will govern all the program's debts, whether they were referred before or after the new profile was established.
10. If I have questions regarding the TFM Chapter, whom should I contact?
Program staff may contact the DMS Agency Liaison Division Policy Staff at (202) 874-6660. Agency counsel may contact the the Fiscal Service Office of Chief Counsel at (202) 874-6680 and request to speak with a debt collection attorney.
FULL COMPROMISE AUTHORITY
11. Before the publication of the TFM Chapter, federal agencies were not required to give DMS full compromise authority. Why and under what authority did that change occur?
Agencies are required to refer debts on behalf of the head of the agency. Treasury's DMS then steps into the shoes of the agencies when collecting. DMS has the same full compromise authority over a referred debt as the head of the referring agency. The publication of the TFM Chapter implemented DMS's full compromise authority. For the past few years, DMS has worked with agencies to ensure compliance with the TFM Chapter. See I TFM 4-4030.30—FMS Authority to Compromise Debts and/or Collect Debts in Installments.
If an agency has not yet provided this authority to DMS by designation in its Agency Profile Form, DMS will reach out to the agency to obtain compliance. Agencies with statutory impediments to providing full compromise authority are now also required to cite this statutory authority on the Agency Profile Form and contact DMS if further guidance is needed.
12. What are the benefits of DMS exercising its full compromise authority?
By providing DMS with full compromise authority, DMS can more effectively collect debts on behalf of federal agencies. If a debtor requests a compromise on a debt that has been referred to DMS's Cross-Servicing Program, DMS works directly with the debtor to determine if a debtor's circumstances meet the criteria for compromise under the Federal Claims Collection Standards (FCCS). If a compromise is appropriate, DMS negotiates the compromise directly with the debtor. If DMS does not have full compromise authority, DMS would have to seek final approval of the proposed compromise from the referring agency. At this point the negotiation process would be put on hold until a response was received from the referring agency. This approval process has historically taken weeks and even months. Due to this lag time, the debtor often either no longer had the ability or the willingness to pay the previously negotiated compromised amount. DMS's implementation of its full compromise authority under the TFM Chapter will eliminate these costly delays.
Moreover, DMS personnel have the training and expertise to negotiate compromises and make decisions based on the compromise criteria set forth in the FCCS. They have a thorough knowledge of the FCCS requirements, know which documentation to request from the debtor, know how to interpret financial statements and credit reports, have the proper tools to verify the accuracy of information, and have extensive experience evaluating and assessing debtors' circumstances. And finally, DMS's expertise in debt collection allows DMS to more effectively assess when a compromise offer is in fact in the best interest of the United States.
13. Who will be able to exercise full compromise authority on referred debts?
DMS personnel at the Operations Centers will be able to exercise full compromise authority on referred debts. DMS's private collection agency (PCA) contractors will not have full compromise authority. PCA authority is limited, and DMS approval is needed in certain situations. Any compromise offers above 50 percent require the approval of DMS. DMS has no current plans to increase the PCAs' authority.
14. If a federal agency's current profile form does not give DMS full compromise authority, can DMS exercise full compromise authority anyway?
DMS will work with agencies whose profile form does not comply with current requirements. Although Treasury has authority to compromise to the same extent as the head of the agency referring the debt, we will not exercise that authority without conferring with the agency first and receiving an updated Agency Profile Form.
15. A federal agency's policy does not allow the agency to grant DMS full compromise authority. Is this a valid exception to the requirement to provide DMS with full compromise authority?
No, there are no exceptions to DMS's full compromise authority unless there are specific legal prohibitions. If there are no legal prohibitions on compromising your agency's debts (or on the agency's ability to delegate that compromise authority), then DMS has 100 percent compromise authority. Your agency may need to reevaluate its internal delegations to ensure that the individual referring the debt to DMS has the appropriate authority to refer debts, including compromise authority. See I TFM 4-4030.30—FMS Authority to Compromise Debts and/or Collect Debts in Installments.
16. What parameters will DMS use in its compromise determinations? Can federal agencies set these parameters for DMS?
DMS's goal is to collect the full amount of the debt and will compromise a debt only if it is in the best interest of the government and consistent with the FCCS. Federal agencies may not impose compromise parameters on DMS, unless there is specific statutory authority for such parameters (which should be cited on the Agency Profile Form). However, if a federal agency has certain policy considerations that it would like DMS to take into account, the federal agency may communicate those policy considerations to DMS. DMS may, at its discretion, consider those policy considerations when considering a compromise.
17. How does DMS define "in the best interest of the Government?" What if a federal agency has a broader or more limited definition of the term?
The definition and interpretation of what constitutes "best interest" of the Government is context-specific. DMS personnel are trained in negotiating compromises and making decisions based on the compromise criteria set forth in the FCCS. If agencies have specific concerns of DMS's interpretation of what may be in the Government's "best interest," they should specify such concerns in their agency profile. DMS will consider those entries in making the final compromise determination.
18. How are PCA fees calculated by the Fiscal Service on debts compromised by PCAs?
Under DMS's current PCA task order, DMS pays fees to PCAs based on a percentage of the total amount collected by the PCA. For example, if a PCA compromises a debt of $100 to $80, and the debtor pays the agreed upon compromise amount, the fee that DMS will pay to the PCA is a percentage of the $80 collected. This provides an incentive for PCAs to attempt collection as closely as possible to the full amount of the debt. DMS also routinely reviews compromise agreements entered into by PCAs to ensure compliance with DMS' task order and the FCCS.
PROOF OF DEBT DOCUMENTATION
19. The TFM Chapter requires that federal agencies provide proof of debt documentation at the time of referral, but it is impossible for my agency to do so. Does this mean we cannot refer debts?
No, your agency can still refer debts. DMS will work with each federal agency to implement the provisions of the TFM chapter. Your agency, however, must make reasonable efforts to provide the required documentation at or around the time of referral or, at the very least, within a short time frame of a request by DMS for such documentation. See I TFM 4-4010—Background and I TFM 4-4035.40—Transfer Eligible Debts to FMS; Provide Debt and Debtor Information to FMS.
20. Does my agency really have to provide DMS with periodic updates about the debt? Why? What information does DMS need?
Yes, agencies are required to provide DMS with periodic updates for the following reasons:
- Meet Certification Requirements: Providing updates is part of an agency's requirement under its annual certification agreement with DMS. Each agency must update DMS with information regarding the validity and enforceability of the debt. For example, an agency must notify DMS if the debtor files for bankruptcy and if an agency is consequently barred from pursuing collection. Refer to the Agency Certification Agreement.
- Aggressively Collect Delinquent Debts: Providing DMS with updated information that would assist its debt collection efforts ensures an agency is satisfying its requirement to aggressively collect its delinquent debts. See I TFM 4-4035.40—Transfer Eligible Debts to FMS; Provide Debt and Debtor Information to FMS.
- Perform Administrative Functions: Agencies are responsible for maintaining records relating to their debts, even after referring the debts to DMS for collection. This includes maintaining accurate debt balances. See I TFM 4-4035.50—Maintain Records.
USE OF ALL DEBT COLLECTION TOOLS
21. My agency has good reasons for not wanting to authorize the use of AWG. Are we still required to authorize its use?
It depends. Agencies are generally required to authorize DMS to use all available debt collection tools. This includes the use of AWG. See, e.g., 31 U.S.C. 3711(g)(9)(G).
Your agency should provide DMS with specific reasons for why it believes the use of AWG is not in the best interest of the government, and DMS will work with your agency to evaluate these policy concerns. DMS will make the final decision regarding whether the use of AWG is appropriate in light of these concerns. See I TFM 4-4035.30—Comply With Relevant Laws and Authorize Use of All Appropriate Debt Collection Tools.
22. Does the TFM Chapter cover the Treasury Offset Program?
No, the TFM Chapter does not address the requirement that agencies refer their debts to the Treasury Offset Program (TOP), except to the extent that the agency has referred a debt to the Cross-Servicing Program and has authorized the Cross-Servicing Program to refer the debt to TOP on the agency's behalf. See I TFM 4-4015—Scope.
23. What are partial matches? Why are alias names added to our debt records?
Partial matches occur in the context of the Treasury Offset Program (TOP). TOP works by matching payments disbursed under a specific Tax Identification Number (TIN) against TINs in a delinquent debtor database. (The TIN for an individual in a non-commercial capacity is usually the Social Security Number, and is the Employer Identification Number for businesses and individuals acting in a commercial capacity.) When a match occurs, an offset takes place and the withheld amount is applied towards the delinquent debt.
A partial match occurs when a payment record and a debt record match on the TIN but fail to match on name (e.g., because of a typo or because the debtor uses two different names). An offset will not take place if there is a partial match. DMS conducts research on the “partially matched” debts to determine if additional valid names (or alias names) need to be added to TOP. DMS believes that adding alias name information to update debt records is an important way to avoid missed offsets through TOP. DMS uses established criteria before adding names to debt records and will only add a name if reasonably confident that the name is a true alias of the debtor. Typical partial matches occur with maiden and married names and acronyms used instead of full business names.
If your agency has concerns about adding alias names to your agency's debt records, we would like to understand the specific reasons for these concerns. DMS may be able to address these concerns so that it can continue using this valuable debt collection tool. See I TFM 4-4035.30—Comply With Relevant Laws and Authorize Use of All Appropriate Debt Collection Tools and I TFM 4-4040.30—Modify Records.
24. Has the process related to fees changed? I thought debtors paid for DMS's fees. Why does the TFM say that my agency will have to pay these costs?
No, the process related to fees has not changed. DMS has never charged the debtors directly for its fees. DMS is permitted to charge federal agencies fees for its debt collection services. Generally, agencies are required by law to pass their debt collection costs to debtors. Part of an agency's debt collection costs are DMS's fees. Agencies generally direct DMS (via the Agency Profile Form) to add these fees to the debt balance. Therefore, while it may appear that DMS is charging these fees directly to the debtor, DMS is actually charging the fee to the agency and the agency is, in turn, directing DMS to collect the fees from the debtor. See I TFM 4-4045.10—Fees Charged to the Creditor Agency.
For other frequently asked questions related to delinquent debt collection, click here.
Return to I TFM 4-4000.