[Federal Register Volume 73, Number 46 (Friday, March 7, 2008)]
[Rules and Regulations]
[Pages 12272-12274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-4586]
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DEPARTMENT OF THE TREASURY
DEPARTMENT OF JUSTICE
31 CFR Part 901
[A.G. Order No. 2918-2007]
Treasury RIN 1510-AA91
Justice RIN 1105-AB26
Standards for the Administrative Collection of Claims
AGENCIES: Department of the Treasury; Department of Justice.
ACTION: Interim rule with request for comments.
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SUMMARY: The Federal Claims Collection Standards (FCCS), provide
governmentwide debt collection procedures and policies for agencies
collecting non-tax debts owed to the United States. This rule revises
part 901, which specifies the order in which a federal agency is
required to apply a partial or installment payment to the various
components of a delinquent, non-tax debt owed to the United States.
Under the current rule, payments are required to be applied first to
penalties, then to administrative costs, then to interest, and last to
principal. As revised, the rule would require agencies to apply
payments first to administrative costs that are paid out of amounts
collected from the debtor (referred to as ``contingency fees'') when
such costs are added to the debt, second to penalties, third to
administrative costs other than contingency fees, fourth to interest,
and last to principal. Additionally, the term ``administrative
charges'' is being replaced with ``administrative costs'' for
consistency and clarity.
DATES: This rule is effective April 7, 2008. Comments must be received
by April 7, 2008.
ADDRESSES: All comments should be addressed to Thomas Dungan, Policy
Analyst, Debt Management Services, Financial Management Service,
Department of the Treasury, 401 14th Street, SW., Room 435, Washington,
DC 20227. A copy of this interim rule is being made available for
downloading from the Financial Management Service Web site at the
following address: http://www.fms.treas.gov/debt. Comments also may be
sent electronically through http://www.regulations.gov using the
electronic comment form provided on that site. An electronic copy of
this document is also available at the http://www.regulations.gov Web
site.
FOR FURTHER INFORMATION CONTACT: Thomas Dungan, Policy Analyst,
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Financial Management Service, Department of the Treasury, at (202) 874-
6660; Ellen Neubauer, Senior Attorney, Financial Management Service,
Department of the Treasury, at (202) 874-6680; or Ruth Harvey,
Commercial Litigation Branch, Civil Division, Department of Justice, at
(202) 307-0388.
SUPPLEMENTARY INFORMATION: The Federal Claims Collection Standards
(FCCS), codified at 31 CFR parts 900 through 904, provide
governmentwide debt collection procedures and policies for agencies
collecting non-tax debts owed to the United States. Part 901 of the
FCCS governs how agencies assess interest, penalties, and
administrative costs on delinquent debts. Paragraph (f) of section
901.9 of the FCCS governs how a debtor's partial or installment
payments are to be applied to the various components of a debt.
Specifically, section 901.9(f) states: ``When a debt is paid in partial
or installment payments, amounts received by the agency shall be
applied first to outstanding penalties, second to administrative
charges, third to interest, and last to principal.'' This rule revises
section 901.9(f) of the FCCS by changing the order in which partial or
installment payments are to be applied to certain administrative
charges, also known as ``administrative costs.''
Administrative costs are the costs incurred by a federal agency to
collect a delinquent debt. Such costs include fees paid to another
federal agency or to a private collection contractor for debt
collection services when those fees are paid from amounts collected
from the debtor. See 31 U.S.C. 3711(g)(6) and 31 CFR 901.1(f)
(authorizing agencies operating Treasury-designated debt collection
centers to charge fees that may be paid out of amounts collected) and
31 U.S.C. 3718(d) and 31 CFR 901.5(c) (authorizing agencies to pay
private collection contractors out of amounts collected). Such fees,
commonly referred to as ``contingency fees,'' must be added to the debt
as an administrative cost to the Government, except as otherwise
provided by law. See 31 U.S.C. 3717(e)(1) and 31 CFR 901.9(a) and (c).
Agencies may calculate the amount to be added to the debt as an
administrative cost based either on the actual costs incurred or on
cost analyses establishing an average cost for processing and handling
the agency's delinquent debts. Adding the contingency fee to the
delinquent debt based on actual cost provides the best method of
ensuring that the components of the debt balance accurately reflect how
the amounts collected from the debtor were actually applied by the
agency. This revision to the rule affects how an agency applies partial
or installment payments only in those cases in which the agency adds
the actual amount of the contingency fee to the debt as an
administrative cost.
As revised, section 901.9(f) will require agencies to apply partial
or installment payments first to contingency fees added to the debt,
second to penalties, third to administrative costs other than
contingency fees, fourth to interest, and last to principal. The
revision will provide consistency between how contingency fees are
actually paid out of a debtor's payments and how a debtor's payments
are applied to debt components, thereby allowing agencies to more
accurately account for the payment of contingency fees from amounts
collected.
Example: To illustrate the effect of this change, the following
example is provided. Assume a debtor owes $1,500 to the Government, as
follows:
$200 Penalty
100 Administrative Costs (excluding contingency fees of $20)
200 Accrued Interest
1,000 Principal
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1,500 Balance Due
If a private collection agency (PCA) that charges the Government a
20% contingency fee collects $100 from a debtor, the PCA is paid $20
from the $100 collection before the remaining $80 is returned to the
federal agency collecting the debt. The debtor receives a credit of
$100 for the amount paid.
Under the current FCCS, the $100 paid by the debtor in this example
would be applied first to any penalties owed by the debtor, rather than
to the contingency fee paid from the amount collected. Since the debtor
in our example owed $200 in penalties, the entire $100 collection would
be applied to the debtor's penalties even though the federal agency
would have only received $80 in actual cash to apply toward that part
of the debt. Additionally, the agency would add the fee charged by the
PCA ($20) to the debt as an administrative cost, thereby not reflecting
the fact that the debtor had, in effect, paid the contingency fee at
the time of making the payment on the debt. Thus, after application of
the entire payment to the penalty under the current FCCS, the
outstanding balance on the debt would be $1,420, as follows:
$100 Penalty (after applying the $100 received from the debtor);
120 Administrative Costs (after adding the PCA charge of $20);
200 Accrued Interest
1,000 Principal
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1,420 Balance Due
As revised, the FCCS would require the federal agency to apply $20
to the contingency fee paid, and to apply the remaining $80 to
penalties. After application of the payment to the contingency fee and
the penalty, the outstanding balance on the debt would be $1,420, as
follows:
$0 Contingency fee (after adding $20 to the debt, and then
subtracting $20 as paid);
120 Penalty (after applying the remaining $80 paid by the debtor,
the net amount actually received by the agency);
100 Administrative Costs (other than contingency fees);
200 Accrued Interest
1,000 Principal
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1,420 Balance Due
For an agency that does not add the cost of the contingency fee to
the debt, this revision to the FCCS will have no practical effect. If
the debt in our example was owed to an agency that does not add the
contingency fee to the debt, the $100 payment made by the debtor would
be applied entirely to the penalty as follows:
$100 Penalty (after applying the $100 paid by the debtor without
deduction for the contingency fee paid by the agency to the
PCA);
100 Administrative Costs (other than contingency fees);
200 Accrued Interest
1,000 Principal
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1,400 Total
This rule also replaces the term ``administrative charges'' in
paragraphs 901.9(f) and 901.9(g) with the term ``administrative costs''
for consistency and clarity.
Regulatory Flexibility Act
The Department of the Treasury and Department of Justice are
promulgating this interim rule without opportunity for prior public
comment pursuant to the Administrative Procedure Act, 5 U.S.C. 553 (the
``APA'' ). The notice and comment requirements of the APA do not apply
to the interim rule for two reasons. First, the interim rule concerns
accounting methods as applied to a component of a debt (that is,
certain administrative costs) and does not result
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in any change to balances due by a debtor on any debt owed to the
United States. The interim rule therefore addresses an internal
``agency * * * procedure, or practice'' within the meaning of section
553(b)(3)(A). Second, and relatedly, the Departments have determined
that a comment period would be ``unnecessary'' under section
553(b)(3)(B), as the interim rule does not alter or affect the rights,
interests, or duties of any person or entity. Because no notice of
proposed rulemaking is required, the provisions of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) do not apply.
The public is invited to submit comments on the interim rule, which
will be taken into account before a final rule is issued.
Regulatory Analysis
This action is limited to agency organization and management as
described by Executive Order 12866 ((3(d)(3) and, therefore, is not a
``regulation'' as defined by that Executive Order. Accordingly, review
of this action by the Office of Management and Budget is not required.
Congressional Review Act
This action pertains to agency organization and management and does
not substantially affect the rights or obligations of non-agency
parties and, accordingly, is not a ``rule'' as that term is used by the
Congressional Review Act (Subtitle E of the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA)). Therefore, the reporting
requirement of 5 U.S.C. 801 does not apply.
List of Subjects in Part 901
Administrative practice and procedure, Claims, Federal employees,
Penalties, Privacy.
Authority and Issuance
0
For the reasons set forth in the preamble, part 901 of title 31 of the
Code of Federal Regulations is amended as follows:
PART 901--STANDARDS FOR THE ADMINISTRATIVE COLLECTION OF CLAIMS
0
1. The authority citation for part 901 continues to read as follows:
Authority: 31 U.S.C. 3701, 3711, 3716, 3717, 3718 and 3720B.
0
2. In Sec. 901.9, revise paragraph (f) to read as follows:
Sec. 901.9 Interest, penalties and administrative costs.
* * * * *
(f) When a debt is paid in partial or installment payments, amounts
received by the Government shall be applied first to any contingency
fees added to the debt, second to outstanding penalties, third to
administrative costs other than contingency fees, fourth to interest,
and last to principal. For purposes of this paragraph (f),
``contingency fees'' are administrative costs resulting from fees paid
by a Federal agency to other Federal agencies or private collection
contractors for collection services rendered when the fees are paid
from the amounts collected from a debtor.
* * * * *
0
3. In Sec. 901.9, revise paragraph (g) by removing the word
``charges'' in the first sentence and adding in its place the word
``costs''.
Dated: February 28, 2008.
Henry M. Paulson, Jr.,
Secretary of the Treasury.
Dated: November 6, 2007.
Peter D. Keisler,
Acting Attorney General.
[FR Doc. E8-4586 Filed 3-6-08; 8:45 am]
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