[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR285.12]

[Page 125-128]
 
                  TITLE 31--MONEY AND FINANCE: TREASURY
 
         CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY
 
PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION IMPROVEMENT ACT OF 1996--Table of Contents
 
                Subpart B--Authorities Other Than Offset
 
Sec. 285.12  Transfer of debts to Treasury for collection.

    (a) Definitions. For purposes of this section:
    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.
    Creditor agency means any Federal agency that is owed a debt.
    Debt means any amount of money, funds or property that has been 
determined by an appropriate official of the Federal government to be 
owed to the United States by a person. As used in this section, the term 
``debt'' does not include debts arising under the Internal Revenue Code 
of 1986.
    Debt collection center means an agency or a unit or subagency within 
an agency that has been designated by the Secretary of the Treasury to 
collect debt owed to the United States. FMS is a debt collection center.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Person means an individual, corporation, partnership, association, 
organization, State or local government, or any other type of entity 
other than a Federal agency.
    Secretary means the Secretary of the Treasury.
    (b) In general. Cross-servicing means that FMS or another debt 
collection center is taking appropriate debt collection action on behalf 
of one or more Federal agencies or a unit or subagency thereof.
    (c) Mandatory transfer of debts to FMS. (1) Except as set forth in 
paragraph (d) of this section, a creditor agency shall transfer any debt 
that is more than 180 days delinquent to FMS for debt collection 
services. For accounting and reporting purposes, the debt remains on the 
books and records of the agency which transferred the debt.
    (2) On behalf of the creditor agency, FMS will take appropriate 
action to collect or compromise the transferred debt, or to suspend or 
terminate collection action thereon, in accordance with the statutory 
and regulatory requirements and authorities applicable to the debt and 
the action. 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 shall advise 
FMS, in writing, of any specific statutory or regulatory requirements 
pertaining to their debt and will agree, in writing, to a collection 
strategy which includes parameters for entering into compromise and 
repayments agreements with debtors.
    (3)(i) A debt is considered 180 days delinquent for purposes of this 
section if it is 180 days past due and is legally enforceable. A debt is 
past-due if it has not been paid by the date specified in the agency's 
initial written demand for payment or applicable agreement or instrument 
(including a post-delinquency payment agreement) unless other 
satisfactory payment arrangements have been made. A debt is legally 
enforceable if there has been a final agency determination that the 
debt, in the amount stated, is due and there are no legal bars to 
collection action. Where, for example, a debt is the subject of a 
pending administrative review process required by statute or regulation 
and collection action during the review process is prohibited, the debt 
is not considered legally enforceable for purposes of mandatory transfer 
to FMS and is not to be transferred even if the debt is more than 180 
days past-due.
    (ii) When a final agency determination is made after an 
administrative appeal or review process, the creditor agency must 
transfer such debt to FMS, if more than 180 days delinquent, within 30 
days after the date of the final decision.
    (iii) Nothing in this section is intended to impact the date of 
delinquency of a debt for other purposes such as for purposes of 
accruing interest and penalties.
    (4) Agencies are not required to transfer to FMS debts which are 
less than $25 (including interest, penalties,

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and administrative costs), or such other amount as FMS may determine. 
Agencies may transfer debts less than $25 to FMS if the creditor agency, 
in consultation with FMS, determines that transfer is important to 
ensure compliance with the agency's policies or programs. Agencies may 
combine individual debts of less than $25 owed by the same debtor for 
purposes of meeting the $25 threshold.
    (d) Exceptions to mandatory transfer. (1) A creditor agency is not 
required to transfer a debt to FMS pursuant to paragraph (c)(1) of this 
section only during such period of time that the debt:
    (i) Is in litigation or foreclosure as described in paragraph (d)(2) 
of this section;
    (ii) Is scheduled for sale as described in paragraph (d)(3) of this 
section;
    (iii) Is at a private collection contractor if the debt has been 
referred to a private collection contractor in accordance with paragraph 
(e) of this section;
    (iv) Is at a debt collection center if the debt has been referred to 
a Treasury-designated debt collection center in accordance with 
paragraph (f) of this section;
    (v) Is being collected by internal offset as described in paragraph 
(d)(4) of this section; or
    (vi) Is covered by an exemption granted by the Secretary as 
described in paragraph (d)(5) of this section.
    (2)(i) A debt is in litigation if:
    (A) The debt has been referred to the Attorney General for 
litigation by the creditor agency; or
    (B) The debt is the subject of proceedings pending in a court of 
competent jurisdiction, including bankruptcy proceedings, whether 
initiated by the creditor agency, the debtor, or any other party.
    (ii) A debt is in foreclosure if:
    (A)(1) Collateral securing the debt is the subject of judicial 
foreclosure proceedings in a court of competent jurisdiction; or
    (2) Notice has been issued that collateral securing the debt will be 
foreclosed upon, liquidated, sold, or otherwise transferred pursuant to 
applicable law in a nonjudicial proceeding; and
    (B) The creditor agency anticipates that proceeds will be available 
from the liquidation of the collateral for application to the debt.
    (3) A debt is scheduled for sale if:
    (i) The debt will be disposed of under an asset sales program within 
one (1) year after becoming eligible for sale; or
    (ii) The debt will be disposed of under an asset sales program and a 
schedule established by the creditor agency and approved by the Director 
of the Office of Management and Budget.
    (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 internal offset. A debt is being 
collected by internal offset if the creditor agency is withholding 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)(i) Upon the written request of the head of an agency, or as the 
Secretary may determine on his/her own initiative, the Secretary may 
exempt any class of debts from the application of the requirement 
described in paragraph (c)(1) of this section. In determining whether to 
exempt a class of debts, the Secretary will determine whether exemption 
is in the best interests of the Government after considering the 
following factors:
    (A) Whether an exemption is the best means to protect the 
government's financial interest, taking into consideration the number, 
dollar amount, age and collection rates of the debts for which exemption 
is requested;
    (B) Whether the nature of the program under which the delinquencies 
have arisen is such that the transfer of such debts would interfere with 
program goals; and
    (C) Whether an exemption would be consistent with the purposes of 
the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134, 110 
Stat. 1321-358 (April 26, 1996).
    (ii) Requests for exemptions must clearly identify the class of 
debts for which an exemption is sought and must explain how application 
of the factors listed above to that class of debts warrants an 
exemption.

[[Page 127]]

    (iii) Requests for exemption must be made by the head of the agency 
requesting the exemption, the Chief Financial Officer of the agency, or 
the Deputy Chief Financial Officer of the agency. For purposes of this 
section, the head of an agency does not include the head of a 
subordinate organization within a department or agency.
    (6) In accordance with paragraph (d)(5)(i) of this section, debts 
being serviced and/or collected in accordance with applicable statutes 
and/or regulations by third parties, such as private lenders or guaranty 
agencies are exempt from the requirements in paragraph (c)(1) of this 
section.
    (e) Schedule of private collection contractors. FMS will maintain a 
schedule of private collection contractors eligible for referral of 
debts from FMS, other debt collection centers, and creditor agencies for 
collection action. An agency with debt which has not been transferred to 
FMS or referred to another debt collection center, for example, debt 
that is less than 180 days delinquent, may refer such debt to a private 
collection contractor listed on FMS' schedule of private collection 
contractors provided they do so in accordance with procedures 
established by FMS. Alternatively, an agency may refer debt that is less 
than 180 days delinquent to a private collection contractor pursuant to 
a contract between the creditor agency and the private collection 
contractor, as authorized by law.
    (f) Debt collection centers. A creditor agency may transfer debt 
that has not been transferred to FMS, such as debt less than 180 days 
delinquent, to a Treasury-designated debt collection center, with the 
consent of, and in accordance with procedures established by FMS. Debt 
collection centers will take action upon a debt in accordance with the 
statutory or regulatory requirements and other authorities that apply to 
the debt or to the particular action being taken. Debt collection 
centers may, on behalf of the creditor agency and subject to the terms 
under which the debt collection center has been designated as such by 
the Secretary, take any action to collect, compromise, suspend or 
terminate collection action on debts, in accordance with terms and 
conditions agreed upon in writing by the creditor agency and the debt 
collection center or FMS. Debt collection centers may charge fees for 
the debt collection services in accordance with the provisions of 
paragraph (j) of this section.
    (g) Administrative offset. As described in paragraph (c) of this 
section, under the DCIA, agencies are required to transfer all debts 
over 180 days delinquent to FMS for purposes of debt collection (i.e., 
cross-servicing). Agencies are also required, under the DCIA, to notify 
the Secretary of all debts over 180 days delinquent for purposes of 
administrative offset. Administrative offset is one type of collection 
tool used by FMS and Treasury-designated debt collection centers to 
collect debts transferred under this section. Thus, by transferring debt 
to FMS or to a Treasury-designated debt collection center under this 
section, Federal agencies will satisfy the requirement to notify the 
Secretary of debts for purposes of administrative offset and duplicate 
referrals are not required. A debt which is not transferred to FMS for 
purposes of debt collection, however, such as a debt which falls within 
one of the exempt categories listed in paragraph (d) of this section, 
nevertheless may be subject to the DCIA requirement of notification to 
the Secretary for purposes of administrative offset.
    (h) Voluntary referral of debts less than 180 days delinquent. A 
creditor agency may refer any debt that is less than 180 days delinquent 
to FMS or, with the consent of FMS, to a Treasury-designated debt 
collection center for debt collection services.
    (i) Certification. Before a debt may be transferred to FMS or 
another debt collection center, the head of the creditor agency or his 
or her delegatee must certify, in writing, that the debts being 
transferred are valid, legally enforceable, and that there are no legal 
bars to collection. Creditor agencies must also certify that they have 
complied with all prerequisites to a particular collection action under 
the laws, regulations or policies applicable to the agency unless the 
creditor agency has requested, and FMS has agreed,

[[Page 128]]

to do so on the creditor agency's behalf. The creditor agency shall 
notify FMS immediately of any change in the status of the legal 
enforceability of the debt, for example, if the creditor agency receives 
notice that the debtor has filed for bankruptcy protection.
    (j) Fees. FMS and other debt collection centers (as defined in 
paragraph (a) of this section) may charge fees sufficient to cover the 
full cost of providing debt collection services authorized by this 
section. Fees paid to recover amounts owed may not exceed amounts 
collected. Nothing in this rule precludes a creditor agency from 
agreeing to pay fees for debt collection services which are not based on 
amounts collected. FMS 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 FMS and other debt 
collection centers may be added to the debt as an administrative cost if 
authorized under 31 U.S.C. 3717(e).

[63 FR 16356, Apr. 2, 1998, as amended at 64 FR 22908, Apr. 28, 1999]