[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: 31CFR285.13]

[Page 128-130]
 
                  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. 285.13  Barring delinquent debtors from obtaining Federal loans or loan insurance or guarantees.

    (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 or an agency thereof by a person, including 
debt administered by a third party as an agent for the Federal 
Government.
    Federal financial assistance or financial assistance means any 
Federal loan (other than a disaster loan), loan insurance, or loan 
guarantee.
    FMS means the Financial Management Service, a bureau of the 
Department of the Treasury.
    Nontax debt means any debt other than a debt under the Internal 
Revenue Code of 1986 (26 U.S.C. 1 et seq.).
    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) Purpose and scope. (1) This section prescribes standards for 
determining whether an outstanding nontax debt owed to the Federal 
Government is in delinquent status and whether such delinquency is 
resolved for the purpose of denying Federal financial assistance to a 
debtor. In addition, this section prescribes the circumstances under 
which the Secretary may exempt a class of debts from affecting a 
debtor's loan eligibility. This section also outlines the factors an 
agency should consider when determining whether waiver of the general 
rule in paragraph (c) of this section is appropriate.
    (2) Additional guidance concerning debt collection and debt 
management is provided in ``Managing Federal Receivables'' and other FMS 
publications.
    (3) Nothing in this section requires an agency to grant Federal 
financial assistance if denial otherwise is authorized by statute, 
regulation, or agency policies and procedures. For example, if an agency 
requires borrowers to have a satisfactory credit history, the agency may 
deny financial assistance even if a delinquent debt has been resolved.
    (4) This section does not confer any new rights or benefits on 
persons seeking Federal financial assistance.
    (5) This section applies to any person owing delinquent nontax debt 
and to any agency that administers a program that grants Federal 
financial assistance.
    (c) General rule. (1) As required by the provisions of 31 U.S.C. 
3720B, a person owing an outstanding nontax debt that is in delinquent 
status shall not be eligible for Federal financial assistance. This 
eligibility requirement applies to all persons seeking Federal financial 
assistance and owing an outstanding nontax debt in delinquent status, 
including, but not limited to, guarantors. This eligibility requirement 
applies to

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all Federal financial assistance even if creditworthiness or credit 
history is not otherwise a factor for eligibility purposes, e.g., 
student loans. A person may be eligible for Federal financial assistance 
only after the delinquency is resolved in accordance with this section. 
An agency may waive this eligibility requirement in accordance with 
paragraph (g) of this section.
    (2) An agency from which a person seeks Federal financial assistance 
may determine, under standards issued by the agency, that a person is 
ineligible for Federal financial assistance under this section if:
    (i) The person is controlled by a person owing an outstanding nontax 
debt that is in delinquent status (e.g., a corporation is controlled by 
an officer, director, or shareholder who owes a debt); or
    (ii) The person controls a person owing an outstanding nontax debt 
that is in delinquent status (e.g., a corporation controls a wholly-
owned or partially-owned subsidiary which owes a debt).
    (3) A creditor agency may obtain information concerning whether or 
not a person seeking Federal financial assistance owes a delinquent debt 
from, among other sources, credit reports, information contained on 
credit applications, and the Department of Housing and Urban 
Development's Credit Alert Interactive Voice Response System (CAIVRS). 
For information about participating in the CAIVRS program, agencies 
should contact the Director of Information Resources Management, Policy 
and Management Division, Office of Information Technology, Department of 
Housing and Urban Development, 451 7th Street, S.W., Washington, DC 
20410.
    (d) Delinquent status. (1) Except as otherwise provided in paragraph 
(d)(2) of this section, a debt is in ``delinquent status'' for purposes 
of this section if the debt has not been paid within 90 days of the 
payment due date. The payment due date is the date specified in the 
creditor agency's initial written demand for payment or applicable 
agreement or instrument (including a post-delinquency repayment 
agreement).
    (2) For purposes of this section, a debt is not in delinquent status 
if:
    (i) The person seeking Federal financial assistance has been 
released by the creditor agency from any obligation to pay the debt, or 
there has been an adjudication or determination that such person does 
not owe or does not have to pay the debt;
    (ii) The debtor is the subject of, or has been discharged in, a 
bankruptcy proceeding, and if applicable, the person seeking Federal 
financial assistance is current on any court authorized repayment plan; 
or
    (iii) The existence of the debt or the agency's determination that 
the debt is delinquent is being challenged under an ongoing 
administrative appeal or contested judicial proceeding and the appeal 
was filed by the debtor in a timely manner. Unless otherwise prohibited, 
an agency may defer making a determination as to whether or not to 
extend credit until the appeal process is completed.
    (3) Unless the provisions of paragraph (d)(2) apply, a debt is in 
delinquent status even if the creditor agency has suspended or 
terminated collection activity with respect to such debt. For example, a 
delinquent nontax debt that has been written off the books of the 
creditor agency or reported to the Internal Revenue Service as 
discharged (i.e., canceled) is in delinquent status for purposes of this 
section.
    (4) Nothing in this section defines the terms ``delinquent'' or 
``delinquent status'' for any purposes other than those described in 
this section.
    (e) Delinquency resolution. (1) For purposes of this section, a 
person's delinquent debt is resolved only if the person:
    (i) Pays or otherwise satisfies the delinquent debt in full;
    (ii) Pays the delinquent debt in part if the creditor agency accepts 
such part payment as a compromise in lieu of payment in full;
    (iii) Cures the delinquency under terms acceptable to the creditor 
agency in that the person pays any overdue payments, plus all interest, 
penalties, late charges, and administrative charges assessed by the 
creditor agency as a result of the delinquency; or

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    (iv) Enters into a written repayment agreement with the creditor 
agency to pay the debt, in whole or in part, under terms and conditions 
acceptable to the creditor agency.
    (2) Unless the provisions of paragraph (e)(1) of this section apply, 
a delinquent debt is not resolved even if the creditor agency has 
suspended or terminated collection activity with respect to such debt. 
For example, a delinquent nontax debt that has been written off the 
books of the creditor agency or reported to the Internal Revenue Service 
as discharged (i.e., canceled) would not be ``resolved.'' If the 
provisions of paragraph (e)(1) of this section do apply, a delinquent 
debt is considered resolved. For example, if a portion of a debt has 
been written off after the person has paid the debt in part where the 
creditor agency accepts such part payment as a compromise in lieu of 
payment in full, the entire debt would be deemed ``resolved'' for 
purposes of this section in accordance with paragraph (e)(1)(ii) of this 
section.
    (f) Exemptions by the Secretary. (1) Upon the written request and 
recommendation of the head of the creditor agency to which a class of 
debts is owed, the Secretary may exempt any class of debts from 
affecting a debtor's eligibility for Federal financial assistance based 
on the provisions of 31 U.S.C. 3720B and this section.
    (2) The creditor agency recommending an exemption for a class of 
debts will provide the Secretary with information about:
    (i) The nature of the program under which the delinquencies have 
arisen;
    (ii) The number, dollar amount, and age of the debts in the program 
for which exemption is recommended;
    (iii) The reasons why an exemption is justified, including why the 
granting of financial assistance to persons owing the type of debt for 
which exemption is requested would not be contrary to the Government's 
goal to reduce losses by requiring proper screening of potential 
borrowers; and,
    (iv) Other information the Secretary deems necessary to consider the 
exemption request.
    (3) The Secretary may exempt a class of debts if exemption is in the 
best interests of the Federal Government.
    (g) Waivers by the agency. (1) The head of an agency from which a 
person seeks to obtain Federal financial assistance may waive the 
eligibility requirement described in paragraph (c) of this section. 
Waivers shall be granted only on a person by person basis. The head of 
the agency may delegate the waiver authority only to the Chief Financial 
Officer of the agency. The Chief Financial Officer may redelegate the 
authority only to the Deputy Chief Financial Officer of the agency.
    (2) The authorized agency official should balance the following 
factors when deciding whether to grant a waiver under paragraph (g)(1) 
of this section:
    (i) Whether the denial of the financial assistance to the person 
would tend to interfere substantially with or defeat the purposes of the 
financial assistance program or otherwise would not be in the best 
interests of the Federal Government; and
    (ii) Whether the agency's granting of the financial assistance to 
the person is contrary to the Government's goal to reduce losses from 
debt management activities by requiring proper screening of potential 
borrowers.
    (3) When balancing the factors described in paragraph (d)(2) of this 
section, the authorized agency official should consider:
    (i) The age, amount, and cause(s) of the delinquency and the 
likelihood that the person will resolve the delinquent debt; and
    (ii) The amount of total debt, delinquent or otherwise, owed by the 
person and the person's credit history with respect to repayment of 
debt.
    (4) Each agency shall retain a centralized record of the number and 
type of waivers granted under this section.
    (h) Effect of denial of Federal financial assistance. Nothing 
contained in this section precludes a person who has been denied Federal 
financial assistance from obtaining such assistance after that person's 
delinquent debt has been resolved in accordance with paragraph (e)(1) of 
this section.

[63 FR 67756, Dec. 8, 1998]

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