[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR901.9]

[Page 1342-1343]
 
                  TITLE 31--MONEY AND FINANCE: TREASURY
 
   CHAPTER IX--FEDERAL CLAIMS COLLECTION STANDARDS (DEPARTMENT OF THE 
                    TREASURY--DEPARTMENT OF JUSTICE)
 
PART 901_STANDARDS FOR THE ADMINISTRATIVE COLLECTION OF CLAIMS
--Table of Contents
 
Sec. 901.9  Interest, penalties, and administrative costs.

    (a) Except as provided in paragraphs (g), (h), and (i) of this 
section, agencies shall charge interest, penalties, and administrative 
costs on debts owed to the United States pursuant to 31 U.S.C. 3717. An 
agency shall mail or hand-deliver a written notice to the debtor, at the 
debtor's most recent address available to the agency, explaining the 
agency's requirements concerning these charges except where these 
requirements are included in a contractual or repayment agreement. These 
charges shall continue to accrue until the debt is paid in full or 
otherwise resolved through compromise, termination, or waiver of the 
charges.
    (b) Agencies shall charge interest on debts owed the United States 
as follows:
    (1) Interest shall accrue from the date of delinquency, or as 
otherwise provided by law.
    (2) Unless otherwise established in a contract, repayment agreement, 
or by statute, the rate of interest charged shall be the rate 
established annually by the Secretary in accordance with 31 U.S.C. 3717. 
Pursuant to 31 U.S.C. 3717, an agency may charge a higher rate of 
interest if it reasonably determines that a higher rate is necessary to 
protect the rights of the United States. The agency should document the 
reason(s) for its determination that the higher rate is necessary.
    (3) The rate of interest, as initially charged, shall remain fixed 
for the duration of the indebtedness. When a debtor defaults on a 
repayment agreement and seeks to enter into a new agreement, the agency 
may require payment of interest at a new rate that reflects the current 
value of funds to the Treasury at the time the new agreement is 
executed. Interest shall not be compounded, that is, interest shall not 
be charged on interest, penalties, or administrative costs required by 
this section. If, however, a debtor defaults on a previous repayment 
agreement, charges that accrued but were not collected under the 
defaulted agreement shall be added to the principal under the new 
repayment agreement.

[[Page 1343]]

    (c) Agencies shall assess administrative costs incurred for 
processing and handling delinquent debts. The calculation of 
administrative costs should be based on actual costs incurred or upon 
estimated costs as determined by the assessing agency.
    (d) Unless otherwise established in a contract, repayment agreement, 
or by statute, agencies shall charge a penalty, pursuant to 31 U.S.C. 
3717(e)(2), not to exceed six percent a year on the amount due on a debt 
that is delinquent for more than 90 days. This charge shall accrue from 
the date of delinquency.
    (e) Agencies may increase an ``administrative debt'' by the cost of 
living adjustment in lieu of charging interest and penalties under this 
section. ``Administrative debt'' includes, but is not limited to, a debt 
based on fines, penalties, and overpayments, but does not include a debt 
based on the extension of Government credit, such as those arising from 
loans and loan guaranties. The cost of living adjustment is the 
percentage by which the Consumer Price Index for the month of June of 
the calendar year preceding the adjustment exceeds the Consumer Price 
Index for the month of June of the calendar year in which the debt was 
determined or last adjusted. Increases to administrative debts shall be 
computed annually. Agencies should use this alternative only when there 
is a legitimate reason to do so, such as when calculating interest and 
penalties on a debt would be extremely difficult because of the age of 
the debt.
    (f) 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.
    (g) Agencies shall waive the collection of interest and 
administrative charges imposed pursuant to this section on the portion 
of the debt that is paid within 30 days after the date on which interest 
began to accrue. Agencies may extend this 30-day period on a case-by-
case basis. In addition, agencies may waive interest, penalties, and 
administrative costs charged under this section, in whole or in part, 
without regard to the amount of the debt, either under the criteria set 
forth in these standards for the compromise of debts, or if the agency 
determines that collection of these charges is against equity and good 
conscience or is not in the best interest of the United States.
    (h) Agencies shall set forth in their regulations the circumstances 
under which interest and related charges will not be imposed for periods 
during which collection activity has been suspended pending agency 
review.
    (i) Agencies are authorized to impose interest and related charges 
on debts not subject to 31 U.S.C. 3717, in accordance with the common 
law.