[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR140.11]

[Page 513-517]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 140_DEBT COLLECTION--Table of Contents
 
                Subpart C_Administrative Wage Garnishment
 
Sec.  140.11  What type of debt is subject to administrative wage garnishment, 


and how can SBA administratively garnish your pay?

    (a) General. SBA may order your employer to pay SBA a portion of 
your disposable pay to satisfy delinquent non-tax debt you owe to the 
United States. This process is called ``administrative wage 
garnishment'' and is authorized by 31 U.S.C. 3720D.
    (b) Scope. (1) This section provides procedures for SBA to collect 
delinquent non-tax debts through administrative wage garnishment.
    (2) This section applies despite any State law.
    (3) Nothing in this section prevents SBA from settling for less than 
the full amount of a debt. See, for example, the Federal Claims 
Collection Standards (FCCS), 31 CFR parts 900-904.
    (4) SBA's receipt of payments under this section does not prevent 
SBA from pursuing other debt collection remedies. SBA may pursue debt 
collection remedies separately or together with administrative wage 
garnishment.
    (5) This section does not apply to the collection of delinquent non-
tax debt owed to the United States from the wages of Federal employees. 
Federal pay is subject to the Federal salary offset procedures set forth 
in 5 U.S.C. 5514 and other laws, including subpart B of this part.
    (6) Nothing in this section requires SBA to duplicate notices or 
administrative proceedings required by contract, other laws, or 
regulations.
    (c) Definitions. In this section the following definitions apply:
    Agency means the SBA.
    Business day means Monday through Friday excluding Federal legal 
holidays.
    Day means calendar day. For purposes of computation, the last day of 
the period will be included unless it is a Saturday, a Sunday, or a 
Federal legal holiday.
    Debt or claim 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 an individual, including debt 
administered by a third party as an agent for the Federal Government. 
Debt also includes accrued interest, administrative costs incurred in 
collection efforts by SBA or a lender participating in an SBA loan 
program, and penalties imposed pursuant to law or contract.
    Debtor or you means an individual who owes a delinquent non-tax debt 
to the United States.
    Delinquent non-tax debt means any debt not related to an obligation 
under the Internal Revenue Code of 1986, as amended, that has not been 
paid by the date specified in SBA's initial written demand for payment, 
or applicable agreement, unless other satisfactory payment arrangements 
have been made. For purposes of this section, the terms ``debt'' and 
``claim'' are synonymous and refer to delinquent non-tax debt.
    Disposable pay means that part of the debtor's compensation 
(including, but not limited to, salary, bonuses, commissions, and 
vacation pay) from an employer remaining after the deduction of health 
insurance premiums and any amounts required by law to be withheld. For 
purposes of this section, ``amounts required by law to be withheld'' 
include amounts for deductions such as social security taxes and 
withholding taxes, but do not include any amount withheld pursuant to a 
court order.
    Employer means a person or entity that employs the services of 
others and that pays their wages or salaries. The term employer 
includes, but is not limited to, State and local Governments, but does 
not include an agency of the Federal Government.
    Evidence of service means information retained by the SBA indicating 
the nature of the document to which it pertains, the date of mailing of 
the document, and to whom the document is being sent. Evidence of 
service may be retained electronically so long as the manner of 
retention is sufficient for evidentiary purposes.
    Garnishment means the process of withholding amounts from an 
employee's disposable pay and the paying of

[[Page 514]]

those amounts to a creditor in satisfaction of a withholding order.
    Withholding order means any order for withholding or garnishment of 
pay issued by an agency, or judicial or administrative body. For 
purposes of this section, the terms ``wage garnishment order'' and 
``garnishment order'' have the same meaning as ``withholding order.''
    (d) When may the SBA initiate administrative wage garnishment 
proceedings? Whenever SBA determines you owe a delinquent non-tax debt, 
SBA may initiate administrative wage garnishment proceedings to withhold 
a portion of your wages to satisfy the debt.
    (e) What notice must the SBA give you before beginning an 
administrative wage garnishment? (1) SBA will send a written notice by 
first-class mail to your last known address at least 30 days before 
initiating garnishment. This pre-garnishment notice will inform you of:
    (i) The type and amount of the debt;
    (ii) SBA's intent to collect the debt by making deductions from your 
pay until the debt is paid in full;
    (iii) An explanation of your rights, including those listed below, 
and the timeframe within which you may exercise your rights.
    (2) You have the right to:
    (i) Inspect and copy non-privileged SBA records related to the debt;
    (ii) Enter into a written repayment agreement with SBA under terms 
agreeable to SBA; and
    (iii) Have a hearing at SBA's Office of Hearings and Appeals (OHA) 
in accordance with paragraph (f) of this section concerning the 
existence or the amount of the debt or the terms of the proposed 
repayment schedule under the garnishment order. However, you are not 
entitled to a hearing concerning the terms of the proposed repayment 
schedule if those terms have been established by written agreement under 
paragraph (e)(2)(ii) of this section.
    (3) SBA will retain evidence of service showing when SBA mailed the 
pre-garnishment notice.
    (f) What type of hearing must SBA give me?--(1) Procedural rules. 
Unless they expressly conflict with this section, the rules of procedure 
governing cases before OHA apply to administrative wage garnishment 
hearings.
    (2) Request for hearing. You will be provided with a hearing, if you 
request one in writing disputing either the existence or amount of the 
debt or the terms of the repayment schedule (except a repayment schedule 
you and SBA agreed to in writing).
    (3) Type of hearing or review. (i) You will have the right to an 
oral hearing only if the Judge determines that the issues in dispute 
cannot be resolved solely by review of the documentary evidence, for 
example, when the Judge finds that the validity of the claim turns on 
the issue of credibility or veracity.
    (ii) If the Judge determines an oral hearing is needed, he or she 
will set the time and location. You may choose whether the oral hearing 
is conducted in person or by telephone. You must pay all travel expenses 
for yourself and your witnesses to attend an in-person hearing. SBA will 
pay telephone charges for telephone hearings.
    (iii) If no oral hearing is needed, the Judge will accord you a 
``paper hearing,'' that is, the Judge will decide the issues in dispute 
based upon a review of the written record. The Judge will set a 
reasonable deadline for the submission of evidence.
    (4) Effect of timely request for hearing. Subject to paragraph 
(f)(13) of this section (failure to appear), if the Judge determines 
your written request for a hearing was received at OHA by the 15th 
business day after SBA mailed the pre-garnishment notice, SBA will not 
issue a garnishment order before the Judge renders a decision.
    (5) Untimely request for hearing. If the Judge determines your 
written request for a hearing was not received at OHA by the 15th 
business day after SBA mailed the pre-garnishment notice, SBA will 
provide a hearing to you. However, SBA may proceed with the issuance of 
a garnishment order and acceptance of payments unless the Judge 
determines that the delay in filing the request was caused by factors 
over which you had no control, or that information received justifies a 
delay or cancellation of the garnishment order.
    (6) Hearing official. A hearing official may be any Judge, as 
designated by the

[[Page 515]]

Assistant Administrator for Hearings and Appeals.
    (7) Procedure. After you request a hearing, the Judge will decide 
what type of hearing to hold and will notify you and the SBA of:
    (i) The date and time of a telephonic hearing;
    (ii) The date, time, and location of an in-person oral hearing; or
    (iii) The deadline for the submission of evidence for a written 
hearing.
    (8) Burden of proof. (i) The SBA will have the burden of going 
forward to prove the existence or amount of the debt.
    (ii) Thereafter, if you dispute the existence or amount of the debt, 
you must establish by a preponderance of the evidence that no debt 
exists or that the amount of the debt is incorrect. In addition, you may 
present evidence that the terms of the repayment schedule are unlawful, 
would cause you a financial hardship, or that collection of the debt may 
not be pursued due to operation of law.
    (9) Record. The Judge must maintain a summary record of any hearing 
provided under this section. A hearing is not required to be a formal 
evidentiary-type hearing; however, witnesses who testify in oral 
hearings will do so under oath or affirmation.
    (10) Date of decision. The Judge must render a written decision 
within 60 days of the date on which your request for a hearing was 
received by OHA. If the Judge's decision is not rendered within that 
time, and SBA had previously issued a garnishment order, SBA must 
suspend garnishment beginning on the 61st day. This suspension must 
continue until the Judge renders a decision.
    (11) Content of decision. The written decision shall include:
    (i) A summary of the facts presented;
    (ii) The Judge's findings, analysis and conclusions; and
    (iii) The terms of any repayment schedule, if applicable.
    (12) Final agency action. The Judge's decision will be the final 
agency action for the purposes of judicial review under the 
Administrative Procedure Act (5 U.S.C. 701 et seq.).
    (13) Failure to appear. In the absence of good cause shown, a debtor 
who fails to appear at an oral hearing will be deemed as not having 
timely filed a request for a hearing.
    (g) Garnishment order. (1) Unless SBA receives an adverse decision 
from the Judge or information it believes justifies delaying or 
canceling garnishment, SBA will send the garnishment order to your 
employer by first-class mail, within the following time frames:
    (i) If you did not make a timely request for a pre-garnishment 
hearing, within 30 days following the 15th business day after SBA mailed 
the pre-garnishment notice;
    (ii) If you did make a timely request for a pre-garnishment hearing, 
within 30 days after the Judge renders a final decision to proceed with 
garnishment; or,
    (iii) As soon as reasonably possible thereafter.
    (2) The garnishment order will be in a form prescribed by the 
Secretary of the Treasury, and will contain the signature of, or the 
image of the signature of, SBA's Administrator or his/her delegatee. The 
garnishment order will contain only the information necessary for 
compliance, including your name, address, and social security number, 
the instructions for garnishing your pay, and the address for sending 
payments.
    (3) SBA will retain evidence of service showing when it mailed the 
garnishment order.
    (h) Certification by employer. Along with the garnishment order, SBA 
will send your employer a certification, in a form determined by the 
Secretary of the Treasury. Your employer must complete and return this 
certification to us within the time stated in the certification 
instructions. The certification will include information about your 
employment status and the amount of your disposable pay available for 
garnishment.
    (i) Amounts withheld. (1) Your employer must deduct the garnishment 
amount from your disposable pay during each pay period.
    (2) Except as shown in paragraphs (i)(3) and (i)(4) of this section, 
the amount of garnishment will be the lesser of:

[[Page 516]]

    (i) The amount stated on the garnishment order, not to exceed 15% of 
your disposable pay; or,
    (ii) The amount in 15 U.S.C. 1673(a)(2) (Restriction on 
Garnishment). This is the amount by which your disposable pay exceeds an 
amount equivalent to thirty times the minimum wage. See 29 CFR 870.10.
    (3) If your pay is subject to other garnishment orders, the 
following applies:
    (i) Unless otherwise provided by Federal law, SBA garnishment orders 
must be paid in the amounts in paragraph (i)(2) of this section, and 
will have priority over other garnishment orders issued later. However, 
withholding orders for family support have priority over SBA garnishment 
orders.
    (ii) If amounts are being withheld from your pay because of a 
garnishment order issued before SBA's garnishment order, or because of a 
garnishment order for family support issued at any time, the earlier or 
family support order will have priority, and the amount withheld because 
of the SBA garnishment order will be the lesser of:
    (A) The amount calculated under paragraph (i)(2) of this section, or
    (B) An amount equal to 25% of your disposable pay minus the amount 
withheld under the garnishment order(s) with priority.
    (iii) If you owe more than one delinquent non-tax debt, SBA may 
issue multiple garnishment orders if the amount withheld from your pay 
does not exceed the amount in paragraph (i)(2) of this section.
    (4) You may give written consent for SBA to garnish from your pay an 
amount greater than that in paragraphs (i)(2) and (i)(3) of this 
section.
    (5) Your employer must promptly pay to SBA all amounts withheld 
under a withholding order.
    (6) Your employer is not required to change normal pay cycles to 
comply with the garnishment order.
    (7) No assignment or allotment of your earnings that you have 
requested may interfere with or prohibit execution of SBA's garnishment 
order. The one exception to this rule is that you may assign or allot 
earnings because of a family support judgment or order.
    (8) The garnishment order will state a reasonable time period within 
which your employer must begin wage garnishment. Your employer must 
withhold the designated amount from your wages each pay period until SBA 
notifies your employer to stop wage garnishment.
    (j ) Exclusions from garnishment. SBA may not garnish your wages if 
SBA knows you have been involuntarily unemployed at any time during the 
last 12 months. You are responsible for informing SBA of the facts and 
circumstances of your unemployment.
    (k) Financial hardship. (1) If your wages are subject to a 
garnishment order issued by SBA, you may, at any time, request a review 
of the amount being withheld from your wages based on a material change 
in circumstances that causes you financial hardship, such as disability, 
divorce, or catastrophic illness. You may send your request to the 
Director of SBA's loan servicing center in Birmingham, Alabama.
    (2) If you request review under paragraph (k)(1) of this section, 
you must specifically state why the current amount of garnishment causes 
you financial hardship and you must send documentation supporting your 
claim.
    (3) If SBA finds financial hardship, SBA will decide how much and 
how long to reduce the amount garnished from your pay. SBA will notify 
your employer of any reductions.
    (l) Ending garnishment. (1) After SBA has recovered the amount you 
owe, including interest, penalties, and administrative costs consistent 
with the FCCS, SBA will send a notice to your employer to stop wage 
garnishment with a copy to you.
    (2) SBA will review your account to ensure that garnishment has 
stopped if you have paid your debt in full.
    (m) Prohibited actions. No employer may fire, refuse to employ, or 
take disciplinary action against you because of a withholding order 
issued by SBA.
    (n) Refunds. (1) SBA must promptly refund any amount collected by 
administrative wage garnishment if either--
    (i) A Judge, after a hearing held under paragraph (f) of this 
section, determines you do not owe a debt to the United States; or

[[Page 517]]

    (ii) SBA determines that your employer continued submitting to SBA 
withheld wages after you had paid your debt in full.
    (2) Refunds of amounts collected will not earn interest unless 
required by federal law or contract.
    (o) Right of action. SBA may sue your employer for any amount that 
the employer fails to withhold from wages owed and payable to you in 
accordance with paragraphs (g) and (i) of this section. However, SBA may 
not file such a suit until the collection action involving you has ended 
unless earlier filing is necessary to avoid expiration of any applicable 
statute of limitations period. For purposes of this section, the 
collection action involving you ends when SBA stops the collection 
action in accordance with the FCCS or other applicable standards. In any 
event, the collection action involving you will be deemed ended if SBA 
has not received any payments from you to satisfy your debt, in whole or 
in part, for a period of one (1) year.

[70 FR 17587, Apr. 7, 2005]