Vous êtes sur la page 1sur 124

Debt Collection 101

1
What is a Debt?
A debt is any amount that is owed to the United
States by a person, organization, or entity other
than a Federal agency. Some examples are:
• Loans (direct, insured & guaranteed)
• Overpayments
• Fines and penalties

2
What is a Delinquent
Debt?
A debt becomes delinquent when:
• Payment has not been made by the payment due date,
or by the end of the “grace period” as established in a
loan or repayment agreement, as in the case of a debt
being paid in installments
• Payment is not made by the due date specified in the
initial billing notice, in the case of administrative debts
such as fines, fees, penalties, and overpayments. The
due date is usually 30 days after the agency mailed the
notice. The date of delinquency is the date the agency
mailed or delivered the billing notice

3
Examples of Delinquent
Debts
• Example: Borrower’s loan payment is due January 1. The loan agreement
allows a grace period of 15 days, meaning that the lending agency will not
assess late charges or declare the loan delinquent if the payment due on
January 1 is made before January 16. If Borrower makes his or her
payment before January 16, the loan is not delinquent. However, if
Borrower fails to make a payment by January 16, then the loan is delinquent
and the date of delinquency is January 1 (the payment due date)
• Example: Agency discovers that duplicate payments were made to
beneficiary and seeks to recover the overpayment. On March 1, the Agency
mails a notice to beneficiary informing him about the overpayment. The
notice states that payment must be made by March 31 to avoid assessment
of late charges and enforced collection action. If beneficiary pays the
amount requested before March 31, then the debt is not delinquent.
However, if beneficiary fails to pay by March 31, then the debt is
delinquent, and the date of delinquency is March 1 (the date of the initial
notice about the debt)

4
Does an Agency Have to
Try to Collect a Delinquent
Debt?

YES!!!!

Agencies have a statutory duty to try to


collect delinquent debts owed from the
public.

5
What are the Steps in Trying
to Collect a Delinquent Debt?

• Seek Voluntary Repayment


• Initiate Involuntary Collection Action
• Take Appropriate Action on Uncollectible Debt

6
Laws, Regulations and Guidance
that Apply to Debt Collection
The Debt Collection Authority Hierarchy
STATUTES
Agency Statutes
Federal Claims Collection Act
Debt Collection Act of 1982
Deficit Reduction Act of 1984
Debt Collection Improvement Act of 1996
REGULATIONS
Agency Regulations
Treasury Regulations (31 CFR part 285)
OPM Salary Offset Regs (5 CFR part 550)
Federal Claims Collection Standards (31 CFR parts 900-904)
OMB Circular No. A-129
GUIDANCE
Managing Federal Receivables
Agency Policies
Guide to the Federal Credit Bureau Program

7
Government-wide Regulatory
References
Voluntary Payment
• Notice to the Debtor – Demand for Payment FCCS (31 CFR 901.2)
• Lump Sum Payments/Installments FCCS (31 CFR 901.8)
• Compromise FCCS (31 CFR Part 902)
Involuntary Collection
• Collateral liquidation FCCS (31 CFR 901.7)
• Interest, Penalty, Administrative Cost FCCS (31 CFR 901.9)
• Offset Multiple (see next slide)
• Reporting to Credit Bureaus, etc. FCCS (31 CFR 901.4)
• Private Collection Agencies FCCS (31 CFR Part 901.5)
• Administrative Wage Garnishment FMS Regulations (31 CFR 285.11)
• Litigation FCCS (31 CFR Part 904)
• Barring Delinquent Debtors FMS Regulations (31 CFR 285.13)
• Cross-servicing FMS Regulations (31 CFR 285.12)
Unable to Collect
• Termination of Collection Action FCCS (31 CFR Part 903)
• Write-off OMB Circular No. A-129
• 1099-C Reporting to IRS IRS Regulations (26 CFR 1.6050P-1)

8
Government-wide Regulatory
References Offset
Offset In General FCCS (31 CFR 901.3)
Non-Centralized Offset FCCS (31 CFR 901.3(c))
Centralized Offset at FMS FCCS (31 CFR 901.3(b))
FMS Regulations (31 CFR 285.5)
Tax Refund Offset FMS Regulations (31 CFR 285.2)
Benefit Payment Offset FMS Regulations (31 CFR 285.4)
Salary Offset OPM Regulations (5 CFR 550.1101-
1110)
and 31 CFR 285.7

9
What are Some of the General Concepts
That Apply to Delinquent Debt
Collection?
• Agency Regulations
• Program Goals and Debt Collection
• Due Process
• Privacy Protection for Individuals
• Determining Appropriate Collection Techniques to Use
• Establishing a Collection Strategy

10
General Concepts
• Agency Regulations –
Generally, each agency must publish its own
regulations, consistent with the government-wide
rules, regulations, and procedures
• Program Goals and Debt Collection –
Examples of program goals – homeownership,
recovery from a disaster, having medical professionals
serve in underserved communities
General Rule – an agency should determine early in
the debt collection process (normally in the first 60
days) whether the debtor will work with the agency
to achieve the program goal
11
General Concepts Continued
• Due Process – is Notice and Opportunity to Dispute

Constitutional Requirement: The Fifth Amendment to the United


States Constitution provides that no person shall “be deprived of life,
liberty or property without due process of law…”

Statutory Requirement: Statutes and regulations define how much


process is due

The Right Thing to Do: Mistakes can be made, and we all would
like notice before something adverse occurs

12
General Concepts Continued
• Privacy Protection for Individuals

• Privacy Act of 1974


• System of Records
• Notices (Publication)
• Restriction on disclosure of records
• Routine Uses

13
General Concepts Continued
• Determining Appropriate Collection Techniques to Use
• Whether the agency is required by law to use the debt collection tool
(see next slide)
• Size and age of the debt
• Type of debt (e.g. Commercial or Consumer)
• Availability of debt collection tool
• Requirements for use of the debt collection tool
• Whether tools can be used concurrently with other tools
• Time and resource required to use the tool
• Feasibility of using each tool, including any legal or contractual
constraints
• Cost of each tool relative to the size of the debt. Cost of using the tool
should never exceed collection

14
Determining the Appropriate
Collection Technique to Use
• Debt Collection tools required by law:
• Demand for payment
• Add late charges to the debt (interest, penalties, and administrative
costs)
• Report delinquent debts to credit bureaus
• Refer debts that are 180 days delinquent to FMS for Cross-
Servicing
• Refer debts that are 180 days delinquent to FMS to be placed in the
Treasury Offset Program (TOP) if debts have not been referred to
TOP through the Cross-Servicing referral
• Bar delinquent debtors from receiving loans or loan guaranties
• Use any debt collection tools specifically mandated by agency
statute or regulation

15
General Concepts Continued
• Establishing a Collection Strategy
• A collection strategy is an organized plan of action
incorporating the various collection tools to be used by an
agency to recover debt

• Each agency should establish and implement effective


collection strategies that suit the agency’s programs and
needs and meet all statutory requirements

• A collection strategy will facilitate debt collection by


providing a systematic, uniform method for collecting
classes of delinquent debts
16
Treasury Offset Program

17
What is an Offset?
Definition:
• Withholding funds payable by the United States to a
person to satisfy a debt

• In other words, the government intercepts or withholds


monies due to a person (or held by the government for
that person) to collect money owed to the government

18
Is Offset Mandatory?
YES!
• Debts delinquent more than 180 days must be sent to
FMS for centralized offset
• Agencies are required to notify Treasury of delinquent
debts, and disbursing officials are required to offset
payments
• Types of payments which may be offset:
Tax refunds, salary, military and civilian retirement pay,
contractor payments, tax overpayments, benefit payments, travel
reimbursement, other Federal payments and State payments.

19
What is Centralized
Offset?
There are two methods of Offset:
• Centralized offset is done by the Treasury
Offset Program (TOP) operated by FMS
• Non-centralized offset is done by the Federal
agency internally on a case-by-case basis

20
Offset – Method
Comparison
Method Centralized Non-centralized

Due process Creditor Agency – must certify to Creditor Agency – must


FMS. certify to the paying agency.

Locating the Payment FMS – By matching payment Creditor Agency


certifications with debts. **May have to comply with
** Computer Matching Act waiver. Computer Matching Act.
Payment types *Federal tax refunds; *current OPM Those certified by the
*generally exclusive to retirement; salary; vendor; *benefit creditor agency (internal
centralized offset payments (SSA); travel advances and offset); payments not
reimbursements; grants. included in centralized offset.
Conducting the Offset FMS Payment Certifying Agency

Notifying the FMS Payment Certifying Agency


debtor/Accounting for
the offset
21
Centralized Offset
Debts Eligible for TOP
• Delinquent debts that are legally enforceable.
• Legally enforceable means there has been a
final determination the debt is due and there
are no bars to collection
• Agency has provided due process

22
Centralized Offset
Debts Ineligible for TOP
• Not legally enforceable (i.e. in bankruptcy,
foreclosure, forbearance or under appeal)
• At the Department of Justice
• Over the applicable statute of limitations for
offset
• Owed by a foreign sovereign
• Owed by another Federal agency

23
What is the Treasury
Offset Program (TOP)?
• TOP is a centralized offset process that intercepts
Federal payments of payees who owe delinquent debts
to agencies that have submitted debt information to
FMS

Centralized offset is the


Offset is withholding offset of payments
funds payable by the disbursed by FMS and
United States to a other Federal disbursing
person to satisfy a debt agencies through the
owed to the United TOP
States or to a state

24
What is the Treasury
Offset Program?
• TOP is one of the largest and most effective
tools in collecting delinquent debts for Federal
and state agencies:
• Debts owed to the United States (tax & non-tax)
• Child support obligations enforced by state agencies
• State income tax debts
• Other State debts through Reciprocal Agreement
Pilot Program
• Collections total over $3 billion per year

25
How Does the Treasury
Offset Program Work?
• Federal and state agencies submit eligible debts to
TOP and certify that debts are valid, delinquent, and
legally enforceable, and that all due process pre-
requisites have been met
• Due process pre-requisites include:
– 60-day prior notice to debtor
– Opportunity to dispute the debt

Dear
Debtor
You owe
$$$

26
How Does the Treasury
Offset Program Work? A TIN is an
individual’s social
security number or
a business’
• TOP compares payee names and Federal employer
identification
taxpayer identification numbers number

(TINs) on Federal payment


certification vouchers to names
and TINs of debtors in TOP’s
debtor database
• When a match occurs, TOP intercepts, or “offsets,” all or
part of a payee’s eligible Federal payments
• FMS notifies the payee and the payment agency about the
offset

27
TOP Pro cess

Does payee name &


TIN match debtor
name & TIN?

PAYMENTS

No Check or EFT
to payee

TOP
Database

DEBTS Yes
$$ to creditor
agency

Notice to debtor
TOP Legal Authorities
Various statutes govern the TOP process
depending upon the type of payment offset and the
type of debt collected

29
TREASURY OFFSET PROGRAM - LEGAL AUTHORITIES

Type of Payment Offset/Levy Type of Debt Collected Statutory Authority Regulatory Authority Amount Deducted

26 U.S.C. 6402(d) 31 CFR 285.2


Federal tax refund Federal non-tax debts 100%
31 U.S.C. 3701 & 3720A Creditor agency regulations

31 CFR 285.3
26 U.S.C. 6402(c)
Federal tax refund Child support debts 45 CFR 303.72 100%
42 U.S.C. 664
HHS procedures

Federal tax refund State income tax debts 26 U.S.C. 6402(e) 31 CFR 285.8 100%

Federal non-tax debts (may


Social Security, Black Lung, & Lesser of 15%, or
not be offset to collect child
Railroad Retirement (benefit 31 U.S.C. 3701 & 3716 31 CFR 285.4 amount
support or other debts owed to
payments) over $750
States)
5 U.S.C. 5514
5 CFR 550.1101
31 U.S.C. 3701 & 3716
Federal salary payments Federal non-tax debts 31 CFR 285.7 15%
42 U.S.C. 404(f) (for Social Security
Creditor agency regulations
debts)

31 CFR 285.1
15 U.S.C. 1673(b)(2)
Federal salary payments Child support debts State law & regulations 50%-65%
31 U.S.C. 3701 & 3716(h)
HHS procedures

Federal Claims Collection


Federal non-tax, non-salary, non- 31 U.S.C. 3701 & 3716 Standards (31 CFR Parts 900- 100%, except as
benefit (includes civil service Federal non-tax debts 42 U.S.C. 404(f) (for Social Security 904) otherwise provided by
retirement) debts) 31 CFR 285.5 law (25% for retirement)
Creditor agency regulations

31 CFR 285.1
Federal non-tax, non-salary, non- 100%, except as
State law & regulations
benefit (includes civil service Child support debts 31 U.S.C. 3701 & 3716(h) otherwise provided by
HHS procedures
retirement) law (25% for retirement)
Exec. Order 13019
100%, except as
otherwise provided by
Federal non-tax, non-benefit State debts 31 U.S.C. 3701 & 3716(h) 31 CFR 285.6
law (15% for salary;
25% for retirement)

Tax levy of 26 U.S.C. 6331(h)


Federal tax debts 26 CFR 6331-1 et seq. 15%
non-tax Federal payments 26 U.S.C. 6103(k)(8) & (n)
Barring Delinquent Debtors
• Under the DCIA, delinquent debtors are ineligible for
financial assistance in the form of a Federal loan or loan
guaranty/insurance, until the delinquency is resolved

• Loan granting, guarantying and/or insuring agencies are


required to bar delinquent debtors

31
Barring Delinquent Debtors
Agency Responsibilities:
• Conduct all due process as quickly as possible
(including any requested hearings or appeals)
• Report delinquent debts to credit bureaus and Federal
delinquent debtor databases (CAIVRS and Debt Check)
• Be aware that delinquent debtors who are applicants for
loans or loan guaranties/insurance may contact the
agency to resolve their delinquent debts in order to
remove the bar

32
Other Delinquent Debtor
Databases
• Other Federal delinquent debtor databases are
available for Federal agencies to assist them in
barring delinquent debtors from loans and loan
guarantees:
– CAIVRS – Maintained by the Department of
Housing and Urban Development
– Debt Check – FMS’ TOP delinquent debtor
database extract

33
DMS Common Client
• Web-based Client is a rewrite of existing Client
• Agencies will access through the internet.
• Two factor authentication:
-PKI (Public Key Infrastructure) certification
-Password
• Slated for rollout in July 2008

34
CY 2006 Collections
Administrative Offsets $154.8 Million

Tax Refund Offset Child Support $1.6 Billion

Tax Refund Offset – Federal Nontax Debt $996.8 Million

Tax Refund Offset – State Income Tax Debt $218.5 Million

Tax Levy $324.9 Million

35
TOP Debtor Database
(as of December 2006)
$119.0 billion  Federal tax debts

$85.7 billion  Child support debts enforced by states

$37.0 billion  Federal non-tax debts

$ 6.0 billion  State income tax debts

TOTAL $$  $247.9 billion

36
Treasury Offset Program
Debts

37
Priority of Debts in TOP
• IRS Income Tax Debts
• Child Support Debts (Temporary Assistance to Needy
Families)
• Federal Non-Tax Debts
• Other Child Support Debts (Non-TANF*)
• State Debts

* Non-TANF debts will have the same priority as TANF debt by 2008

38
Priority of Debts in TOP
• When more than one debt is submitted for the same
debtor, TOP applies funds collected in accordance
with priorities set by statute and policy
• If a debtor has two or more debts of the same priority,
TOP applies funds to the oldest debt first

39
General Rules For All
Debts Submitted to TOP
(31 CFR Part 285, Subpart A)

• Debts must be:


– Delinquent & legally enforceable
– Less than 10 years old (except for judgment debts,
student loans, and certain state income tax debts)
– $25 or more, except for salary which is $100
• Federal agencies must submit delinquent debts to TOP,
including debts owed by state & local governments

40
General Rules For All
Debts Submitted to TOP
• Creditor agency must submit certification with debts
– Accomplished electronically if agency signs annual agreement
to certify debts
– Certified for the life of the debt; agency responsible for
inactivating debts if they become ineligible for TOP
(bankruptcy, debt paid in full)
• Certification states that debt meets eligibility
requirements and that all due process pre-requisites,
including state law pre-requisites, have been met

41
General Rules For All
Debts Submitted to TOP
• TOP sends warning notices to debtors for recurring
payments (e.g., monthly retirement benefits)
• TOP sends notice of any offset to the debtor
– Notice includes date and amount of offset, creditor agency to
which offset money was sent, and contact point within the
creditor agency
• States will send offset notices under Reciprocal
Agreement Program
• NTDO agencies may choose to send their own offset
notices

42
Treasury Offset Program
Payments

43
TOP – Payments
• Tax refund payments may be offset up to 100%
• Vendor payments and Federal employee travel
advances & travel reimbursements may be offset up
to 100%
• Salary payments limited to 15% of disposable pay,
except when collecting child support (limit increases to
50-65%)
• OPM retirement payments limited to 25%
• Social security and Railroad retirement payments
limited to 15%

44
TOP – Exemptions/Payments
• Payments exempted by law, e.g. student loan
payments, veterans’ benefits
• Payments exempt by Treasury
• Means-tested payments
• Non means-tested payments – if offset would tend to
interfere with or defeat the purpose of the program

45
Fees
• Treasury charges a fee of $17.00 for tax refund
and administrative offsets

46
Benefit Payment Offset (BPO)

47
Benefit Payment Offset
(BPO)
• 60 and 30 Day Warning Letters are sent out
• Offset Letter sent out when offset occurs
• 15 % is the Maximum Amount that a beneficiary’s benefit payment
will be offset for a non-tax debt
• Amount of offset will be the lesser of the amount of the debt; an
amount equal to 15% of the monthly benefit payment; or the amount
by which the benefit payment exceeds $750
• No payment $750.00 and under will be offset
• Supplementary Security Income (SSI) payments are NOT subject to
offset
Centralized Salary Offset
(CSO)

49
What is Federal Employee
Salary Offset?
• Federal agencies collect debts owed by a federal
employee through installment deductions from the
employee’s pay

• Salary Offset Limits 15% of “disposable pay” for


federal non-tax debts

50
What is Disposable Pay?
• The dollar amount left after the following deductions:
– Tax levies
– Properly withheld taxes, FICA, Medicare
– Health and life insurance premiums
– Retirement contributions

Does NOT include amounts deducted under a


garnishment

51
What’s Different for the Salary
Offset Process?
• Minimum dollar amount for a debt referred for Salary
Offset is $100.00
• Salary Offset will always take the debt balance to zero
• Uses record types and reason codes to communicate
between TOP, Salary Payment Agency (SPA), and
Creditor Agencies
• SPA can charge a one time administrative fee and/or a
per offset fee plus the TOP offset fee

52
Centralized Salary Offset
Participating Salary Payment Agencies:

 Interior
 National Finance Center
 DoD-DFAS
 U.S. Postal Service
 GSA

53
Non-Treasury Disbursing
Office (NTDO) Vendor
Offsets

54
NTDO Vendor Offset Program
• Implemented with the following:
– DoD in December 2002
– State of Maryland in June 2007
– State of New Jersey in July 2007
– Army Corps of Engineers in July 2007
• Not a real time process
• Potential to over collect the debt
• Starting fall 2007, USPS will participate

55
State Income Tax Program

56
State Income Tax Program
• States can refer delinquent income tax debts to TOP
for offset against tax refund payments only
• Currently 39 states and the District of Columbia
participate in the program

57
State Income Tax Program
• Special requirements for tax refund offset to collect
state income tax obligations (26 U.S.C. 6402(e)):
– States must send 60-day notice to debtors by certified
mail, return receipt requested
– Taxpayers must reside in the state to which the tax
obligation is owed (based on address on Federal tax
return for year of refund)

58
State Reciprocal Agreement
Program

59
State Reciprocal Agreement
Program
• States will refer debts to TOP for offset against Federal
vendor payments and State payments will be matched
against Federal non-tax debts
• Interim draft rule on Administrative Offset Under
Reciprocal Agreements with States (31 CFR 285.6)
published in the Federal Register on January 11, 2007
• States must enter into an agreement with FMS
• Pilot began with the State of Maryland on June 11, 2007
and with the State of New Jersey on July 2, 2007

60
State Reciprocal Agreement
Program
ADMINISTRATIVE OFFSET STATE PAYMENT OFFSET
(offset of Federal payments to collect State debts) (offset of State payments to collect Federal
nontax debts)

Statutes 31 U.S.C. 3716 State law and 31 U.S.C. 3716(h)


Regulations New rule at 31 CFR 285.6 State regulations, if any, and 31 CFR 285.6

Debts to be collected State debts (including tax) other than: Nontax debts owed to the United States
• child support
• debts owed by other governments -- State,
local, foreign, etc.

Payments to be offset All Federal payments except: All State payments, as authorized by applicable
• payments exempt under 31 CFR 285.5 State laws and the reciprocal agreements.
• Federal benefit payments
• Tax refunds
• Salary
• Other payments specified in the reciprocal
agreement

Creditor Agencies Voluntary for States as creditor agencies Voluntary for Federal creditor agencies to
participate

Payment Agencies No discretion for payment agencies State payment agencies participate according to
State law and reciprocal agreement

Due Process 31 U.S.C. 3716 and new rule State Law


Requirements

61
Cross-Servicing

62
Treasury’s Role
• Debt Collection Improvement Act of 1996
• maximize collections through use of all appropriate
tools
• centralize debt collection within Treasury
• require proper screening of potential borrowers -
sharing of information
• inform public of activity & ensure due process
• encourage sale of delinquent debt
• rely on expertise of private sector companies

63
Agencies Ask: What do I do with my
delinquent debt?
Yes - Eligible for Mandatory referral

Is debt 180 days delinquent?


1 2
No - Eligible for Voluntary referral

2 Is the debt one of Foreclosure


Yes - Do not refer to Treasury
(Cross-Servicing or TOP) END
following Exclusions? Bankruptcy
Foreign Gov. Debt
Forebearance/ Appeals
No - Eligible for Cross-Servicing
and TOP 3
3 At a Private Collection Agency
Yes - Refer directly to TOP.
At a Federal Debt Collection Center
Scheduled for Sale
Do NOT refer to Cross-Servicing TOP
Is debt one of the following
Collectible Under Internal Offset w/in 3 yrs
DCIA Exemptions?
At DOJ/ Litigation No- Refer directly to Cross-Servicing.
Cross-Servicing will refer to TOP
CROSS
as a collection tool. SERVICING
Cross-Servicing Collection Tools

• Demand Letters & Phone Calls


• Payment Agreement Options
• Credit Bureau Reporting
• Treasury Offset Program
• Administrative Wage Garnishment
• Private Collection Agencies
• Litigation by Department of Justice
• IRS Form 1099-C after Closeout

65
How Agencies Participate

• Letter of Agreement detailing responsibilities


of DMS and Creditor Agency
• Agencies must certify that:
– debts are valid and legally enforceable in order to
refer
– due process has been completed
• Once LOA is signed and debt referrals begin,
the Agency ceases all collection activity

66
Agency Profile
• Contains information about:
– Agency points of contact
– How an agency wants DMS to service their
debts (refer to TOP, refer to credit bureaus)
– payment agreement parameters
– whether the fee is added to the debt or charged
to the agency

67
How Debts Get Into
FedDebt
• Agency can refer the debts electronically
by file
• Agencies can use the on-line interface to
enter debts manually

68
Next Step: Demand Letter
• How many days after debt referral does Cross-Servicing
send a demand letter?

A. 10
B. 30
C. 5
D. 60

69
WINNER
If you chose C, you are correct!!

You win more information on:


The flexibility of a debt &
debtor based system!
70
Debt & Debtor System
• FedDebt is a debt & debtor based
system which allows:
– DMS to better handle joint & several debts
– A demand letter to be sent to each debtor
– Users can update debt and/or debtor information
– Multiple Payment Agreements possible for a debt
– Removal of a debtor from the debt without closing the
entire debt

71
How are Payment Agreements
established?
A. Discussing the terms with the debtor and
sending an e-mail to confirm the terms
B. Recording the terms in the system without the
debtor’s consent
C. Scribbling the terms on a post-it note and
throwing it away when the first payment arrives
D. Discussing the terms with the debtor and
sending a written agreement to confirm the terms

72
WINNER
If you chose D, you are
correct!!

You win more information


about:
Payment Agreements!
73
Payment Agreements
• FedDebt payment agreement types:
– Repayment Agreement, in full or installments
– Compromise Agreements, in full or installments
– Partial Payment Agreements*
*Future evaluation of ability to pay
• Interest can accrue during payment
agreements - set on the Agency Profile

74
How often are consumer debtors
reported to Credit Bureau
repositories?

A. Every 30 days
B. Every quarter
C. Every day
D. Once a year

75
WINNER
If you chose A, you are
correct!!

With FedDebt, you win:


Credit Bureau Reporting at the
Debtor Level!
76
Credit Bureau Reporting
• DMS able to report all debtors on the debt
– Consumer CBR begins 60 days after referral and occurs
monthly
– Commercial CBR begins 30 days after referral and
occurs quarterly
• DMS researches and responds to CBR disputes for
debts we are servicing
• DMS asks Creditor Agencies to respond to CBR
disputes within 7 days

77
What is TOP?

A. A child’s toy
B. A word used to describe a type of hat
C. A program run by Treasury to intercept
(offset) federal payments to satisfy a delinquent
federal debt
D. A text message to say “tired of this party”

78
WINNER
If you chose C, you are
correct!!

You win information about:


TOP Referrals through the
Cross-Servicing Program!
79
Treasury Offset Program

• Under Cross-Servicing, all debtors under a debt can be


referred to TOP
• No additional fees will be charged for a TOP offset under
Cross-Servicing
• Ability to designate bypass indicators on the Creditor
Agency profile

80
What is a Private Collection
Agency?
A. A company that specializes in collecting
delinquent debt?
B. A non-profit organization which collects money
for extravagant parties?
C. A soldier in the Army who holds all the funds for
the Superbowl pool?
D. A company that collects all type of objects to sell
on EBay?

81
WINNER
If you chose A, you are correct!!

With this correct answer, you win:

More PCA Details!


82
Private Collection Agencies

• Goal is to collect or resolve debt


• Performance based contract, the better a
PCA performs
– more money they receive in commissions
– more debt referrals they receive

83
Private Collection Agencies

• Single debtor debts will now be linked for


distribution to the same PCA
– Federal Agency must provide TIN to ensure proper
linking

• Resolve debts through administrative resolutions -


debtor’s death, bankruptcy, disability with the
inability to pay, entity out of business

84
Private Collection Agencies

• Use similar collection tools to BDMOC


• Payment agreements - PCAs are not passed full
agreement authority
• DMS monitoring
– log into PCA’s collection system from DMS site
– annual compliance reviews

85
Why is it important for Agencies to
authorize Administrative Wage
Garnishment?

A. They will collect more money


B. They will collect more money
C. They will collect more money
D. They will collect more money

86
WINNER
If you chose A, B, C, or D you are
correct!!

With that correct answer, you win:

More information about AWG!


87
Administrative Wage
Garnishment
• Allows garnishment of up to 15% of private sector
employee’s disposable wages
• Can be used without a court order
• Form issued to employer with instructions to send portion
of wages to Treasury
• Funds received from employer applied to individual’s debt
balance
• Proved to be a useful collection tool to increase collection
rate & encourage agreements

88
How do we keep track of the
money collected?

A. We were supposed to keep track?


B. Carve the collections on a stone?
C. In a log book?
D. Record transactions, including how they are
applied in FedDebt?

89
WINNER
If you chose D, you are correct!!

Great job, you get to hear more about:

FedDebt Financials!
90
FedDebt Financials
• Transaction categories
– Payments
– Reversals
– Adjustments
• Payments reported to the system weekdays by file by the
lockbox bank

91
FedDebt Financials
• Federal agencies can report payments, adjustments and
reversals
– by file
– using on-line functionality
• DMS users can manually record payments, adjustments
and reversals
• Payments are applied first to last in this order: fees,
administrative cost, penalties, interest and principal

92
FedDebt Financials
• Transaction Date vs. Posting Date
– Transaction Date = date the payment was deposited by
the bank
– Posting Date = date the payment was applied to a debt
in FedDebt
• Historical Recalculation
– Transactions post as of the transaction date

93
FedDebt Financials
• Cash vs. Non-Cash Transactions
– Cash = financial transaction that results in the
movement of funds between the Creditor Agency and
DMS (ex. lockbox payment)
– Non-Cash = financial transaction that changes the
balance of the debt, but does not result in the exchange
of funds (ex. balance adjustment)
• Reconciling with IPAC
– Collection File

94
What collection tools are
remaining?

A. Litigation by the Department of Justice


B. Issuance of the IRS Form 1099C after closeout
C. Both A & B
D. I can’t concentrate anymore, I have a headache

95
WINNER
If you chose C, you are correct!!

You win:
More Cross-Servicing
Information!
96
Department of Justice
Referrals
• Referred for initiation of litigation or post judgment
enforcement
• Planned FedDebt enhancements will provide automated
debt screening for DOJ referral
• List of possible referrals to be reviewed by DMS Analyst

97
Issuance of IRS Form
1099C
• Future FedDebt capabilities
– Reports provided to Creditor Agencies either on-line or
electronically
– Enhanced 1099C review and processing (monthly and
year-end review)
– 1099Cs can be issued for all debtors

98
Review
• Debt collection tools used by Cross-Servicing
– Demand Letters and Phone Calls
– Payment Agreements
– Credit Bureau Reporting
– Treasury Offset Program
– Private Collection Agencies
– Department of Justice – Enforced Collection
– IRS Form 1099-C Issuance

99
Federal Agency Role

100
Agencies Need To:
• Enroll for FMS Cross-Servicing and/or TOP
• Provide Due Process to debtors
• Send the Demand Letter and any subsequent letters
• Respond to debtor inquiries/conduct hearings
• Refer debt to FMS when 180 days delinquent
Agency has the option of referring to TOP only, to TOP and Cross-
Servicing simultaneously, or to Cross-Servicing only (with the
possibility of inclusion in TOP as part of the full service debt recovery)
• Report to Treasury using Treasury Report on
Receivables

101
Notice to the Debtor/Demand
for Payment
Demand Letter provides the debtor:
• Notification of the existence of the debt and the amount
• Opportunity to repay in full, or work out a repayment
agreement
• Information regarding agency’s policies on accrual of
interest, penalties, and administrative costs

102
Notice to the Debtor/Demand
for Payment continued
Demand Letter provides the debtor:
• Evidence of due process compliance, as well as any rights
the debtor may have to avoid the use of our debt collection
tools
• Notice provides means of responding to debtors who
exercise due process rights

103
Notice to the Debtor/Demand
for Payment continued
Guidance:
See the Demand Letter Checklist in
Managing Federal Receivables, Appendix 8, at:
www.fms.treas.gov/debt/regulations.html

Fair Debt Collection Practices Act (FDCPA),


15 U.S.C. 1681 et seq., the FDCPA provides valuable
guidance on appropriate practices in communicating with
debtors

104
The Demand Letter
Checklist
• Agency can send one letter or a series of letters, but the
first letter must be sent within 30 days of delinquency
• At least 60 days before referring to FMS, the following
information must be provided to the debtor:
- Nature and amount of the debt, including the basis for the debt
- Explanation of how interest, penalties, and administrative costs are added to
the debt.
- Date by which payment should be made to avoid late charges and enforced
collection (generally, 30 days from the date the demand letter is mailed)
- Name, address, and phone number of a contact person or office within the
creditor agency

105
The Demand Letter
Checklist
Explain the agency’s options to enforce collection
if debtor fails to pay:
• Offset Federal payments
• Refer debt to Private Collection Agency
• Credit Bureau Reporting
• Administrative Wage Garnishment
• Department of Justice for litigation
• Refer debt to Treasury for any of these collection
actions (and advise debtor that agency required to refer
when 180 days delinquent)

106
The Demand Letter
Checklist Continued
Explain Debtor’s Rights to:
• Inspect and copy agency’s records related to the debt
• Request a review of agency’s determination of the
debt
• Request a waiver, if applicable
• Request a hearing for salary offset or administrative
wage garnishment
• Enter into a reasonable written repayment agreement

107
The Demand Letter
Checklist Continued
Advise Debtor of the following:
• Notification to agency if bankruptcy filed
• Penalties for knowingly making false statements
• Excess collections will be refunded to the debtor, unless
prohibited by law
• For joint income tax filers, spouse should file Form
8379 with IRS to claim his/her share of tax refund

108
Lump Sum
Payment/Installment Payments
Agency should try to collect overdue debt:
• Single lump sum payment
• Installment options
• Rights of Debtor before using collection remedies

109
Installment Payments
Requirements:
• Verify debtor’s claim of inability to repay in a lump
sum by obtaining a financial statement or credit report

• Evidence debtor has a willingness to abide by terms of


the agreement, including the repayment schedule; and
ability to make agreed payments

110
Installment Payments
Factors to consider when determining the
debtor’s ability to pay:
• Age and health
• Income
• Inheritance prospects
• Hidden assets or fraudulent transfers
• Assets/income available for enforced collection
• Reasonable and necessary living expenses

111
Installment Agreement
The installment agreement should include the following:
• Initial lump sum payment as large as the debtor can
afford
• Term not to exceed three years
• Consider pre-authorized debit to make the required
installment payments
• Consider additional collateral to secure the
outstanding balance of the account

112
Installment Agreement
Additional terms:
• Interest rate to be charged for repayment terms

• Outstanding late charges from previous


agreement
• Acceleration clause (declaring full amount of the
debt due and payable – not just the delinquent
payment) in the event that the debtor defaults

113
Compromise

Definition – An agency compromises a debt


whenever it accepts less than the full amount of
the outstanding debt in full satisfaction of the
entire amount

114
Compromise
Agency may consider Compromise when:
• Debtor is unable to pay
• Agency is unable to enforce collection
• Cost of collection is more than debt
• Doubt concerning debt enforcement

115
Compromise
Requirements:
• DOJ concurrence when principal amount exceeds
$100,000
• Do not refer debts to DOJ unless the agency accepts
the compromise offer
• FMS has authority to compromise a debt with a
principal amount of $500,000 or less

116
Compromise
Terms:
• Written agreement signed by the debtor and the
agency
• Agreement should not inadvertently release the
agency’s claim against remaining debtor(s) not a
party to the agreement
• No installment payments
• Full amount of the debt (less any amounts paid) will
be reinstated and immediately due and payable in
the event of default
• Does not release the debtor from other debts owed to
the United States
117
Compromises
Reporting the compromised amount to IRS:
The agency may be required to report the difference
between the full amount of the debt and the amount
paid by the debtor in a compromise agreement to IRS as
potential income for tax purposes using Form 1099-C

118
Collateral Liquidation
Definition:
Collateral is property pledged as security for a
loan. Liquidation is the process of converting
the collateral into cash in order to pay all or a
portion of the debt

119
Collateral Liquidation
When to take action:
When debtor will not, or cannot, repay the
amount owed, and collateral liquidation is
the best method for protecting the
government’s financial interests

120
Collateral Liquidation
Key Government-wide policies –

• Force a sale of the collateral to a third party


• Avoid taking title to the collateral property as part of
your agency’s liquidation strategy
• If an agency obtains title, the agency is responsible
for maintaining and insuring the property while it is
owned by the agency

121
Collateral Liquidation
If the debt is not fully satisfied by collateral
liquidation:
• Obtain a deficiency judgment, or
• Otherwise continue to pursue collection on
the un-recovered portion

122
Write-Off/CNC Suspend/Terminate Collection
 
Accounting Concept  
  Legal Concept
Does this debt have value, so that  
it can be considered an asset of Should the United States pursue
the United States?
If the answer is “no”, then it should be collection, based on FCCS factors
written off. (31 CFR 903.3)?
OMB A-129 says that the answer is “no” If the answer is “no,” then collection
for all debts delinquent more than should be suspended or terminated.
two years, unless the agency can
justify to OMB and Treasury why it  
should be reflected as an asset on Might it be in the interest of the
the government’s books.
United States to pursue
  collection in the future?
Is it possible the debt will have
value in the future?  
  If “yes,” then just suspend collection. If
If “yes,” then it should be classified as “no,” then collection should be
currently not collectible, or terminated.
“CNC” after it is written off.
Close-Out
Both a legal and an accounting concept 
Does it appear that this debt will ever have value or be collectible?
 If “no,” then the debt should be closed out.
Write-off and termination of collection must happen prior to close-out.
An IRS Form 1099C should be produced for eligible debts at close-out.

123
Questions?

124

Centres d'intérêt liés