# Board of Contract Appeals

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URL: https://www.frixlaw.com/law-library/documents/agency%3Acbca%3Aa0cea3b8c232209b

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

Board of Contract Appeals

General Services Administration
Washington, D.C. 20405

November 24, 2004

GSBCA 16520-DBT

In the Matter of TRACY Wi

Clay Gergick, Chief, Receivables Collections and Sales Section, General Services
Administration, Kansas City, MO, appearing for General Services Administration.

Tracy WE. GE. Respondent.

NEILL, Board Judge.

The General Services Administration (GSA), having been unsuccessful in collecting
what it contends is a bonafide debt of Ms. Tracy WI, now wishes to garnish the

amount due from Ms. WI's disposable pay. GSA proposes to do this pursuant to
garnishment provisions contained in the Debt Collection Improvement Act of 1996 (DCIA),

Pub. L. No. 104-134, 110 Stat. 1321 (1996).

On October 7, 2004, this Board issued a docketing order to GSA officials and Ms.
WEEE acknowledging that GSA had forwarded to the Board Ms. Wi's request
for an administrative wage garnishment (AWG) hearing. Under GSA's recently amended
regulations implementing the DCIA (effective December 10, 2003), a debtor has the right
"[t]o request a hearing . . . concerning the existence and/or amount of the debt, and/or the
terms of the proposed repayment schedule under the garnishment order." 68 Fed. Reg.
68,760 (Dec. 10, 2003) (to be codified at 41 CFR 105-57.004).

‘The documentation provided with GSA's AWG hearing request provided little
information regarding the origin and nature of the alleged debt. We, therefore, requested
GSA to provide an administrative report regarding this case. GSA promptly complied with
our request. We then provided a copy of the agency's administrative report to Ms.
WEEE with the request that she provide her own comments on the report no later than
Thursday, November 11. She failed to reply to our request. By overnight mail, we advised
GSBCA 16520-DBT 2

Ms. WJ on Wednesday, November 17 that it was our intention to convene a
telephonic hearing on Tuesday, November 23. On that date, Ms Wi) made herself
available for the hearing and provided answers to some additional questions the Board had
after reviewing the materials submitted by GSA.

Based upon the information provided, we make the following findings of fact.

Findings of Fact

1. On December 8, 2002, a vehicle owned by GSA's Fleet Management Service and
leased to the United States Navy was stolen. It was later recovered by GSA after sustaining
damage in an accident. The cost of repairs to the vehicle amounted to $3,971.51. Agency
Report, Attachments A-B. The person eventually arrested and charged with theft of the
vehicle was the teenage son of Ms. WI. Id., Attachment C.

2. By letter dated May 28, 2003, an employee of GSA's Fleet Management Service
wrote Ms. Wi to say: "After reviewing the facts, we have determined that you are
liable for the damages to the government vehicle totaling $3,971.51." The letter asked for
immediate payment of this amount and warned that if a payment of the debt was not
promptly made, Ms. Wi would be subject to interest on the debt, a penalty for
delinquent payment, and charges for the administrative costs associated with the collection
of the debt. Agency Report, Attachment D. The Government's claim was supported by
copies of repair invoices. Also included in this demand latter was an explanatory sheet
advising Ms. WE of GSA's policy regarding debts and advising her of her debtor
rights. Among these rights were the right to inspect and copy records pertaining to the debt,
the right to dispute information in these records, the right to appeal any unresolved dispute,
and the right to request a repayment agreement if a lump sum payment would create a
financial hardship. Id., Attachment E.

3. By letter dated June 30, 2003, GSA's regional finance center sent a second notice
to Ms. WE, this time demanding payment of $3,978.47 and warning that interest
would continue to accrue on this claim until paid. Agency Report, Attachment F. This
interest charge, however, was waived when Ms. Wi) immediately indicated a
willingness to agree to a repayment plan. By letter dated the following day, July 1, 2003,
GSA sent for Ms. W's consideration a promissory note to be executed by her. The
note provided for seventy monthly payments of $60 and a final payment of $44.45 for
payment of the original claim of $3,971.51 plus interest at the rate of "2.2500%," first
payment to be made on August 2, 2003. On July 14, 2003, Ms. Wi signed the note
before a notary public for Wayne County, Michigan. IJd., Attachments G-I.
GSBCA 16520-DBT 3

4. Ms. Wi failed to make any payment on the promissory note. A "Claim
Action History Report" contained in the agency's report notes that, on December 22, 2003,
GSA "deactivate[d] promissory note" and referred a claim for $3,971.51 to the Department
of the Treasury's Financial Management Service (FMS) for collection. Agency Report,
Attachment I. Shortly thereafter, on January 5, 2004, FMS advised GSA that the debtor
wished to enter into a repayment agreement according to which she would pay $133 down
and monthly installment payments of the same about until the debt was paid. Treasury's
communication of this information to GSA mentions neither the amount of the debt, nor any
applicable interest on the amount due, nor the number of payments required to pay off the
debt. Nevertheless, on the following day, January 6, GSA agreed to the proposed monthly
payment of $133. Id., Attachment J.

5. By letter dated September 10, 2004, a private collection agency advised Ms.
WE that she owed GSA $5,226.70 and that, if this amount was not paid, the
Treasury Department, of behalf of GSA, would issue a garnishment order requiring her
employer to deduct and send to the Government up to 15% from her disposable pay for each
period until the debt plus interest, penalties, and costs was paid in full. In addition, this letter
advised Ms. WIE that she could inspect and copy GSA's records relating to her debt
and that she could also request a hearing from GSA by completing and mailing an enclosed
form. The letter assured Ms. WJ that, if this enclosed form was received before
October 1, 2004, the Treasury Department would not issue a wage garnishment on behalf
of GSA until after a hearing had been held and a decision rendered. GSA's AWG Hearing
Request at 4-5 (unnumbered).

6. Ms. WE signed and returned the form requesting an AWG hearing. Her
request was received by the collection agency on September 23. The request was forwarded
to the Treasury's FMS and then to GSA officials. GSA, in turn, then requested this Board
to conduct a hearing and render a decision in accordance with GSA's AWG regulations.

7. From documentation contained in GSA's initial AWG hearing request, it is clear
that the collecting agency which wrote Ms. WIE on September 10 hadbeen in contact
with her previously and had secured some limited information regarding her income and
. monthly expenses. A fact sheet included in the request shows that Ms. WIRES case
was referred to the collection agency on March 20, 2004. The amount listed on the sheet as
"Referred" is $5,226.70. The "Current Bal[ance]" is said to be $4,083.36. One line on the
fact sheet reads "Interest Rate:" and is followed by the figure "0.000%." Another line reads
"Interest Amt:" and it is followed by the figure "0.00." As to monthly income and expense
information regarding the debtor, the agency fact sheet lists Ms. WIE's income as
$900. Her rent is listed as $350; food is listed as $200; and her cost of utilities is listed at
GSBCA 16520-DBT 4

$200. No entry is made on the fact sheet for health insurance. GSA's AWG Hearing
Request at 10-14 (unnumbered).

Discussion
GSA's AWG regulations provide that, when a hearing is held at the debtor's request:

(1) GSA will have the burden of establishing the existence and/or amount of
the debt. (2) Thereafter, if the debtor disputes the existence and/or amount of
the debt, the debtor must prove by preponderance of the evidence that no debt
exists or that the amount of the debt is incorrect. In addition, the debtor may
present evidence that the terms of the repayment schedule are unlawful, would
cause a financial hardship to the debtor, or that collection of the debt may not
be pursued due to operation of law.

68 Fed. Reg. 68,760, 68,763 (Dec. 10, 2003) (to be codified at 41 CFR 105-57.005(f)).

Based upon the record before us, we conclude that GSA has not met its burden of
establishing the existence or the amount of Ms. WiEJ’s alleged debt. While the data
regarding the cost of repairs made to the damaged vehicle appears to be persuasive, we find
nothing in the record to support GSA's assumption that Ms. WIE's son is liable for
the cost of repairing the agency's damaged vehicle. We likewise find no support for the
additional assumption on GSA's part that Ms. WIJ is personally responsible for any
obligation her son might have to pay for this cost of repair. In other words, we remain
unconvinced that a debt actually exists so far as these two individuals are concerned.
Because we find that GSA has failed to carry this initial burden, Ms. Wi|'s failure
to challenge the agency's contention is immaterial.

The agency report tells us that Ms. Wi's son was arrested and charged with
theft of the Government's vehicle. The agency also alleges that the court ordered the son to
pay for the damage done to the vehicle. Unfortunately, however, GSA has been unable to
document this alleged determination of liability. It has failed to provide us, for example,
with a copy of the court's order. Instead, we are left only with the initial determination made
by an employee of GSA's Fleet Management Service that "[a]fter reviewing the facts, we ~
have determined that you are liable for the damages to the government vehicle totaling
$3,971.51." Finding 2.

When GSA alleges as part of an AWG hearing that a debt exists, we expect the
agency to identify the legal standard it is using to determine this fact. In another case also
involving a motor vehicle belonging to GSA's Fleet Management Service, the agency sought
GSBCA 16520-DBT 5

recovery for damages done to one of its vehicles as a resuft of an individual's tortious
conduct. In that case we have concluded, in a decision issued on this same date, that the
agency failed to establish the existence ofa debt so far as the alleged debtor was concerned.
We reach the same conclusion here and for the same reason. In cases such as these, we
expect the agency to identify for us the legal standard to be applied in order to determine (i)
that a tort has occurred and (ii) that the alleged debtor is in fact liable for any resulting
damages.

In the case now before us, a conviction and order from a court of competent
jurisdiction directing Ms. WIJ's son to pay for repair of the vehicle would at least
identify the legal standard used to determine his liability. Nevertheless, even if the court's
action were to be documented, we would still expect the agency to identify for us the legal
basis for concluding that Ms. WI is personally responsible for this debt of her son.
Since the record for this case provides us with nothing exceptthe bare, unsupported assertion
of liability, we obviously can draw no conclusion regarding the existence of the alleged debt.

Weare of course aware that the record does contain a promissory note executed by
Ms. WEEE, which covers the cost of the repairs made to GSA's vehicle and the interest
due on the unpaid portion of the note. The status of this note, however, is far from clear.
Documentation provided with the agency's report indicates that the note was "deactivated"
on December 22, 2003. Further, we find no evidence in the record that GSA or the FMS
ever sought to collect from Ms. Wi the amount which would be due pursuant to the
terms of the note in the event of default. Rather, in late December 2003, GSA referred to
Treasury only a debt of $3,971.51 and, in early January 2004, agreed to repayment terms of
$133 per month for an unspecified period of time. See Findings 3-4. We conclude,
therefore, that the debt which is the subject of this proceeding is that said to arise from
damage to GSA's vehicle and not one based solely upon a defaulted promissory note. In any
event, ifit was the intention of GSA to seek garnishment based solely on the defaulted note,
we would have expected the agency to identify for us and discuss the legal standards
supporting the existence of a debt based solely on a defaulted note. This, of course, has not
been done.

The Government's showing regarding the amount of the alleged debt is similarly
insufficient. The notices provided to Ms. WJ warned her of interest, penalties, and
administrative costs for which she might be responsible if she failed to respond promptly to
GSA's demand for payment. Yet, the amount used as the basis for the promissory note was
not the $3,978.47 of the demand latter of June 30, 2003, but the basic claim for $3,971.51
asserted in GSA's letter of May 28, 2003. Findings 2-3. By September 2004, the amount
due was said to amount to $5,226.70. Finding 5. In contrast, the collection agency's fact
sheet shows a figure of $5,226.70 as "Referred" and a figure of $4,083.36 as "Current
GSBCA 16520-DBT 6

Balfance]." Finding 7. When asked by us to explain these different amounts, the agency
simply stated that the difference was attributable to additional interest and collection fees but
that the Department of the Treasury would have to provide an itemized list of interest, late
charges, and the fees of the collection agency.

We recognize that by law the Government is required to charge interest and penalties
on unpaid claims and can likewise, under certain circumstances, waive such interest and
charges. See 31 U.S.C. § 3717 (2000). In establishing the amount of a claim for purposes
of an AWG hearing, however, we expect GSA to account in detail for any charges it adds
or elects not to add to the basic amount initially found due. Even if GSA had successfully
met its burden of establishing the existence of the alleged debt, the information provided
regarding the total amount claimed is confusing and insufficiently detailed to support any
determination on our part of an amount in excess of the original amount stated in GSA's
letter of May 28, 2003.

Decision

For the reasons set out above, we conclude that GSA has notestablished the existence
of a debt owed by Ms. EE as required in order to effect an administrative wage

garnishment.
VN _

EDWIN B. NEILL
Board Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Acbca%3Aa0cea3b8c232209b. Public record. Not legal advice.