Indebtedness of Military Personnel

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Parts 43a and 50

[DoD Directive 1344.9]

RIN 0790-AF65

Indebtedness of Military Personnel

AGENCY: Office of the Secretary, DoD.

ACTION: Proposed rule.

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SUMMARY: In order to comply with Public Law the Hatch Act Reform

Amendments of 1994, the Department of Defense is in the process of

promulgating a regulations with regard to members of the Armed Forces

which includes provisions for the involuntary allotment of the pay of a

member of the Armed Forces for indebtedness owed a third party as

determined by the final judgment of a court of competent jurisdiction,

and as further determined by competent military or executive authority,

as appropriate, to be in compliance with the procedural requirements of

the Soldiers' and Sailors' Civil Relief Act of 1940; and which gives

consideration for the absence of a member of the Armed Forces from an

appearance in a judicial proceeding resulting from the exigencies of

military duty. While the Department of Defense has traditionally by

regulation required members to pay their just financial obligations, no

mechanism previously existed to enforce payments of just debts with the

exception of payments owned for child or spousal support. The proposed

revision of Department of Defense Directive 1344.9 (32 CFR part 50)

establishes a program for involuntary allotments to require members to

pay their just debts. The impact to the government of this legislation

is much greater than to the public. The Department of Defense must hire

additional personnel to process and review applications, as well as

incur administrative processing costs (e.g., mailing, record keeping,

xeroxing, and providing of processing forms). Additionally, the program

will require personnel time in the form of review and providing

assistance (e.g., military legal assistance) to members against whom an

application for involuntary allotment is pending. The cost to the

applicant for an involuntary allotment against a member's pay will be

minimal in terms of time and money. The applicant will have to provide

information which should already be in the applicant's possession,

incur postage costs, and expend approximately 15 minutes completing the

application form. In return for their effort, applicants with

enforceable claims will be entitled to receive from the military member

an involuntary allotment of pay on a monthly basis towards satisfaction

of the judgment debt owed.

DATES: Written comments on this proposed rule must be received by June

27, 1994.

ADDRESSES: Forward comments to the Office of the Under Secretary of

Defense (Personnel and Readiness), Requirements and Resources, Legal

Policy, room 4C763, 4000 Defense Pentagon, Washington, DC 20301-4000.

FOR FURTHER INFORMATION CONTACT:

Major Alan L. Cook, (703) 697-3387.

SUPPLEMENTARY INFORMATION: Appendix A to 32 CFR part 50 requires the

use of two forms. The first form is an involuntary allotment

application. Use of a standard form is required because the Hatch Act

Reform Amendments of 1994 require a determination by competent military

or executive authority that the final judgment of a court of competent

jurisdiction giving rise to the involuntary allotment application

complies with the requirements of the Soldiers' and Sailors' Civil

Relief Act. Additionally, in order to ensure due process for

involuntary allotment applications, several certifications and

acknowledgements are required by the applicant. In the absence of a

standardized form, the cost to the government of reviewing non-standard

forms for compliance would be unfairly burdensome in comparison to the

minimum cost to an applicant of obtaining and using a standard form to

make application. Furthermore, use of a standard form saves the

applicant time and money by not requiring the applicant to obtain a

copy of the Department of Defense Directive and reading it in order to

ensure proper submission of information to obtain an involuntary

allotment. The second form for involuntary allotment notice and

processing creates a standardized methodology within the Department of

Defense, to include the Military Departments, to ensure uniform

processing procedures. This saves both time and money for the review

authorities. Both forms are in the process of development. However,

their basic contents and requirements are clearly delineated in

appendix A to 32 CFR part 50. It has been determined that 32 CFR part

50 is not a significant regulation action. The rule does not: (1) Have

an annual effect on the economy of $100 million or more or adversely

affect in a material way the economy, a sector of the economy,

productivity, competition, jobs, the environment, public health or

safety, or State, local, or tribal governments or communities; (2)

Create a serious inconsistency or otherwise interfere with an action

taken or planned by another agency; (3) Materially alter the budgetary

impact of entitlements, grants, user fees, or loan programs or the

rights and obligations of recipients thereof; or (4) Raise novel legal

or policy issues arising out of legal mandates, the President's

priorities, or the principles set forth in this Executive Order. It has

also been determined that this rule is not subject to the Regulatory

Flexibility Act (5 U.S.C. 601) because it will not have a significant

adverse economic impact on a substantial number of small entities. The

primary financial effect on administering the rule will be a reduction

in administrative costs and other burdens resulting from the

simplification and clarification of certain policies. Finally, it has

been determined that 32 CFR part 50 may impose reporting or record

keeping requirements under the Paperwork Reduction Act of 1980 (44

U.S.C. 3501-3520) and that the paperwork reduction process is under

review.

List of Subjects in 32 CFR Parts 43a and 50

Claims, Credit, Military personnel.

Accordingly, under the authority of 10 U.S.C. 301, title 32 of the

Code of Federal Regulations, chapter I, subchapter C, is proposed to be

amended to read as follows:

PART 43A--[REMOVED]

1. Part 43a is removed.

2. 32 CFR part 50 is added to read as follows:

PART 50--INDEBTEDNESS OF MILITARY PERSONNEL

Sec.

50.1 Purpose.

50.2 Applicability and scope.

50.3 Definitions.

50.4 Responsibilities.

50.5 General policies.

50.6 Full disclosure and standards of fairness by creditors.

Appendix A to part 50-Processing Procedures

Appendix B to Part 50-Certificate of Compliance

Appendix C to Part 50-Standards of Fairness

Authority: Pub. L. 103-94 and 10 U.S.C. 113(d).

Sec. 50.1 Purpose.

This part

(a) Sets established Department of Defense policy governing

delinquent indebtedness of members of the Military Services, and

establishes policy for involuntary allotments from the disposable pay

of military members to satisfy judgment indebtedness in accordance with

Public Law 103-94.

(b) Sets forth procedures for processing claims of such

indebtedness and applications for involuntary allotments from the

disposable pay of military members.

(c) Incorporates the provisions of Public Law 90-321, Public Law

95-109 and Public Law 103-94.

Sec. 50.2 Applicability and scope.

(a) The provisions of this part apply to the Office of the

Secretary of Defense, the Military Departments, the Chairman of the

Joint Chiefs of Staff and the Joint Staff, the Defense Agencies, and

the DoD Field Agencies (hereafter referred to as ``DoD Components'').

The term ``Military Services,'' as used herein, refers to the Army, the

Navy, the Air Force, and the Marine Corps.

(b) The provisions of this part do not apply to:

(1) Indebtedness of a member of the Military Services to the

Federal Government.

(2) Processing of indebtedness claims to enforce judgments against

military members for alimony or child support.

(3) Claims by State or municipal governments under the processing

procedures for complaints. Note, a State or municipal government must

comply with Appendix A to this part when seeking an involuntary

allotment.

Sec. 50.3 Definitions.

(a) Absence. Is a member's lack of an ``appearance,'' at any stage

of the judicial process, as evidenced by failing to physically attend

court proceedings, be represented at court proceedings by counsel of

the member's choosing, or to timely respond to pleadings, orders or

motions.

(b) Appearance. Is the presence and participation of a member of

the military services throughout the judicial proceeding from which the

judgment was issued that is the basis for a request for enforcement

through involuntary allotment.

(c) Applicant. The original judgment creditor, a successor in

interest, or attorney or agent thereof who requests an involuntary

allotment from a member of the Military Services pursuant to procedures

described in appendix A to this part.

(d) Court. A court of competent jurisdiction within any State,

territory, or possession of the United States.

(e) Debt collector. An agency or agent engaged in the collection of

debts described under Public Law 95-109.

(f) Disposable pay. In determining the amount of disposable pay due

to a member and subject to involuntary allotment under the provisions

of Public Law 103-94 and this part:

(1) Include basic pay and compensation payable under 37 U.S.C.

chapter 3.

(2) Exclude:

(i) Amounts awarded for suggestions.

(ii) Special and incentive pays payable under 37 U.S.C. chapter 5.

(iii) Accrued leave payments under 37 U.S.C. chapter 9.

(iv) Payments to missing persons under 37 U.S.C. chapter 10.

(v) Separation payments, including involuntary separation pay under

10 U.S.C. 1174 voluntary separation incentive (VSI) under 10 U.S.C.

1175, special separation benefit (SSB) under 10 U.S.C. 1174a, reservist

special separation pay (RSSP) under Public Law 102-484, section 4416,

and reservist involuntary separation pay (RISP) under Public Law 102-

484, section 4418.

(vi) Allowances paid under 37 U.S.C. Chapter 7 and other

reimbursements for expenses incurred in connection with duty in a

Military Service or allowances in lieu thereof.

(vii) Payments not specifically enumerated in paragraph (f)(1) of

this section.

(3) Deduct:

(i) Amounts owed by a member to the United States.

(ii) Amounts deducted for employment taxes.

(iii) Amounts mandatorily withheld for the Armed Forces Retirement

Home.

(iv) Fines and forfeitures ordered by a court-martial or by a

commanding officer.

(v) Amounts properly withheld for Federal, State, or local income

tax purposes, if the withholding of the amount is authorized or

required by law and if amounts withheld are not greater than would be

the case if the member claimed all dependents to which entitled. The

withholding of additional amounts pursuant to 26 U.S.C. 3402(i) may be

permitted only when the member presents evidence of a tax obligation

which supports the additional withholding.

(vi) Deductions for Servicemen's Group Life Insurance premiums;

(vii) Deductions for the dental benefits plan premiums.

(viii) Amounts otherwise required by law to be deducted from a

member's pay (except payments under of 42 U.S.C. 659, 661, 662, and

665.

(g) Exigencies of military duty. Is a military assignment or

mission essential duty that, because of its urgency, importance,

duration, location, or isolation, necessitates the absence of a member

of the military services from appearance at a judicial proceeding.

Absence from an appearance in a judicial proceeding is normally

presumed to be caused by exigencies of military duty during periods of

war, national emergency, or when the member is deployed (see appendix A

to this part, paragraph B2.c.(5)(a)).

(h) Judgment. A final judgment must be a valid, enforceable order

or decree, issued not earlier than two years before the date of an

application for an involuntary allotment, by a court from which no

appeal may be taken, or from which no appeal has been taken within the

time allowed, or from which an appeal has been taken and finally

decided. The judgment must award a sum certain amount and specify that

the amount is to be paid by an individual who, at the time of

application for the involuntary allotment, is a member of the Military

Services.

(i) Just financial obligations. A legal debt acknowledged by the

military member in which there is no reasonable dispute as to the facts

or the law; or one reduced to judgment which conforms to the Soldiers'

and Sailors' Civil Relief Act (SSCRA), if applicable.

(j) Member of the military services. Includes Regular, Reserve, and

National Guard members who are not retired.

(k) Preponderance of the evidence. A greater weight of evidence, or

evidence which is more credible and convincing to the mind. That which

best accords with reason and probability (see Black's Law Dictionary).

(l) Proper and timely manner. A manner which under the

circumstances does not reflect discredit on the military service.

Sec. 50.4 Responsibilities.

(a) The Under Secretary of Defense (Personnel and Readiness)

(USD(P&R)) shall:

(1) Have policy oversight concerning involuntary allotment of

military pay; and

(2) Shall establish policies and procedures governing the

assistance to be provided by military authorities to creditors of

military personnel who have debt complaints.

(b) The Comptroller of the Department of Defense shall establish

procedures supplemental to those contained in this part which are

necessary to administer and process involuntary allotments from members

of the Military Services; this includes the authority to promulgate

forms necessary for the efficient administration and processing of

involuntary allotments.

(c) The Heads of DoD Components, or their designees, shall urge

military personnel to meet their just financial obligations, since

failure to do so damages their credit reputation and affects the public

image of all DoD personnel (DoD Directive 1000.10,\1\ subsection D.4.,

DoD Directive 1000.11,\2\ and DoD Directive 5500.7.\3\

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\1\Copies may be obtained, at cost, from the National Technical

Information Service, 5285 Port Royal Road, Springfield, VA 22161.

\2\See footnote 1 to Sec. 50.4(c).

\3\See footnote 1 to Sec. 50.4(c).

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(d) The Director, Defense Finance and Accounting Services, or his

or her designee, shall:

(1) Assure implementation of this part and compliance with its

provisions.

(2) Determine whether the provisions of the Soldiers' and Sailors'

Civil Relief Act (SSCRA) have been complied with under the provisions

of Public Law 103-94.

(3) Act as the DoD Executive Agent for forms prescribed by this

part, or otherwise necessary to process involuntary allotments.

(e) The Secretaries of the Military Departments shall help ensure

compliance with the requirements of this part, to include:

(1) Requiring commanders to counsel members to pay their just

debts, including complying, as appropriate, with court orders and

judgments for the payment of alimony or child support.

(2) Ensuring notification and counseling of members against whom

creditors are seeking involuntary allotments pursuant to a court

judgment in accordance with the provisions of this part.

(3) Designating those commanders who shall be responsible for

determining whether a member's absence from a judicial proceeding was

caused by exigencies of military duty.

(4) Emphasizing prompt command action to assist with the processing

of involuntary allotment applications.

Sec. 50.5 General policies.

(a) Members of the Military Services are expected to pay their just

financial obligations in a proper and timely manner. However, DoD

Components have no legal authority, except as stated in paragraphs

(a)(1) and (a)(2) of this section, to require members to pay a private

debt or to divert any part of their pay for its satisfaction.

(1) Legal process instituted in civil courts to enforce judgments

against military personnel for the payment of alimony or child support

will be acted upon in accordance with the provisions of Public Law 93-

647, as amended, and part 7, chapter 7, section B. of DoD 7000.14-

R,\4\, Volume 7.

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\4\See footnote 1 to Sec. 50.4(c).

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(2) Involuntary allotments pursuant to the provisions of Public Law

103-94 shall be established in accordance with the provisions of this

part.

(b) Whenever possible, indebtedness disputes should be resolved

through amicable means. Claimants desiring to contact a military member

concerning a claim of indebtedness may obtain the member's military

address by writing to the locator service of the Military Department

concerned, and enclosing the appropriate fee for the service, as

provided under DoD Instruction 7230.7.\5\

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\5\See footnote 1 to Sec. 50.4(c).

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(c) The following general policies apply to processing of debt

complaints.

(1) Creditors are encouraged to use the processing procedures for

debt complaints described in appendix A to this part. Complaints

meeting the requirements of this part will receive prompt processing

assistance from commanders.

(2) Assistance in indebtedness matters will not be extended to

those creditors:

(i) Who have not made a bona fide effort to collect the debt

directly from the military member;

(ii) Whose claims are patently false and misleading;

(iii) Whose claims are obviously exorbitant; or

(iv) Who are in an ``off-limits'' status, or who have been

determined to be practicing unfair consumer or commercial practices

detrimental to the morale and welfare of service members, pursuant to

applicable directives of the military services, to include the Armed

Forces Disciplinary Control Board and Off-Installation Liaison and

Operations regulations.\6\

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\6\See footnote 1 to Sec. 50.4(c).

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(3) Some States have enacted laws which prohibit creditors from

contacting a debtor's employer with respect to indebtedness or

communicating facts on indebtedness to an employer unless certain

conditions are met. The conditions which must be met to remove this

prohibition are generally such things as reduction of a debt to

judgment and obtaining written permission of the debtor.

(i) At DoD installations in States having such laws, the processing

of debt complaints will not be extended to those creditors who are in

violation of the State law. Commanders may advise creditors that this

rule has been established because it is the general policy of the

Military Services to comply with State law when that law does not

infringe upon significant military interests.

(ii) This policy will govern even though a creditor is not licensed

to do business in the State where the debtor is located. A similar

practice will be commenced in any State enacting a similar law with

respect to debt collection.

(4) Under the provisions of Public Law 95-109, contact by a debt

collector with third parties, such as commanding officers, for the

purpose of aiding debt collection is prohibited without a court order,

or the debtor's prior consent, given directly to the debt collector.

Creditors are generally exempt from Public Law 95-109, but only when

they collect on their own behalf.

(d) The following general policies apply to processing of

involuntary allotments (except statutory allotments for child support

or alimony).

(1) In those cases in which the indebtedness of a military member

has been reduced to a judgment, an application for an involuntary

allotment from the disposable pay of the member may be made pursuant to

the procedures described in appendix A to this part. These procedures

provide the exclusive remedy available under Public Law 103-94.

(2) Involuntary allotment requests will not be processed for

creditors who, either at the time of application for the involuntary

allotment or at the time the debt was incurred that forms the basis for

the court judgment, are in an ``off-limits'' status, or who have been

determined to be practicing unfair consumer or commercial practices

detrimental to the morale and welfare of service members, pursuant to

applicable directives of the military services, to include the Armed

Forces Disciplinary Control Board and Off-Installation Liaison and

Operations regulation.

(3) An involuntary allotment from a member's disposable pay shall

not be commenced in any indebtedness case in which:

(i) Exigencies of military duty caused the absence of the member

from the judicial proceeding at which the judgment was rendered.

(ii) There has not been compliance with the procedural requirements

of the SSCRA.

(4) Only one involuntary allotment pursuant to Public Law 103-94

and this part may be authorized from the disposable pay of a member at

any given time.

(5) An involuntary allotment shall not exceed the lesser of 15

percent of a member's disposable pay, or the maximum amount authorized

under the garnishment law of the State where the judgment was entered.

An involuntary allotment shall not be authorized if the pay of a

similarly situated civilian employee is not subject to garnishment

under the applicable State law and Public Law 103-94.

(6) The amount of an involuntary allotment under Public Law 103-94

and this part when combined with deductions as a result of garnishments

or statutory allotments for spousal support and child support under 42

U.S.C. 659, 661, 662, or 665, may not exceed the maximum percentage

specified in 15 U.S.C. 1673. In any case in which the maximum

percentage would be exceeded, garnishments and involuntary allotments

for spousal and child support shall take precedence over involuntary

allotments authorized under Public Law 103-94 and this part.

Involuntary allotments established pursuant to Public Law 103-94 shall

be reduced or stopped as necessary to avoid exceeding the maximum

percentage allowed.

Sec. 50.6 Full disclosure and standards of fairness by creditors

The Truth in Lending Act prescribes the general disclosure

requirements which must be met by those offering or extending consumer

credit, and 12 CFR part 226 prescribes the specific disclosure

requirements for both open-end and installment credit transactions. In

place of Federal Government requirements, State regulations apply to

credit transactions when the Federal Reserve Board has determined that

the State regulations impose substantially similar requirements and

provide adequate enforcement measures. Commanding officers, with the

assistance of judge advocates, should check regulations of the Federal

Reserve Board to determine whether Federal or State laws and

regulations govern.

Appendix A to Part 50--Processing Procedures

A. Debt Complaints

1. It is incumbent on those submitting indebtedness complaints

to show that the disclosure requirements of the Truth in Lending

Act, and 12 CFR part 226 have been met and that the Standards of

Fairness (appendix C to this part) have been applied.

2. Creditors subject to 12 CFR part 226, and assignees claiming

thereunder, shall submit with their request for debt processing

assistance an executed copy of the Certificate of Compliance

(appendix B to this part), and a true copy of the general and

specific disclosures provided the military member as required by the

Truth in Lending Act. Requests which do not meet these requirements

will be returned without action to the claimant.

3. A creditor not subject to 12 CFR part 226, such as a public

utility company (as set forth in Sec. 226.3 thereof), shall submit

with the request a certification that no interest, finance charge,

or other fee is in excess of that permitted by the law of the State

in which the obligation was incurred.

4. A foreign-owned company having debt complaints shall submit

with its request a true copy of the terms of the debt (English

translation) and shall certify that it has subscribed to the

Standards of Fairness.

5. Indebtedness complaints which meet the requirements of this

part will be processed by DoD Components. Processed means that Heads

of DoD Components, or designees, shall:

a. Review all available facts surrounding the transaction

forming the basis of the compliant, including the member's legal

rights and obligations, and any defenses or counterclaims the member

may have.

b. Advise the member that (1) just financial obligations are

expected to be paid in a proper and timely manner, and what the

member should do to comply with that policy; (2) financial and legal

counseling services are available under the provisions of DoD

Directive 1344.7\1\ in resolving indebtedness; and (3) that a

failure to pay just debts may result in the creditor obtaining a

court judgment which could form the basis for collection of pay from

the member pursuant to an involuntary allotment.

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\1\See footnote 1 to Sec. 50.4(c).

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c. If a member acknowledges a debt as a result of creditor

contact with a DoD Component, advise the member that assistance and

counseling may be available from the on-base military banking

office, or the credit union serving the military field of

membership, or other available military community service

organizations.

d. Direct that the appropriate commander advise the claimant

that (1) those aspects of DoD policy prescribed in Sec. 50.5 are

pertinent to the particular claim in question; and (2) the member

concerned has been counseled concerning his or her obligations with

respect to the claim. The commander's response will not undertake to

arbitrate any disputed debt, or to admit or deny the validity of the

claim. Under no circumstances will the response indicate whether any

action has been taken against the member as a result of the

compliant.

B. Involuntary Allotments

1. Involuntary Allotment Application

a. Regardless of the Service affiliation of the military member

involved, an application to establish an involuntary allotment from

the disposable pay of a military member shall be made by sending a

signed application on DD Form aa,\2\ ``Involuntary Allotment

Application,'' to the Defense Finance and Accounting Service (DFAS)

at the following address. Defense Finance and Accounting Service,

Cleveland Center, Code L, PO Box 998002, Cleveland, OH 44199-8002.

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\2\This form will be developed. The final form will be included

as an appendix to this part.

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(1) Each application must include a copy of the final judgment

certified by the clerk of court, proof of actual service on the

member, and such other documents as may be required by paragraph

B.1.b. of this part.

(2) A garnishment summons or order is insufficient to satisfy

this final judgment requirement and is not needed in order to apply

for an involuntary allotment under this appendix.

(3) Proof of actual service on the military member shall, in the

case of any default judgment, and may, in other cases, be

demonstrated by including with the application for involuntary

allotment a copy of the return of service showing personal service

on the member or, where service by certified or registered mail is

permitted by the rules of court, of the return receipt for such mail

signed by the member. Involuntary allotments will not be authorized

without evidence of actual service. In cases where jurisdiction was

obtained by substituted service (such as service by publication or

by mailing to a last known address), or where the judgment was

entered on a confession of judgment, no involuntary allotment will

be authorized and the application will be returned to the creditor.

b. Applications for involuntary allotment, must contain the

following information, certifications, and acknowledgment:

(1) The full name, social security number, and branch of service

of the military member against whose disposable pay an involuntary

allotment is sought. Although not required, inclusion of the

member's current duty station and duty address on the application

form will facilitate processing of the application.

(2) The applicant's full name and address. If the applicant is

not a natural person, the application must be signed by an

individual with the authority to act in behalf of such entity. If

the allotment is to be in favor of other than the judgment creditor,

proof of the right to succeed to the interest of the original

judgment creditor is required and must be attached to the

application.

(3) A certification that the judgment has not been amended,

superseded, set aside, or satisfied; or, if the judgment has been

satisfied in part, the extent to which the judgment remains

unsatisfied.

(4) A certification that the judgment was issued while the

member was not on active duty. If the judgment was issued while the

member was on active duty, a certification that the member was

present or represented by an attorney of the member's choosing in

the proceedings, or if the member was not present or so represented,

a certification that the judgment or other court documents comply

with the rights of the member under the SSCRA.

(5) A certification that the member's pay could be garnished

under applicable State law and Public Law 103-94 if the member were

a civilian employee.

(6) A certification that, to the knowledge of the applicant, the

debt has not been discharged in bankruptcy not has the member filed

for protection from creditors under the bankruptcy laws of the

United States.

(7) A certification that the applicant will promptly notify the

designated DFAS official to discontinue the involuntary allotment if

the judgment is satisfied prior to the collection of the total

amount of the judgment through the involuntary allotment process.

(8) A certification that if the member overpays the amount owed

on the judgment, the applicant will refund the amount of overpayment

to the member within 30 days of discovery or notice of the

overpayment, whichever is earlier, and that if the applicant fails

to repay the member, the applicant understands he or she may be

denied the right to collect by involuntary allotment on other debts

reduced to judgments.

(9) A certification that at either the time of application for

the involuntary allotment or the time the debt was incurred that

forms the basis for the court judgment, the applicant (and the

judgment creditor, if different from the applicant) was (were) not

in an ``off-limits'' status, or had not been determined to be

practicing unfair consumer or commercial practices detrimental to

the morale and welfare of service members, pursuant to applicable

directives of the military services, to include the Armed Forces

Disciplinary Control Board and Off-Installation Liaison and

Operations regulation.

(10) A certification that the applicant (and the judgment

creditor, if different from the applicant) has (have) complied with

the Standards of Fairness contained in appendix C to this part.

(11) Acknowledgment that as a condition of application, the

applicant agrees that neither the United States, nor any disbursing

official or Federal employee whose duties include processing

involuntary allotment applications and payments, shall be liable

with respect to any payment or failure to make payment from moneys

due or payable by the United States to any person pursuant to any

application made in accordance herewith.

c. The original and three copies of the application and

supporting documents must be submitted by the applicant to DFAS.

d. A complete ``application package'' (the DD Form aa,

``Involuntary Allotment Application'', supporting documentation, and

three copies of the application and supporting documents), is

required for processing of any request to establish an involuntary

allotment pursuant to this part.

e. The designated DFAS official shall refuse to process any

application that does not conform with the requirements of this

part, is unsigned, is incomplete in any material regard, lacks

required documentation, or contains false certifications. If an

application is ineligible for processing under this part, the

application package shall be returned to the applicant with an

explanation of the deficiency. In cases involving repeated false

certifications by an applicant, the designated DFAS official may

refuse to accept or process additional applications by that

applicant for such period of time as the official deems appropriate

to deter against such violations in the future.

2. Processing of Involuntary Allotment Applications

a. Promptly upon receipt of DD Form aa, ``Involuntary Allotment

Application'', the designated DFAS official shall review the

``application package'' to ensure compliance with the requirements

of this part. If the application package is complete, the DFAS

official shall:

(1) Determine the location and address of the commander as

designated by the military service to have authority to give notice

of the involuntary allotment application to the member against whose

pay the involuntary allotment application in sought, and, if

required, to determine whether exigencies of military duty caused

the absence of the member from the judicial proceeding at which the

judgment was rendered;

(2) Mail one copy of the application package to the member and

two copies of the application package, along with DD Form bb,\3\

``Involuntary Allotment Notice and Processing,'' to the commander of

the military member;

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\3\See footnote 1 to section B.1.a. to this appendix.

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(3) Within 60 days of mailing of the copies of the application

package and DD Form bb, ``Involuntary Allotment Notice and

Processing'', DFAS will provide notice to the member and the

member's commander that automatic processing of the involuntary

allotment application will occur if a response is not received

within 90 calendar days from the original date of mailing.

Additionally, notice will be provided that automatic processing may

be delayed if the member's commander provides DFAS notice that the

member has been granted an extension to respond as authorized by

this part, the date the response is due, and the reason(s) for the

extension. In the absence of any additional correspondence from the

member's commander, DFAS may automatically process the involuntary

allotment application 15 calendar days after the extended date that

the commander notified DFAS the response was due.

(4) Retain the original of the application package.

b. Upon receipt of an application package and DD Form bb,

``Involuntary Allotment Notice and Processing,'' from the designated

DFAS official, the commander (as noted in paragraph B.2.a.(1) of

this Appendix) will immediately notify the member of the receipt of

the application, provide the member a copy of the entire application

package, and counsel the member using and completing Part I of DD

Form bb concerning the following.

(1) That an application for the establishment of an involuntary

allotment has been received and that the member could have up to 15

percent of disposable pay taken to satisfy the judgment upon which

the application is based.

(2) That the member has 15 calendar days from the date of

receipt of the notice to respond to the commander by completing Part

II of DD Form bb and submitting any information or documentation

deemed relevant by the member. That for good cause shown, the

commander may grant an extension of reasonable time (normally not

exceeding 30 calendar days) to submit a response. That during times

of deployment, war, national emergency, or other similar situations,

extensions exceeding 30 calendar days may be granted.

(3) That the member's response will either consent to the

involuntary allotment or contest it.

(4) That the member may contest the application for the

following reasons:

(a) The member's rights under the SSCRA were not complied with

during the judicial proceeding upon which the involuntary allotment

application is sought.

(b) Exigencies of military duty caused the absence of the member

from appearance in a judicial proceeding forming the basis for the

judgment upon which the application is sought.

(c) Information contained in the application is false or

erroneous in material part.

(d) The judgment has been fully satisfied, or has been

superseded or set aside.

(e) The judgment has been materially amended, or partially

satisfied. When asserting this defense, the member shall include

evidence of the amount of the judgment that remains in effect and is

unsatisfied.

(f) There is a legal impediment to the establishment of the

involuntary allotment (for example, the judgment debt has been

discharged in bankruptcy, or the judgment debtor has filed for

protection from the creditors under the bankruptcy laws of the

United States, or the applicant is not the judgment creditor nor a

proper successor in interest to that creditor).

(g) Either now or at the time the debt was incurred that forms

the basis for the court judgment, the applicant (and the judgment

creditor, if different from the applicant) was (were) in an ``off-

limits'' status, or had been determined to be practicing unfair

consumer or commercial practices detrimental to the morale and

welfare of service members, pursuant to applicable directives of the

military services, to include the Armed Forces Disciplinary Control

Board and Off-Installation Liaison and Operations regulation.

(h) Either now or at the time the debt was incurred that forms

the basis for the court judgment, the applicant (and the judgment

creditor, if different from the applicant) was (were) acting in a

manner that violated the Standards of Fairness promulgated as

Appendix C to this part.

(i) Or other appropriate reasons which must be clearly specified

and explained by the member.

(5) That, if the member contests the involuntary allotment, the

member shall provide evidence (documentary or otherwise) in support

thereof. The evidence provided must enable the decisional authority

to decide whether to approve the application for an involuntary

allotment. Furthermore, that any evidence submitted by the member

may be disclosed to the applicant for the involuntary allotment.

(6) That the member may consult with a legal assistance

attorney, or a civilian attorney at no expense to the government.

That if a legal assistance attorney is available, the member should

immediately arrange for an appointment. That if a legal assistance

attorney is not available, the member may request form the commander

an appropriate delay until such time as a legal assistance attorney

becomes available for consultation (in cases where a response will

not be submitted back to DFAS within 90 days from the date DFAS

mailed the copies of the application package, the commander must

immediately notify the designated DFAS official of the delay, the

date for an expected response, and the reason for the delay--e.g.,

unavailability of a legal assistance attorney for counseling).

Additionally, that requests for extensions of time based on the need

for legal assistance may be denied to members who fail to exercise

due diligence in seeking such assistance.

(7) That if the member contests the involuntary allotment on the

grounds that exigencies of military duty caused the absence of the

member from the judicial proceeding at which the judgment was

rendered, then the member's commander will review and make the final

determination on this contention, and notify the designated DFAS

official of the commander's decision by completing Part III of DD

Form bb and forwarding the form to DFAS.

(8) That if the member contests the involuntary allotment on any

basis other than exigencies of military duty, the application

package, DD Form bb, and the member's response, if any, will be

returned to the designated DFAS official for appropriate action.

(9) That if the member fails to respond to the commander within

the time period specified (including any extensions authorized by

the commander), the commander shall notify the designated DFAS

official of the member's failure to respond by completing Part III

of DD Form bb and forwarding the form to DFAS.

c. After counseling the member (as noted in paragraph B.2.a.(1)

of this appendix) the commander shall:

(1) Date and sign Part I of DD Form bb;

(2) Obtain the member's acknowledgment of counseling by having

the member sign in the appropriate space on Part I of DD Form bb;

(3) Determine if the member consents to the involuntary

allotment or needs the time authorized under this part to review the

application package and take appropriate action. If the member

consents to the voluntary allotment, the commander will direct the

member to appropriately complete Part II of DD Form bb. The

commander will then forward the DD Form bb to the designated DFAS

official.

(4) As soon as possible, but not later than the end of the

authorized time period for the member to submit his or her response,

the commander will forward by mail the DD Form bb and any response

received from member to DFAS.

(5) If the member fails to respond within the time authorized

for a response, or asserts that exigencies of military duty caused

the absence of the member from an appearance in the judicial

proceeding upon which the Involuntary Allotment Application is

sought, then the commander will complete Part III of DD Form bb

prior to forwarding of the form and the member's response, if any,

to the designated DFAS official.

(a) In determining whether exigencies of military duty caused

the absence of the member, the commander at the level designated by

the Service concerned shall consider the definition of ``exigencies

of military duty'' contained in this part, the evidence provided by

the member, any other reasonably available evidence (e.g., a copy of

the member's personnel record), and whether the military duties in

question were of such paramount importance that they precluded

making the member available to attend the judicial proceedings, or

rendered the member unable to timely respond to process, motions,

pleadings, or orders of the court.

(b) The evidentiary standard for a commander to determine

whether exigencies of military duty caused the absence of the member

from an appearance in the judicial proceeding upon which the

Involuntary Allotment Application is sought is ``a preponderance of

the evidence''.

(6) Provide the member a copy of the completed DD Form bb within

five days of mailing to the designated DFAS official.

d. Upon receipt of DD Form bb, ``Involuntary Allotment Notice

and Processing,'' and any additional evidence submitted by the

member, the designated DFAS official will conduct a review of the

entire application package, DD Form bb, ``Involuntary Allotment

Notice and Processing,'' and any evidence submitted by the member,

to determine whether the application for an involuntary allotment

will be approved and established.

(1) In those cases where the commander of the member has

completed Part III of DD Form bb, and determined that exigencies of

military duty caused the absence of the member from an appearance in

a judicial proceeding upon which the involuntary allotment

application is sought, the designated DFAS official shall deny the

involuntary allotment application. The designated DFAS official will

provide the applicant written notice of the denial and the reason

therefor. Additionally, the designated DFAS official shall advise

the applicant that the responsibility for determining whether

exigencies of military duty existed belonged to the member's

commander, that the commander's decision is final, that DFAS has no

authority to change the commander's decision regarding exigencies of

military duty, and that any correspondence concerning this issue

should be addressed to the Service concerned.

(2) In all cases other than as described in paragraph B.2.d(1)

of this section, the designated DFAS official shall deny an

involuntary allotment application, and give written notice to the

applicant of the reason(s) for denial, if the designated DFAS

official determines that:

(a) The member's rights under the SSCRA were not complied with

during the judicial proceeding upon which the involuntary allotment

application is sought.

(b) The pay of a similarly situated civilian employee is not

subject to garnishment under applicable State law and Public Law

103-94, and the regulations promulgated thereunder.

(c) Information contained in the application is false or

erroneous in material part.

(d) The judgment has been fully satisfied, or has been

superseded or set aside.

(e) The judgment has been materially amended, or partially

satisfied. In such a case, the request for involuntary allotment may

be approved only to satisfy that portion of the judgment that

remains in effect and unsatisfied; the remainder of the request

shall be denied.

(f) There is a legal impediment to the establishment of the

involuntary allotment (for example, the judgment debt has been

discharged in bankruptcy, or the judgment debtor has filed for

protection from the creditors under the bankruptcy laws of the

United States, or the applicant is not the judgment creditor nor a

proper successor in interest to that creditor).

(g) Either now or at the time the debt was incurred that forms

the basis for the court judgment, the applicant (and the judgment

creditor, if different from the applicant) was (were) in an ``off-

limits'' status, or had been determined to be practicing unfair

consumer or commercial practices detrimental to the morale and

welfare of services members, pursuant to applicable directives of

the military services, to include the Armed Forces Disciplinary

Control Board and Off-Installation Liaison and Operations

regulation.

(h) Either now or at the time the debt was incurred that forms

the basis for the court judgment, the applicant (and the judgment

creditor, if different from the applicant) was (were) acting in a

manner that violated the Standards of Fairness promulgated as

Appendix A to this part.

(i) A separate involuntary allotment (pursuant to Public Law

103-94 and this part) already exists against the member's disposable

pay.

(j) Because of spousal and child support garnishments or

statutory allotments, the member has insufficient funds from which

to pay the requested involuntary allotment without violating the

applicable maximum percentage prescribed in 15 U.S.C. 1673.

(k) The applicant has abused the processing privilege (e.g., an

applicant, having been notified of the requirements of this part,

repeatedly refuses or fails to comply therewith).

(l) Or other appropriate reasons which must be clearly explained

to the applicant.

(3) In all cases other than as described in paragraphs B.2.d.(1)

and (2) of this section, the designated DFAS official shall approve

the involuntary allotment application and establish an involuntary

allotment against the disposable pay of the member.

e. The designated DFAS official shall, at any time after

establishing an involuntary allotment, cancel or suspend such

allotment and notify the applicant of that cancellation if a member

submits legally sufficient proof, by affidavit or otherwise, that

the allotment should not continue because of the existence of the

factors enumerated in paragraph B.2.d(2) of this section.

3. Payments

a. Except as provided in paragraph B.3.c. of this section,

payment of an involuntary allotment shall commence within 30 days

after the designated DFAS official has approved the involuntary

allotment.

b. Payments under this part shall not be required to be made

more frequently than once each month, and the designated official

shall not be required to vary normal pay and disbursement cycles.

c. If the designated DFAS official receives several applications

concerning the same member of a Military Service, payments shall be

satisfied on a first-come, first-served basis.

d. Payments shall continue until the sum certain amount of the

judgment is collected. Interest or other costs earned during the

collection period can be collected only by submitting a separate

judgment and involuntary allotment application.

e. If the member is found not to be entitled to money due from

or payable by the Military Services, the designated official shall

return the application and advise the applicant that no money is due

from or payable by the Military Service to the member. When it

appears that disposable pay available for the purpose of involuntary

allotment is exhausted temporarily or otherwise unavailable, the

applicant shall be told why and for how long that money is

unavailable, if known. If the member separates from active duty, the

applicant shall be informed that the allotment is discontinued.

f. The applicant shall notify the designated official promptly

if the judgment upon which the allotment is based is satisfied,

vacated, modified, or set aside, and the designated official shall

adjust or discontinue the involuntary allotment accordingly.

g. The Comptroller may, in DoD 7000.14-R, Volume 7, Part A,

designate the priority to be given to such involuntary allotments

among the deductions and collections taken from members' pay, except

that they may not give precedence over deductions required to arrive

at a member's disposable pay or garnishments for alimony and child

support payments and statutorily required child and spousal support

allotments. In the absence of a contrary designation by the

Comptroller, all other lawful deductions (except voluntary

allotments by the member) and collections shall take precedence over

these involuntary allotments.

Appendix B to Part 50--Certificate of Compliance

I certify that the---------------------------------------------------

upon extending credit-------------------------------------------------

(Name of Creditor)

to---------------------------------------------------------------------

on (Date)-------------------------------------------------------------

complied with the full disclosure requirements of the Truth-in-

Lending Act and Federal Reserve Board Regulation Z, and the Fair

Debt Collection Practices Act (or the laws and regulations of State

of ____________________), and that the attached statement is a true

copy of the general and specific disclosures provided the obligor as

required by law.

I further certify that the Standards of Fairness set forth in

DoD Directive 1344.9\1\ have been applied to the consumer credit

transaction to which this form refers. (If the unpaid balance has

been adjusted as a consequence, the specific adjustments in the

finance charge and the annual percentage rate should be set forth

below.)

\1\See footnote 1 to Sec. 50.4(c).

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(Adjustments)

----------------------------------------------------------------------

----------------------------------------------------------------------

(Date of Certification)

----------------------------------------------------------------------

Signature of Creditor or Authorized Representative

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(Street)

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(City, State and Zip Code)

Appendix C to Part 50--Standards of Fairness

1. No finance charge contracted for, made, or received under any

contract shall be in excess of the charge which could be made for

such contract under the law of the place in which the contract is

signed in the United States by the military member.

a. In the event a contract is signed with a U.S. company in a

foreign country, the lowest interest rate of the State or States in

which the company is chartered or does business shall apply.

b. However, interest rates and service charges applicable to

overseas military banking facilities will be as established by the

Department of Defense.

2. No contract or loan agreement shall provide for an attorney's

fee in the event of default unless suit is filed, in which event the

fee provided in the contract shall not exceed 20 percent of the

obligation found due. No attorney fees shall be authorized if the

attorney is a salaried employee of the holder.

3. In loan transactions, defenses which the debtor may have

against the original lender or its agent shall be good against any

subsequent holder of the obligation. In credit transactions,

defenses against the seller or its agent shall be good against any

subsequent holder of the obligation, provided that the holder had

actual knowledge of the defense or under conditions where reasonable

inquiry would have apprised the holder of this fact.

4. The military member shall have the right to remove any

security for the obligation beyond State or national boundaries if

the military member of the family moves beyond such boundaries under

military orders and notifies the creditor, in advance of the

removal, of the new address where the security will be located.

Removal of the security shall not accelerate payment of the

obligation.

5. No late charge shall be made in excess of 5 percent of the

late payment, or $5,00, whichever is the lesser amount, or as

provided by law or applicable regulatory agency determination. Only

one late charge may be made for any tardy installment. Late charges

will not be levied where an allotment has been timely filed, but

payment of the allotment has been delayed. Late charges by overseas

banking facilities are a matter of contract with the Department of

Defense.

6. The obligation may be paid in full at any time or through

accelerated payments of any amount. There shall be no penalty for

repayment. In the event of prepayment, that portion of the finance

charges which has inured to the benefit of the seller or creditor

shall be prorated on the basis of the charges which would have been

ratably payable had finance charges been calculated and payable as

equal periodic payments over the terms of the contract, and only the

prorated amount to the date of prepayment shall be due. As an

alternative, the ``Rule of 78'' may be applied.

7. If a charge is made for loan insurance protection, it must be

evidenced by delivery of a policy or certificate of insurance to the

military member within 30 days.

8. If the loan or contract agreement provides for payments in

installation, each payment other than the down payment, shall be in

equal or substantially equal amount, and installments shall be

successive and of equal or substantially equal duration.

9. If the security for the debt is repossessed and sold in order

to satisfy or reduce the debt, the repossession and resale will be

governed by the laws of the State in which the security is

requested.

10. A contract for personal goods and services may be terminated

at any time before delivery of the goods or services without charge

to the purchaser. However, if goods made to the special order of the

purchaser result in preproduction costs, or require preparation for

delivery, such additional costs will be listed in the order form or

contract.

a. No termination charge will be made in excess of this amount.

Contracts for delivery at future intervals may be terminated as to

the undelivered portion.

b. The purchaser shall be chargeable only for that proportion of

the total cost which the goods or services delivered bear to the

total goods called for by the contract. This is in addition to the

right to rescind certain credit transactions, involving a security

interest in real estate provided by Public Law 90-321 and Federal

Reserve Board Regulation Z (12 CFR part 226).

Dated: April 20, 1994.

L.M. Bynum,

Alternate OSD Federal Register, Liaison Officer, Department of Defense.

[FR Doc. 94-10070 Filed 4-25-94; 8:45 am]

BILLING CODE 5000-04-M