Debt Settlement Policies and Procedures

DEPARTMENT OF AGRICULTURE

Agricultural Stabilization and Conservation Service

7 CFR Part 792

RIN 0560-AD03

Debt Settlement Policies and Procedures

AGENCY: Agricultural Stabilization and Conservation Service, USDA.

ACTION: Final rule.

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SUMMARY: A proposed rule was published on June 15, 1993, with respect

to the debt management practices of the Agricultural Stabilization and

Conservation Service (ASCS). This final rule adopts, with minor

changes, the provisions of the proposed rule. Accordingly, this final

rule sets forth the policies and procedures which ASCS will use to

settle debts. ASCS policies and procedures conform to the guidelines

set forth in the Federal Claims Collection Act, as amended by the Debt

Collection Act of 1982. ASCS will also follow the provisions of the

Federal Claims Collection Standards with respect to administrative

actions undertaken by ASCS to settle claims. This regulation is

necessary to protect the financial integrity of many Federal

agricultural programs by ensuring the Government will be able to

collect, or otherwise settle, debts owed it by any person,

organization, corporation, or other legal entity.

EFFECTIVE DATE: April 5, 1994.

FOR FURTHER INFORMATION CONTACT: Paula Roney, Debt Management and

Contract Procedures Branch, Financial Management Division, ASCS, at

703-305-1424.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule is issued in conformance with Executive Order

12866. Based on information compiled by the Department, it has been

determined that this final rule:

(1) Would have an annual effect on the economy of less than $100

million;

(2) Would not 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;

(3) Would not create a serious inconsistency or otherwise interfere

with an action taken or planned by another agency;

(4) Would not alter the budgetary impact of entitlements, grants,

user fees, or loan programs or rights and obligations of recipients

thereof; and

(5) Would not raise novel legal or policy issues arising out of

legal mandates, the President's priorities, or principles set forth in

Executive Order 12866. Paperwork Reduction Act

The information collection requirements of these regulations were

reviewed and approved through July 31, 1996, by the Office of

Management and Budget (OMB) and assigned OMB No. 0560-0146. The

reporting burden for required reports is estimated to average 10

minutes per response, including the time for reviewing instructions,

searching existing data sources, maintaining the data and completing

the information collection. Send comments regarding this burden

estimate, including suggestions for reducing the burden, to OIRM, AG

Box 7630, Washington, DC 20250.

Regulatory Flexibility Act

ASCS is not required by 5 U.S.C. 553 or any other provision of law

to publish a notice of proposed rulemaking with respect to the subject

matter of this final rule. Therefore this action is exempt from the

provision of the Regulatory Flexibility Act and no Regulatory

Flexibility Analysis was prepared.

Executive Order 12778

This final rule has been reviewed in accordance with Executive

Order 12778. It is not retroactive and preempts State and local laws.

Before any judicial action may be brought regarding the provisions of

this final rule, administrative appeal remedies set forth at 7 CFR

parts 24 and 780 must be exhausted.

Executive Order 12372

This action will not have a significant impact specifically upon

area and community development; therefore, review as established by

Executive Order 12372 (July 14, 1982) was not used to assure that units

of local government are informed of this action.

Background

The Federal Claims Collection Act of 1966 (the Act), as amended by

the Debt Collection Act of 1982 (31 U.S.C. 3711, et seq.), and the

joint regulations promulgated thereunder by the Comptroller General and

the Attorney General (4 CFR parts 101-105) provide minimum standards

for the administrative collection of claims by the United States. The

Federal Claims Collection Standards (FCCS) require each Federal agency

to take aggressive action to collect debts owed it, and to cooperate

with other Federal agencies in their debt collection activities.

Federal agencies are required to promulgate regulations consistent with

the standards.

Currently, ASCS follows the Department of Agriculture's debt

collection procedures at 7 CFR part 3. However, 7 CFR part 3 provides

that the head of any agency of the Department may adopt separate

regulations to be followed for the collection of claims and debts. ASCS

requires separate regulations for the following reasons:

(1) In order to make ASCS regulations consistent with Commodity

Credit Corporation's debt settlement policies and procedures at 7 CFR

part 1403 to the extent that it would not conflict with the Act or the

FCCS, such as providing for hearings and reviews to our National

Appeals Division;

(2) In order to set our priority for collecting debt by offset;

(3) In order to allow ASCS to depart from 7 CFR part 3 in those

areas where it would not conflict with the Act or the FCCS, such as the

requirement in 7 CFR part 3 to send notice by personal delivery or

certified mail; and,

(4) To allow any amendments or revisions necessitated by statutory

or program changes to be made at the agency level rather than the

departmental level.

This regulation is necessary to protect the financial integrity of

many Federal agricultural programs by ensuring the Government will be

able to collect, or otherwise settle, debts owed it by any person,

organization, corporation, or other legal entity.

Two comments were received in response to the proposed rule

published in the Federal Register on June 15, 1993 (58 FR 33029). The

first commenter questioned why ASCS failed to address the use of

alternative dispute resolution, as required by Pub. L. 101-552. Pub. L.

101-552 requires the Secretary of Agriculture, with respect to each

program under the Secretary's jurisdiction that makes, guarantees, or

insures agricultural loans, to prescribe rules requiring each such

program to participate in State agricultural loan mediation programs.

However, since ASCS does not make, guarantee or insure agricultural

loans, this provision does not apply to it. Rules governing mediation

of Commodity Credit Corporation agricultural loan programs administered

by ASCS employees to which this provision does apply are contained in 7

CFR part 1405.

This commenter also objects to the provision of 7 CFR 792.8 which

provides that all debts due ASCS or CCC may be offset without regard to

assignments which may have been filed. This provision was developed to

increase the ability of ASCS and CCC to recoup delinquent debts and to

deter the circumvention of offset by such practices as the assignment

of payments to friends, relatives, partners, or subsidiary

corporations. Taking an assignment of an ASCS or CCC program payment as

security for a debt has never been without risk. There has always been

the possibility that a payment will not be made, e.g., if a producer

fails to comply with contract requirements. Therefore, it was

determined that any heightened risk to lenders is outweighed by the

benefit to the Government in the increased ability to collect

delinquent debts.

This commenter further takes exception to the provision in 7 CFR

792.10(b) which states that ASCS will assess late payment interest on

the full amount of delinquent debts, which means the sum of the

principal, accrued program interest and any other charges which are due

and owing at the time the late payment interest is assessed. The

commenter states that this provision is illegal under North Dakota law

and has the effect of charging a rate in excess of that which is

disclosed to the borrower. Since ASCS programs are not loan programs,

debts due ASCS are not based on amounts borrowed. Instead they are

generally based on failure to comply with contract provisions. Further,

agencies of the Federal Government are not bound by State laws

regarding debt collection activities.

This commenter states that provisions of 7 CFR 792.7, which provide

for administrative offset prior to the completion of due process

requirements in certain circumstances, have the effect of

``swallowing'' due process. The commenter also states that payments

should be withheld rather than offset during the period before due

process is completed. The language referred to in 7 CFR 792.7 is taken

from the Federal Claims Collection Standards with which agencies are

required to be consistent. In addition, taking offset prior to

completion of due process requirements does not negate any rights which

the debtor has. Due process requirements still must be completed.

Further, there is no benefit to the debtor in ``withholding'' payment

rather than offsetting payment. In either case, the debtor does not

have use of the funds. In fact by offsetting payment and applying it to

the debt, rather than merely holding the payment, the debtor is ensured

that any interest assessment will be stopped. If when due process is

completed it is determined that the debtor does not owe the debt, the

offset payment will be returned to the debtor, with prompt payment

interest when applicable.

Finally, this commenter made several broad policy suggestions which

were not within the scope of these regulations. These suggestions will

not be responded to in this regulation.

The second commenter also expressed concern that the provisions of

7 CFR 792.7 which permit offset prior to completion of all due process

requirements would negate the due process requirements. As stated

above, that is not the case. Due process requirements do not stop

because offset is taken. They are still required to be completed in the

same time periods regardless of whether or not offset has been taken.

This commenter also needed clarification regarding the difference

between the cited provision for accelerated offset and the provisions

for withholding at 7 CFR 792.9. Withholding is a temporary action and

monies withheld are not actually credited to the debtor. It is

generally used when the amount due is uncertain. Under accelerated

offset, the payment is actually applied to the debt. As stated above,

this will ensure that any interest which may be accruing is stopped.

This is more difficult to ensure in cases of withholding since in most

cases, because the amount due is uncertain, there is no recorded debt

to which to apply the payment.

List of Subjects in 7 CFR Part 792

Claims, Income taxes.

Accordingly, subchapter E, chapter VII of title 7 of the Code of

Federal Regulations is amended by adding a new part 792 to read as

follows:

PART 792--DEBT SETTLEMENT POLICIES AND PROCEDURES

Sec.

792.1 Applicability.

792.2 Administration.

792.3 Definitions.

792.4 Demand for payment of debts.

792.5 Collection by payment in full.

792.6 Collection by installment payments.

792.7 Collection by administrative offset.

792.8 Priorities of offsets versus assignments.

792.9 Withholding.

792.10 Late payment interest, penalty and administrative charges.

792.11 Waiver of late payment interest, penalty charge and

administrative charges.

792.12 Administrative appeal.

792.13 Additional administrative collection action.

792.14 Contact with debtor's employing agency.

792.15 Prior provision of rights with respect to debt.

792.16 Discharge of debts.

792.17 Referral of delinquent debts to credit reporting agencies.

792.18 Referral of debts to Department of Justice.

792.19 Referral of delinquent debts to IRS for tax refund offset.

792.20 Reporting discharged debts to IRS.

792.21 Referral of debts to private collection agencies.

792.22 Collection and compromise.

Authority: 31 U.S.C. 3701, 3711, 3716-3719, 3728; 4 CFR Parts

101-105; 7 CFR 3.21(b).

Sec. 792.1 Applicability.

Except as may otherwise be provided by statute, this part sets

forth the manner in which the Agricultural Stabilization and

Conservation Service (ASCS) will settle and collect debts by ASCS. The

provisions of part 1403 of this title are applicable to actions of ASCS

regarding the settlement and collection of debts on the behalf of the

Commodity Credit Corporation (CCC).

Sec. 792.2 Administration.

The regulations in this part will be administered under the general

supervision and direction of the Administrator, ASCS.

Sec. 792.3 Definitions.

The following definitions shall be applicable to this part:

Administrative charges means the additional costs of processing

delinquent debts against the debtor, to the extent such costs are

attributable to the delinquency. Such costs include, but are not

limited to, costs incurred in obtaining a credit report, costs of

employing commercial firms to locate debtor, costs of employing

contractors for collection services, costs of selling collateral or

property to satisfy the debt.

Administrative offset means deducting money payable or held by the

United States Government, or any agency thereof, to satisfy in whole or

in part a debt owed the Government, or any agency thereof.

ASCS means the Agricultural Stabilization and Conservation Service

of the United States Department of Agriculture (USDA).

CCC means the Commodity Credit Corporation.

Certified financial statement means an account of the assets,

liabilities, income and expenses of a debtor, executed in accordance

with generally accepted accounting principles and attested to as

accurate by the debtor and preparer, under penalty of perjury.

Claim means an amount of money or property which has been

determined by ASCS, after a notice of delinquency and a demand for the

payment of the debt has been made by ASCS, to be owed to ASCS by any

person other than a Federal agency.

Credit reporting agency means: (1) A reporting agency as defined at

4 CFR 102.5(a), or

(2) Any entity which has entered into an agreement with USDA

concerning the referral of credit information.

Debt means any amount owed to ASCS which has not been satisfied

through payment or otherwise.

Debt record refers to the account, register, balance sheet, file,

ledger, data file, or similar record of debts owed to ASCS, CCC, or any

other Government Agency with respect to which collection action is

being pursued, and which is maintained in an ASCS office.

Delinquent debt means: (1) Any debt owed to ASCS that has not been

paid by the date specified in the applicable statute, regulation,

contract, or agreement; or

(2) Any debt that has not been paid by the date of an initial

notification of indebtedness mailed or hand-delivered pursuant to

Sec. 792.4.

Discharged debt means any debt, or part thereof, which ASCS has

determined is uncollectible and has closed out, and if the amount in

controversy exceeds $100,000.00, excluding interest and administrative

charges, or such higher amount as may be prescribed, in which the

Department of Justice has concurred in such determination.

IRS means the Internal Revenue Service.

Late payment interest rate means the amount of interest charged on

delinquent debts and claims. The late payment interest rate shall be

determined as of the date a debt becomes delinquent and shall be equal

to the higher of the Prompt Payment Act interest rate or the standard

late payment rate prescribed by 31 U.S.C. 3717, which is based on the

Treasury Department's current value of funds rate.

Person means an individual, partnership, association, corporation,

estate or trust, or other business enterprise or other legal entity

and, whenever applicable, the Federal Government or a State government,

or any agency thereof.

Salary offset means the deduction of money from the current pay

account of a present or former Government employee payable by the

United States Government to, or held by the Government for, such person

to satisfy a debt that person owes the Government.

Settlement means any final disposition of a debt or claim.

System of records means a group of any records under the control of

ASCS or CCC from which information is retrieved by the name of the

individual, organization or other entity or by some identifying number,

symbol, or other identification assigned to the individual,

organization or other entity.

Withholding means the taking of action to temporarily prevent the

payment of some or all amounts to a debtor under one or more contracts

or programs.

Sec. 792.4 Demand for payment of debts.

(a) When a debt is due ASCS, an initial written demand for payment

of such amount shall be mailed or hand-delivered to the debtor. If the

debt is not paid in full by the date specified in the initial demand

letter, or if a repayment schedule acceptable to ASCS has not been

arranged with the debtor, the initial demand may be followed by two

subsequent written demands at approximately 30-day intervals, unless it

is determined by ASCS that further demands would be futile and the

debtor's response does not require rebuttal. The initial or subsequent

demand letters shall specify the following: (1) The basis for and the

amount of the debt determined to be due ASCS, including the principal,

applicable interest, costs, and other charges;

(2) ASCS' intent to establish an account on a debt record 30 days

after the date of the letter, or other applicable period of time, if

the debt is not paid within that time;

(3) The applicable late payment interest rate.

(i) If a late payment interest rate is specified in the contract,

agreement or program regulation, the debtor shall be informed of that

rate and the date from which the late payment interest has been

accruing;

(ii) If a late payment interest rate is not specified in the

contract, agreement or program regulation, the debtor shall be informed

of the applicable late payment interest rate set out in Sec. 792.10.

(4) ASCS' intent, if applicable, to collect the debt 30 days from

the date of the initial demand letter, or other applicable period of

time, by administrative offset from any CCC or ASCS payments due or to

become due to the debtor, and that the claim may be reported to other

agencies of the Federal government for offset from any amounts due or

to become due to the debtor;

(5) ASCS' intent, if applicable, under Sec. 792.17, to report any

delinquent debt to a credit reporting agency no sooner than 60 days

from the date of the letter;

(6) ASCS' intent, if applicable, under Sec. 792.19, to refer any

delinquent debt to the IRS, no sooner than 60 days from the date of the

letter, to be considered for offset against any tax refund due or to

become due the debtor.

(7) If not previously provided, the debtor's right to request

administrative review by an authorized ASCS official, and the proper

procedure for making such request. If the request relates to the: (i)

Existence or amount of the debt, it must be made within 15 days from

the date of the letter, unless a different time period is specified in

the contract, agreement or program regulation;

(ii) Appropriateness of reporting to a credit reporting agency, it

must be made within 30 days from the date of the letter; or

(iii) Appropriateness of referral to IRS for tax refund offset, it

must be made within 60 days from the date of the letter, if applicable.

(8) The debtor's right to a full explanation of the debt and to

dispute any information in the records of ASCS concerning the debt;

(9) The opportunity afforded the debtor to enter into a written

agreement which is acceptable to ASCS for the repayment of the debt;

(10) That ASCS maintains the right to initiate legal action to

collect the amount of the debt;

(11) That if any portion of the debt remains unpaid or if a

repayment schedule satisfactory to ASCS has not been arranged 90 days

after the due date, a penalty charge shall be assessed on the unpaid

balance of the debt as prescribed in Sec. 792.10(e);

(b) When ASCS deems it necessary to protect the Government's

interest, written demand may be preceded by other appropriate actions.

Sec. 792.5 Collection by payment in full.

Except as ASCS may provide, ASCS shall collect debts owed to the

Government, including applicable interest, penalties, and

administrative costs, in full, whenever feasible whether the debt is

being collected by administrative offset or by another method,

including voluntary payment. If a debt is paid in one lump sum after

the due date, ASCS will impose late payment interest, as provided in

Sec. 792.10, unless such interest is waived as provided in Sec. 792.11.

Sec. 792.6 Collection by installment payments.

(a) Payments in installments may be arranged, at ASCS' discretion,

if a debtor furnishes satisfactory evidence of inability to pay a claim

in full by the specified date. The size and frequency of installment

payments shall: (1) Bear a reasonable relation to the size of the debt

and the debtor's ability to pay; and

(2) Normally be of sufficient size and frequency to liquidate the

debt in not more than three years.

(b) Except as otherwise determined by ASCS, no installment

arrangement will be considered unless the debtor submits a certified

financial statement which reflects the debtor's assets, liabilities,

income, and expenses. The financial statement shall not be required to

be submitted sooner than 15 workdays following its request by ASCS.

(c) All installment payment agreements shall be in writing and

require the payment of interest at the late payment interest rate in

effect on the date such agreement is executed, unless such interest is

waived or reduced by ASCS. The installment agreement shall specify all

the terms of the arrangement and include provision for accelerating the

debt in the event the debtor defaults.

(d) ASCS may deem a repayment plan to be abrogated if the debtor

fails to comply with its terms.

(e) If the debtor's financial statement or other information

discloses the ownership of assets which are not encumbered, the debtor

may be required to secure the payment of an installment note by

executing a security agreement and financing agreement which provides

ASCS a security interest in the assets until the debt is paid in full.

(f) If the debtor owes more than one debt to ASCS, ASCS may allow

the debtor to designate the manner in which a voluntary installment

payment is to be applied. If the debtor does not designate the

application of a voluntary installment or partial payment, the payment

will be applied to such debts as determined by ASCS.

Sec. 792.7 Collection by administrative offset.

(a) The provisions of this section shall apply to all debts due

ASCS except as otherwise provided in this part and part 1404 of this

title. This section is not applicable to:

(1) ASCS requests for administrative offset against money payable

to a debtor from the Civil Service Retirement and Disability Fund and

ASCS requests for salary offset against a present, former or retired

employee of the Federal Government which shall be made in accordance

with regulations at part 3 of this title;

(2) ASCS requests for administrative offset against a Federal

income tax refund payable to a debtor which shall be made in accordance

with Sec. 792.19;

(3) Cases in which ASCS must adjust, by increasing or decreasing, a

payment which is to be paid under a contract in order to properly make

other payments due by ASCS; and

(4) Any case in which a statute explicitly provides for or

prohibits using administrative offset to collect the debt for the type

of debt involved.

(b) Debts due ASCS or CCC may be collected by administrative offset

from amounts payable by ASCS when: (1) The debtor has been provided

written notification of the basis and amount of the debt and has been

given an opportunity to make payment. Such written notification and

opportunity includes notice of the right to pursue an administrative

appeal in accordance with part 780 of this chapter or any other

applicable appeal procedures, if not previously provided;

(2) The debtor has been provided an opportunity to request to

inspect and copy the records of ASCS related to the debt;

(3) The debtor has been given the opportunity to enter into a

written agreement which is acceptable to ASCS for repayment of the

debt;

(4) The debtor has been notified in writing that the debt will be

collected by administrative offset if not paid; and

(5) The debt has not been delinquent for more than ten years or

legal action to enforce the debt has not been barred by an applicable

period of limitation, whichever is later.

(c) Administrative offset shall also be effected against amounts

payable by ASCS:

(1) When requested or approved by the Department of Justice; or

(2) When a person is indebted under a judgment in favor of ASCS or

the United States.

(d) A payment due any person may be offset when there is a breach

of a contract or a violation of ASCS program requirements, and offset

is considered necessary by ASCS to protect the financial interests of

the Government.

(e) ASCS may effect administrative offset against a payment to be

made to a debtor prior to completion of the procedures required by

paragraphs (b)(1) through (b)(4) of this section if: (1) Failure to

take the offset would substantially prejudice ASCS' ability to collect

the debt; and

(2) The time before the payment is to be made does not reasonably

permit the completion of those procedures.

(f) (1) Judgments in favor of the United States may be offset

against any amounts payable by ASCS based on information provided by or

obtained from the Department of Justice. Debts due any agency other

than ASCS which have not been reduced to judgment shall be offset

against amounts payable by ASCS to a debtor when an agency of the U.S.

Government has submitted a written request for offset which is mailed

or hand-delivered to the appropriate ASCS State office, Kansas City

Financial Management Office, Kansas City Management Office, or Kansas

City Commodity Office. Such written request must: (i) Bear the

signature of an authorized representative of the requesting agency;

(ii) Include a certification that all requirements of the law and

the regulations for collection of the debt and for requesting offset

have been complied with;

(iii) State the name, address (including county), and, where

legally available, the Social Security number or employer ID number of

the debtor, and a brief description of the basis of the debt, including

identification of the judgment, if any;

(iv) State the amount of the debt separately as to principal,

interest, penalties, and administrative costs. Interest, if any, shall

be computed on a daily basis to a date shown in the request. The amount

to be offset shall not exceed the principal sum owed by the debtor,

plus interest computed in accordance with the request, and any late

payment interest, penalties and administrative costs that have been

assessed;

(v) Certify that the debtor has not filed for bankruptcy. If the

debtor has filed for bankruptcy, a copy of the order of the bankruptcy

court relieving the agency from the automatic stay must be included;

and

(vi) State the name, address, and telephone number of a contact

person within the agency and the address to which payment should be

sent.

(2) Unless prohibited by law, the head of an agency, or a designee,

may defer or subordinate in whole or in part the right of the agency to

recover through offset all or part of any indebtedness to such agency,

or may withdraw a request for offset. Notice of such action must be

sent to the appropriate ASCS office.

(g)(1) After ASCS has complied with the provisions of this part,

ASCS may request other agencies of the Government to offset amounts

payable by them to persons indebted to ASCS.

(2) In the case of a request to IRS for a tax refund offset, the

provisions at Sec. 792.19 shall apply.

(h) (1) Debts shall be collected by offset in the following order

of priority without regard to the date of the request for such

collection:

(i) Debts to ASCS.

(ii) Debts to other agencies of USDA as determined by ASCS.

(iii) Debts to other government agencies as determined by ASCS.

(2) In the case of multiple debts involving the same debtor, ASCS

may, at its discretion, deviate from the usual order of priority in

applying recovered amounts to debts owed other agencies when considered

to be in the Government's best interest. Such decision shall be made by

ASCS based on the facts and circumstances of the particular case.

(i) Amounts recovered by offset for ASCS and CCC debts but later

found not to be owed to the Government shall be promptly refunded.

(j) The debtor shall be notified whenever any offset action has

been taken.

(k) Offsets made pursuant to this section shall not deprive a

debtor of any right he or she might otherwise have to contest the debt

involved in the offset action either by administrative appeal or by

legal action.

(l) Any action authorized by the provisions of this section may be

taken against amounts payable to a debtor who operates under more than

one name, provided there is identical ownership, or ASCS determines

that the debtor has established an entity for the purpose of avoiding

the payment of the claim or debt.

(m) The amount to be offset shall not exceed the actual or

estimated amount of the debt, including interest, administrative

charges, and penalties, unless the Department of Justice requests that

a larger specified amount be offset.

(n) Offset action will not be taken against payments when: (1) A

debt has been discharged as provided in Sec. 792.16.

(2) ASCS determines such action will unduly interfere with the

administration of an ASCS or CCC program.

(3) The debt has been delinquent for more than ten years or legal

action to enforce the debt due ASCS is barred by an applicable period

of limitation, whichever is later.

Sec. 792.8 Priorities of offsets versus assignments.

(a) No amounts payable to a debtor by ASCS shall be paid to an

assignee until there have been collected any amounts owed by the debtor

except as provided in this section.

(b) A payment which is assigned in accordance with part 1404 of

this title by execution of Form CCC-36 shall be subject to offset for

any debt owed to ASCS or CCC or any judgment in favor of the United

States without regard to the date notice of assignment was accepted by

ASCS or CCC.

(c) A payment which is assigned in accordance with part 1404 of

this title by execution of Form CCC-252 shall be offset: (1) Against

any debt of the assignor entered on the debt record of the applicable

ASCS office prior to the filing of such form with ASCS or CCC, or

(2) At anytime, regardless of the date of filing of such form with

ASCS or CCC, if the debt which is the basis for the offset arises from

a judgment in favor of the United States, or under the same contract

under which the payment is earned by the assignor.

(d) With respect to all other Federal agencies, offset shall be

made of any amounts due any other Federal agency which have not been

reduced to judgment, and which are entered on the debt record of the

appropriate ASCS office prior to the date the notice of assignment was

accepted by ASCS or CCC.

(e) Any amount due and payable to the assignor which remains after

deduction of amounts paid to the assignee shall be available for

offset.

Sec. 792.9 Withholding.

(a) Withholding of a payment prior to the completion of an

applicable offset procedure may be made from amounts payable to a

debtor by ASCS to ensure that the interests of ASCS and the United

States will be protected as provided in this section.

(b) A payment may be withheld to protect the interests of ASCS or

the United States only if ASCS determines that: (1) There has been a

serious breach of contract or violation of program requirements and the

withholding action is considered necessary to protect the financial

interests of ASCS;

(2) There is substantial evidence of violations of criminal or

civil frauds statutes and criminal prosecution or civil frauds action

is of primary importance to program operations of ASCS;

(3) Prior experience with the debtor indicates that collection will

be difficult if amounts payable to the debtor are not withheld;

(4) There is doubt that the debtor will be financially able to pay

a judgment on the claim of ASCS;

(5) The facts available to ASCS are insufficient to determine the

amount to be offset or the proper payee;

(6) A judgment on a claim of ASCS has been obtained; or

(7) Such action has been requested by the Department of Justice.

(c) Except for debts due ASCS or CCC, withholding action by ASCS on

amounts payable to debtors of other Government agencies may not be made

unless requested by the Department of Justice.

Sec. 792.10 Late payment interest, penalty and administrative charges.

(a) Late payment interest provisions of this section shall not

apply:

(1) To debts owed by Federal agencies and State and local

governments. Interest on debts owed by such entities shall be charged

to the extent authorized under the common law or applicable statutory

authority.

(2) If an applicable statute, regulation, agreement, or contract

either prohibits the charging of such interest or specifies the

interest or charges applicable to the debt involved;

(3) If the late payment interest is waived by ASCS in accordance

with Sec. 792.11.

(4) To administrative charges as set forth in paragraph (f) of this

section.

(b) ASCS will assess late payment interest on the full amount of

delinquent debts. For purposes of this section, the term ``full amount

of the delinquent debt'' means the sum of the principal, accrued

program interest, and any other charges which are otherwise due and

owing to ASCS on the delinquent debt at the time the late payment

interest is assessed, except as provided in paragraphs (a)(2) and

(d)(3) of this section.

(c) The late payment interest shall be expressed as an annual rate

of interest which ASCS charges on delinquent debts. The late payment

interest rate shall be equal to the higher of the Treasury Department's

current value of funds rate or the rate of interest assessed under the

Prompt Payment Act, determined as of the date specified in paragraphs

(d)(1) and (d)(2) of this section. The rate of interest assessed under

the Prompt Payment Act was chosen as an alternative rate to ensure that

the Government would recoup interest at a rate which was at least as

high as that which it pays for late payments.

(d) (1) When a debt results from a statute, regulation, contract,

or other agreement with specific provisions for late payment interest

and payment due date, late payment interest shall accrue on the amount

of the debt from the first day the debt became delinquent, unless

otherwise provided by statute.

(2) With respect to debts not resulting from a statute, regulation,

contract, or agreement containing specific provisions for late payment

interest and payment due date, late payment interest shall begin to

accrue from the date on which notice of the debt, including notice of

late payment interest, is first mailed or hand-delivered to the debtor.

(3) The rate of late payment interest initially assessed will be

fixed for the duration of the indebtedness, except when a debtor has

defaulted on a repayment agreement and seeks to enter into a new

agreement. ASCS may then set a new rate of interest which reflects the

late payment interest rate in effect at the time the new agreement is

executed. All charges which accrued, but which were not collected under

the defaulted agreement, shall be added to the principal to be paid

under a new repayment agreement.

(4) The late payment interest on delinquent debts will accrue on a

daily basis.

(e) Except as specified in paragraph (a)(2) of this section, a

penalty charge of three (3) percent per annum will be assessed on any

portion of a debt which remains unpaid ninety (90) days after the date

described in paragraph (d)(1) or (d)(2) of this section, if no

repayment schedule satisfactory to ASCS has been agreed upon. Such

penalty charge will be assessed retroactively from the date late

payment interest began to accrue and applied on a daily basis. Such

rate shall continue to accrue until the delinquent debt has been paid.

(f) ASCS shall assess as administrative charges the additional

costs of processing delinquent debts against the debtor, to the extent

such costs are attributable to the delinquency. Such costs include, but

are not limited to, costs incurred in obtaining a credit report, costs

of employing commercial firms to locate debtor, costs of employing

contractors for collection services, costs of selling collateral or

property to satisfy the debt.

(g) When a debt is paid in partial or installment payments,

payments will be applied first to administrative charges, second to the

penalty charge assessed in accordance with paragraph (e) of this

section and late payment interest, and third to outstanding principal.

Sec. 792.11 Waiver of late payment interest, penalty charge and

administrative charges.

(a) ASCS shall waive the collection of late payment interest and

administrative charges on a debt or any portion of a debt which is paid

within 30 days after the date on which late payment interest began to

accrue.

(b) ASCS may waive the assessment and collection of all or a

portion of the penalty charge on debts which are appealed in accordance

with 7 CFR part 780 or other applicable appeal procedures from either

the date of the appeal or the date such interest began to accrue,

whichever is later, until the date a final administrative determination

is issued. Such waiver shall not apply for any delay due to: (1) The

appellant's request for a postponement of the scheduled hearing;

(2) The appellant's request for an additional time following the

hearing to present additional information or a written closing

statement; or

(3) The appellant's failure to timely present information to the

reviewing authority.

(c) Assessment and collection of late payment interest, the penalty

charge and administrative charges under this part may be waived by ASCS

in full, or in part, if it is determined by the Controller, ASCS, or

his or her designee, that such action is in the best interest of ASCS.

Sec. 792.12 Administrative appeal.

If the opportunity to appeal the determination has not previously

been provided under part 24 of this title or part 780 of this chapter

or any other appeal procedure, a debtor may obtain an administrative

review under part 780 of this chapter, or other applicable appeal

procedures, of ASCS' determination concerning the existence or amount

of a debt, if a request is filed with the authority who made the

determination within 15 days of the date of ASCS' initial demand

letter, unless a longer period is specified in the initial demand

letter.

Sec. 792.13 Additional administrative collection action.

Nothing contained in this part shall preclude the use of any other

administrative or contractual remedy which may be available to ASCS to

collect debts owed to the Government.

Sec. 792.14 Contact with debtor's employing agency.

When a debtor is employed by the Federal Government or is a member

of the military establishment or the Coast Guard, and collection by

offset cannot be accomplished in accordance with 5 U.S.C. 5514, ASCS

may contact the employing agency to arrange for payment of the debt by

allotment or otherwise, in accordance with section 206 of Executive

Order No. 11222, May 8, 1965, 30 FR 6469, 3 CFR, 1964-1965 Comp., p

306.

Sec. 792.15 Prior provision of rights with respect to debt.

ASCS will not provide an administrative appeal with respect to

issues which were raised or should have been raised at any

administrative review requested by the debtor as provided under another

statute or regulation before: (a) Effecting administrative offset;

(b) Referring the debt to private collection or credit reporting

agencies;

(c) Referring the debt for salary offset against the current pay of

a present or former Government employee; or

(d) Referring the debt to IRS for tax refund offset.

Sec. 792.16 Discharge of debts.

(a) Except as required by other applicable regulation or statute, a

debt or part thereof owed ASCS shall be discharged with the concurrence

of the Department of Justice, if applicable, and the records and

accounts on that debt closed in the following situations: (1) When an

obligation or part thereof is discharged in bankruptcy;

(2) When an obligation or part thereof is the subject of a final

judgment entered by a court of competent jurisdiction which is adverse

to ASCS and no appeal will be taken by ASCS;

(3) When a debt or part thereof is compromised and paid, the amount

of such compromise;

(4) When collection of a debt by administrative offset is barred in

accordance with Sec. 792.7(b)(5).

(b) Debts discharged in accordance with this section may be

reported to the Internal Revenue Service pursuant to Sec. 792.20.

Sec. 792.17 Referral of delinquent debts to credit reporting agencies.

(a) This section specifies the procedures that will be followed by

ASCS and the rights that will be afforded to debtors when ASCS reports

delinquent debts to credit reporting agencies.

(b) Before disclosing information to a credit reporting agency in

accordance with this part, ASCS shall review the claim and determine

that it is valid and delinquent.

(c) Before a debt may be referred to a credit reporting agency, the

debtor must be notified, pursuant to Sec. 792.4, of ASCS' intent to

make such a report. Such notification shall include: (1) ASCS' intent

to disclose to a credit reporting agency that the debtor is responsible

for the debt, and that such disclosure will be made not less than 60

days after notification to such debtor.

(2) The information intended to be disclosed to the credit

reporting agency under paragraph (g)(1) of this section.

(3) The debtor's right to enter a repayment agreement on the debt,

including, at the discretion of ASCS, installment payments, and that if

such an agreement is reached, the debt will not be referred to a credit

reporting agency.

(4) The debtor's right to review of this action in accordance with

paragraph (i) of this section.

(d) The debtor shall be notified, in writing at the debtor's last

known address, when ASCS has reported any delinquent debt to a credit

reporting agency.

(e) (1) ASCS shall notify each credit reporting agency to which an

original disclosure of delinquent debt information was made of any

substantial change in the condition or amount of the claim.

(2) ASCS shall promptly verify or correct, as appropriate,

information about the debt on request of a credit reporting agency. The

records of the debtor shall reflect any correction resulting from such

request.

(f) Information reported to a credit reporting agency on delinquent

debts shall be derived from the system of records maintained by ASCS.

(g) ASCS shall limit delinquent debt information disclosed to

credit reporting agencies to: (1) The name, address, taxpayer

identification number, and other information necessary to establish the

identity of the debtor;

(2) The amount, status, and history of the claim; and

(3) The program under which the claim arose.

(h) Reasonable action shall be taken to locate a debtor for whom

ASCS does not have a current address before reporting delinquent debt

information to a credit reporting agency.

(i) (1) Before disclosing delinquent debt information to a credit

reporting agency, ASCS shall, upon request of the debtor, provide for a

review of the debt in accordance with Sec. 792.12. This review shall

only consider defenses or arguments which were not available or could

not have been available at any previous appeal proceeding permitted

under Sec. 792.12.

(2) Upon receipt of a request for review within 30 days from the

date of notice to the debtor of intent to refer delinquent debt

information to a credit reporting agency, ASCS shall suspend its

schedule for disclosure to a credit reporting agency until a final

decision regarding the appropriateness of disclosure to a credit

reporting agency is made.

(3) Upon completion of the review, the reviewing official shall

transmit to the debtor a written notification of the decision. If

appropriate, the debtor shall be notified of the scheduled date on or

after which the debt will be referred to the credit reporting agency.

The debtor will also be notified of any changes from the initial

notification in the information to be disclosed.

(j) (1) In accordance with guidelines established by the

Administrator, ASCS, the responsible claims official shall report to

credit reporting agencies delinquent debt information specified in

paragraph (g) of this section.

(2) The agreements entered into by USDA and credit reporting

agencies shall provide the necessary assurances to ASCS that the credit

reporting agencies to which information will be provided are in

compliance with the provisions of all the laws and regulations of the

United States relating to providing credit information.

(3) ASCS shall not report delinquent debt information to credit

reporting agencies when: (i) The debtor has entered a repayment

agreement covering the debt with ASCS, and such agreement is still

valid; or

(ii) ASCS has suspended its schedule for disclosure of delinquent

debt information pursuant to paragraph (i)(2) of this section.

(k) Disclosures made under this section shall be in accordance with

the requirements of the Privacy Act, as amended (5 U.S.C. 552a).

(l) The provisions of paragraphs (a) through (k) of this section

apply to commercial debts owed by farm producers and all personal

debts. All commercial debts owed by debtors other than farm producers

may be reported to credit reporting agencies without following the

provisions of paragraphs (a) through (k) of this section.

Sec. 792.18 Referral of debts to Department of Justice.

(a) Debts that exceed $100,000.00 exclusive of interest, penalties,

and administrative charges, or such higher amount as may be prescribed,

shall be referred to the Department of Justice before they can be

discharged.

(b) Debts which cannot be compromised or on which collection action

cannot be suspended or terminated, may be referred to the Department of

Justice for collection action. Claims of less than $600.00 exclusive of

interest, penalties, and administrative costs will not be referred to

the Department of Justice unless:

(1) Referral is important to a significant enforcement policy, or

(2) The debtor not only has the clear ability to pay the claim, but

the Government can effectively enforce payment, having due regard for

the exemptions available to the debtor under State and Federal law and

the judicial remedies available to the Government.

Sec. 792.19 Referral of delinquent debts to IRS for tax refund offset.

ASCS may refer legally enforceable delinquent debts to IRS to be

offset against tax refunds due to debtors under 26 U.S.C. 6402, in

accordance with the provisions of 31 U.S.C. 3720A and Treasury

Department regulations.

Sec. 792.20 Reporting discharged debts to IRS.

(a) In accordance with IRS regulations, ASCS may report to IRS as

discharged debts on IRS Form 1099-G the amounts specified in paragraph

(b) of this section.

(b) The following discharged debts may be reported to IRS: (1) The

amount of a debt discharged under a compromise agreement between ASCS

and the debtor, except for compromises made due to doubt about the

Government's ability to prove its case in court for the full amount of

the debt.

(2) The amount of a debt discharged by the running of the statutory

period of limitation for collecting the debt by administrative offset

specified in 31 U.S.C. 3716.

Sec. 792.21 Referral of debts to private collection agencies.

If ASCS' collection efforts have been unsuccessful after 90 days

from the date of delinquency, the head of the agency or his designee

may enter into a contract with any person or organization, under such

terms and conditions as the head of the agency or his designee

considers appropriate for collection services to recover debts owed to

ASCS.

Sec. 792.22 Collection and compromise.

The Administrator, ASCS, or his designee may compromise any claim

of the Government of not more than $100,000.00 exclusive of interest,

penalties, and administrative charges, or such higher amount as may be

prescribed, that has not been referred to another executive or

legislative agency for further collection action.

Signed at Washington, DC, on March 28, 1994.

Bruce R. Weber,

Acting Administrator, Agricultural Stabilization and Conservation

Service.

[FR Doc. 94-8089 Filed 4-4-94; 8:45 am]

BILLING CODE 3410-05-P