Administrative Wage Garnishment

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 285

RIN 1510-AA67

Administrative Wage Garnishment

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Final rule.

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SUMMARY: This final rule implements the administrative wage garnishment

provisions contained in the Debt Collection Improvement Act of 1996

(DCIA). Wage garnishment is a process whereby an employer withholds

amounts from an employee's wages and pays those amounts to the

employee's creditor in satisfaction of a withholding order. The DCIA

authorizes Federal agencies administratively to garnish the disposable

pay of an individual to collect delinquent nontax debts owed to the

United States in accordance with regulations issued by the Secretary of

the Treasury.

DATES: This rule is effective June 5, 1998.

FOR FURTHER INFORMATION CONTACT: Gerry Isenberg, Financial Program

Specialist, Debt Management Services, at (202) 874-6660 or James Regan,

Attorney-Advisor, at (202) 874-6680, Financial Management Service,

Department of the Treasury, 401 14th Street SW, Washington, DC 20227.

This document is available for downloading from the Financial

Management Service web site at the following address: http://

www.fms.treas.gov.

SUPPLEMENTARY INFORMATION:

Background

This final rule implements the wage garnishment provision in

section 31001(o) of the Debt Collection Improvement Act of 1996 (DCIA),

Pub. L. 104-134, 110 Stat. 1321-358 (Apr. 26, 1996), codified at 31

U.S.C. 3720D. Wage garnishment is a process whereby an employer

withholds amounts from an employee's wages and pays those amounts to

the employee's creditor in satisfaction of a withholding order. The

DCIA authorizes Federal agencies administratively to garnish up to 15%

of the disposable pay of a debtor to satisfy delinquent nontax debt

owed to the United States. Prior to the enactment of the DCIA, agencies

were required to obtain a court judgment before garnishing the wages of

non-Federal employees. Section 31001(o) of the DCIA preempts State laws

that prohibit wage garnishment or otherwise govern wage garnishment

procedures.

As authorized by the DCIA, a Federal agency collecting delinquent

nontax debt may garnish administratively a delinquent debtor's wages in

accordance with regulations promulgated by the Secretary of the

Treasury. The Financial Management Service (FMS), a bureau of the

Department of the Treasury, is responsible for promulgating the

regulations implementing this and other debt collection tools

established by the DCIA.

In accordance with the requirements of the DCIA, this final rule

establishes the following rules and procedures:

1. Notice

At least 30 days before an agency initiates garnishment

proceedings, the agency will give the debtor written notice informing

him or her of the nature and amount of the debt, the intention of the

agency to collect the debt through deductions from pay, and an

explanation of the debtor's rights regarding the proposed action.

2. Rights of the Debtor

The agency will provide the debtor with an opportunity to inspect

and copy records related to the debt, to establish a repayment

agreement, and to receive a hearing concerning the existence or amount

of the debt and the terms of a repayment schedule. A hearing must be

held prior to the issuance of a withholding order if the debtor's

request is timely received. For hearing requests that are not received

in the specified time frame, an agency need not delay issuance of the

withholding order prior to conducting a hearing. An agency may not

garnish the wages of a debtor who has been involuntarily separated from

employment until that individual has been reemployed continuously for

at least 12 months. The debtor bears the burden of informing the agency

of the circumstances surrounding an involuntary separation from

employment.

3. Employer's Responsibilities

The agency will send to the employer of a delinquent debtor a wage

garnishment order directing that the employer pay a portion of the

debtor's wages to the Federal Government. This final rule requires the

debtor's employer to certify certain payment information about the

debtor. Employers will not be required to vary their normal pay cycles

in order to comply with the garnishment order.

The DCIA prohibits employers from taking disciplinary actions

against the debtor based on the fact that the debtor's wages are

subject to administrative garnishment. In addition, the DCIA authorizes

an agency to sue an employer for amounts not properly withheld from the

wages payable to the debtor.

Discussion of Comments

General

In response to its Notice of Proposed Rulemaking (NPRM) concerning

Administrative Wage Garnishment (62 FR 62458, Nov. 21, 1997), FMS

received comments from Federal agencies, private collection agencies,

an umbrella organization for organizations that support the activities

of the Federal Family Education Loan Programs, and a private citizen.

Many of the commenters have been involved in implementing a similar

administrative wage garnishment provision that authorizes the U.S.

Department of Education (Education) to garnish 10% of the disposable

pay of employed individuals who have defaulted on their student loan

obligations. See 20 U.S.C. 1095a; 34 CFR 682.410. FMS drafted the NPRM

after consultation with the Departments of Education and Justice about

their experience implementing wage garnishment to collect student

loans. The comments received in response to the NPRM based on the

commenters' experience with Education's program have been helpful in

drafting the final rule. It is important to note that Education's wage

garnishment program is applicable to the collection of one type of debt

subject to a single statutory scheme. The DCIA wage garnishment

provision and this rule, on the other hand, are applicable to all

Federal agencies collecting all types of debt, the collection of which

is subject to a variety of statutory provisions. Therefore, as

explained below, while some of the suggestions have been incorporated

into the final rule, others do not apply to a government-wide wage

garnishment program involving all Federal agencies with various types

of debts.

A review of the comments is provided in the following Comment

Analysis which includes a discussion of FMS' determination whether to

incorporate specific suggestions in the final rule. The Comment

Analysis is organized by reference to the paragraphs in the NPRM.

NPRM Sec. 285.11(a) Purpose

No changes were made to NPRM Sec. 285.11(a). FMS did not receive

any comments applicable to this paragraph.

NPRM Sec. 285.11(b) Scope

One commenter suggested that FMS incorrectly interpreted the DCIA

in the NPRM by not limiting the applicability

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of administrative wage garnishment to the collection of only those

debts evidenced by written agreements. The commenter believes that the

language contained in 31 U.S.C. 3720D(a) authorizing wage garnishment

``if the individual is not currently making required repayment in

accordance with any agreement between the agency head and the

individual'' so limits the use of wage garnishment. FMS disagrees with

the commenter. There is nothing in the plain language of the statute to

indicate that the referenced phrase limits the applicability of wage

garnishment to debts evidenced by a written agreement. The term

``debt,'' as defined in 31 U.S.C. 3701(b)(1), as amended by the DCIA,

is not limited to debts evidenced by a written agreement between the

debtor and the Government.

One commenter suggested that the rule establish a minimum threshold

amount for garnishment based on a cost estimate of the garnishment

procedure. This is unnecessary since the use of the administrative wage

garnishment tool by agencies is voluntary and should be used by

agencies in appropriate situations. Agencies may set their own policies

regarding minimum thresholds.

NPRM Sec. 285.11(c) Definitions

One commenter suggested that the definition of agency under NPRM

Sec. 285.11(c) be expanded to authorize agents or vendors of Federal

agencies to garnish debtors' wages in accordance with this rule.

Whether or not an agent or vendor can perform a particular function on

behalf of a Federal agency is beyond the scope of this rule. While the

use of contractors for the collection of debt generally is authorized

by law, agencies may not contract out ``inherently governmental

functions.'' See Office of Management and Budget (OMB) Circular A-76.

This is not to say that contractors cannot assist agencies in

conducting administrative wage garnishment. For example, contractors

could be hired to mail notices and garnishment orders authorized by the

agency, receive documents from the debtor and the employer, and

document agency-approved repayment agreements with the debtor.

NPRM Sec. 285.11(d) General Rule

One commenter suggested that FMS clarify a statement in the NPRM

preamble concerning NPRM Sec. 285.11(d) involving the use of wage

garnishment by Treasury-designated debt collection centers. In addition

to agencies that administer the program that gives rise to the debt,

agencies that pursue the recovery of the debt for those agencies, such

as the Department of the Treasury, Treasury-designated debt collection

centers, and the Department of Justice, are authorized to conduct

administrative wage garnishment. See, e.g., the definition of

``agency'' in NPRM Sec. 285.11(c), unchanged in the final rule.

NPRM Sec. 285.11(e) Notice Requirements

The suggestion by one commenter that the rule specifically prohibit

the combination of an agency's notice of intention to garnish a

debtor's wages with other notices to the debtor has not been

incorporated into this rule. The rule gives agencies the flexibility to

combine notices where appropriate. In many circumstances, the debtor

can be informed clearly in a single communication of all debt

collection remedies available to the Federal agency and the

opportunities available to the debtor to be heard concerning the

existence or amount of the debt.

One commenter's suggestion that FMS develop a standard

administrative wage garnishment notice for government-wide use has not

been incorporated in the final rule. Because agency-specific laws

applicable to debt collection have to be considered in drafting a

notice, a standard government-wide form would not be appropriate.

One commenter suggested that the rule exempt private collection

professionals acting on behalf of agencies from the liability

provisions of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.

1692 et seq., provided that such entities comply with the terms of this

rule and use notices and forms developed by Treasury or other agencies.

The extent to which the FDCPA may apply to any entity, particularly

private collection agencies, is outside the scope of this rule.

Several commenters suggested that the rule should clearly state

that the certificate of service may be retained electronically. Other

commenters suggested that a certificate of service is unnecessary. The

final rule retains the requirement that an agency keep a certificate of

service as evidence of mailing. However, NPRM Secs. 285.11(e)(3) and

285.11(g)(3) have been amended to indicate more clearly that the

certificate of service may be retained electronically so long as the

manner of retention is sufficient for evidentiary purposes.

NPRM Sec. 285.11(f) Hearing

One Federal agency asked that the rule address whether an agency

needs to publish its own regulation before it can engage in

administrative wage garnishment under the DCIA. Another commenter

questioned how an agency's existing hearing procedures for debt

determination relate to the wage garnishment requirements contained in

the DCIA and NPRM. The phrase ``consistent with this section'' was

added to NPRM Sec. 285.11(f)(1) in this final rule to clarify that

agency regulations must follow the minimum requirements for wage

garnishment hearings as set forth in this rule. Each agency is

responsible for prescribing hearing procedures in accordance with the

statutory and regulatory requirements of this rule and other

requirements applicable to that agency's debt collection hearing

procedures. Those agencies with hearings procedures which meet the

requirements established under this rule and agency-specific statutory

and other requirements need not develop new hearing procedures.

Agencies should seek legal advice from their agency counsel to

determine whether existing agency procedures meet the requirements

established under this rule and whether the agency is required to

publish new or amended regulations. Section 285.11(b)(6) has been added

to the final rule to further clarify that ``(n)othing in this section

requires agencies to duplicate notices or administrative proceedings

required by contract or other laws or regulations.''

The final rule does not incorporate one commenter's suggestion that

the Department of the Treasury or the Department of Justice be required

to review agencies' wage garnishment procedures and regulations prior

to allowing an agency to initiate a wage garnishment program. Unique

statutory requirements apply to every Federal program that gives rise

to delinquent debt. Thus, the agency administering the program that

gives rise to the debt is in the best position to know what is

required. The Departments of Treasury and Justice will continue,

however, to provide guidance to agencies concerning debt collection

practices and procedures.

One commenter recommended amending NPRM Sec. 285.11(f)(4) by

establishing that a debtor has 15 ``calendar'' days, rather than 15

``business'' days, to request a hearing. FMS was concerned that 15

calendar days would not allow sufficient time for a debtor to request a

hearing prior to the issuance of a garnishment order given that 15

calendar days could include four to seven weekend days or holidays. For

this reason, NPRM Sec. 285.11(f)(4) has not been changed.

Several comments addressed the hearing procedures proposed in the

NPRM. The final rule incorporates the comment from two commenters

[[Page 25138]]

suggesting that the requirement in NPRM Sec. 285.11(f)(8)(ii) that a

debtor prove by ``clear and convincing evidence'' that no debt exists

or that the amount of the debt is incorrect is too burdensome. In the

final rule at Sec. 285.11(f)(8)(ii), FMS replaced the ``clear and

convincing'' standard with the less burdensome ``preponderance of the

evidence'' standard.

One commenter suggested that proving the terms of the repayment

schedule are ``unreasonable,'' as required at NPRM

Sec. 285.11(f)(8)(ii), is too vague and that the debtor should be

required to show that the terms of the repayment schedule would cause a

``financial hardship'' to the debtor. The final rule incorporates this

suggestion.

In response to a commenter's suggestion, NPRM Sec. 285.11(f)(8)(ii)

has been amended to clarify that the debtor may present evidence that

collection of the debt may not be pursued due to operation of law,

e.g., enforcement of the order is subject to the automatic stay imposed

at the time of a bankruptcy filing pursuant to 11 U.S.C. 362.

Two commenters suggested that this rule restrict hearing officials

to those individuals not under the supervision or control of the head

of the agency. The commenters suggested that the rule, without such a

change, could result in inequitable wage garnishment hearing decisions

since an agency, and its qualified hearing officer, have a vested

interest in the outcome. FMS disagrees for three reasons. First,

Congress did not intend to require that hearing officials be

independent. Unlike other statutes, see, e.g., 5 U.S.C. 5514(a)(2)

(concerning Federal salary offset), the DCIA does not require an

independent hearing official. Second, the rule explicitly sets forth

minimum hearing procedures that ensure the debtor has a meaningful

opportunity to be heard and minimize the risk of erroneous deprivation

of the debtor's property interest in his or her wages. Finally, any

final hearing decision by the agency on wage garnishment is subject to

judicial review under the Administrative Procedure Act. See, e.g., 5

U.S.C. 706 (concerning judicial review of an agency's actions).

NPRM Sec. 285.11(g) Wage Garnishment Order

One commenter noted that the provision under NPRM Sec. 285.11(g)

requiring agencies to submit a wage garnishment order to a debtor's

employer within 30 days of a hearing decision (or within 30 days after

the debtor fails to make a timely request for a hearing) should be

reconciled with the 20 day period provided under Education's wage

garnishment regulation at 34 CFR 682.410(b)(10)(H). Such a

reconciliation with Education's rule is not warranted or necessary. The

time period in this rule accommodates a broad range of agencies'

requirements and is consistent with the goal of issuing a wage

garnishment order promptly after notice and an opportunity to be heard

have been provided to the debtor.

The final rule does not incorporate one commenter's suggestion that

NPRM Sec. 285.11(g)(2) be amended to delete the requirement that the

wage garnishment order be signed by the head of the agency or his/her

designee. The commenter suggested that issuance of the wage garnishment

order on agency letterhead including the agency's seal is sufficient to

demonstrate official issuance. This rule requires a signature to

authenticate a wage withholding order. Failure to include a signature

on a wage withholding order could result in employer uncertainty as to

the validity of the order and could result in delay, and possible loss,

of garnishment payments to which the Government is entitled.

As noted in the NPRM and as suggested by a commenter, FMS is

developing a wage garnishment order form. It is anticipated that the

use of a standard wage garnishment order form by agencies will make it

easier for private sector employers to recognize and comply with agency

wage garnishment order requirements. This form will be available from

FMS at the address listed above and will be available for downloading

from the FMS web site at the following address: www.fms.treas.gov.

One commenter suggested that rather than require the agency to keep

a certificate of service indicating the date of the mailing of a

garnishment order, the rule should require the debtor's employer to

verify receipt. The commenter's rationale is that the DCIA (31 U.S.C.

3720D(f)(2)(A)) and NPRM Sec. 285.11(o) authorize the agency to sue the

employer for noncompliance with the wage garnishment order. The final

rule does not incorporate this comment because the Government need only

show that the order was mailed, not whether it actually was received.

Nelson v. Diversified Collection Services, 961 F.Supp. 863, 868-69 (D.

Md. 1997). By requiring an agency to retain a copy of the certificate

of service, the agency can produce evidence that the order was mailed

without having to place an additional burden on the employer.

One commenter suggested that the requirement to comply with the

wage garnishment order should be waived under circumstances when a

small employer (with less than five employees) would be subject to a

major hardship (financial or otherwise) as a result of complying with

the order. Such a change to the rule is unnecessary since the use of

the wage garnishment collection tool by agencies is not mandated under

the DCIA. Agencies can set their own policies on when it is appropriate

to utilize the administrative wage garnishment process.

NPRM Sec. 285.11(h) Certification by Employer

The final rule did not incorporate the recommendation of two

commenters to delete the requirement under NPRM Sec. 285.11(h)

requiring the debtor's employer to complete and return a certification

form to the agency. The commenters suggested this provision is unduly

burdensome and that an employer's failure to complete and return the

form could unnecessarily delay the garnishment process. The

certification form serves multiple purposes. One, the form provides the

agency with information necessary to monitor the employer's compliance

with the wage garnishment order in accordance with the requirements of

the DCIA and applicable laws. The form also will provide information so

the agency can calculate anticipated collection amounts to determine

whether to pursue other collection tools. Finally, the form will assist

the employer in calculating the amount to be garnished from the

debtor's disposable pay. It is noted that the employer's failure to

complete the certification form as required does not affect the

employer's responsibility to withhold the appropriate garnishment

amount within a ``reasonable time'' in accordance with this rule. See

NPRM Sec. 285.11(i)(7), renumbered as Sec. 285.11(i)(8) in the final

rule.

NPRM Sec. 285.11(i) Amounts Withheld

Two commenters recommended clarifying the impact of the Consumer

Credit Protection Act's (CCPA) minimum disposable pay requirement on

the wage garnishment provisions of the DCIA and this rule. See CCPA,

Sec. 303(a)(2), codified at 15 U.S.C. 1673(a)(2) (maximum allowable

garnishment). NPRM Sec. 285.11(i) has been amended to clarify that the

amount of garnishment is limited by the CCPA. Under section 285.11(i)

of the final rule, the amount of garnishment is the lesser of the

amount indicated on the garnishment order up to 15% of the debtor's

disposable pay or the amount set forth in 15 U.S.C. 1673(a)(2). The

amount set forth in 15 U.S.C. 1673(a)(2) is the amount by which a

debtor's

[[Page 25139]]

disposable pay exceeds an amount equivalent to thirty times the minimum

wage. For example, if a debtor receives disposable pay of $160.00 per

week and thirty times the minimum wage is $154.50, the amount that may

be garnished weekly is the lesser of $24.00 (15% of $160) or $5.50

($160.00-$154.40 = $5.50). See 29 CFR 870.10(b)(1) for information on

calculating an amount equivalent to thirty times the minimum wage.

Section 285.11(i)(3) of the final rule is the same as NPRM

Sec. 285.11(i)(2) except that Sec. 285.11(i)(3)(iii) has been added to

clarify the amount of garnishment for a debtor who owes multiple debts

to a single creditor agency. Under section 285(i)(3)(iii) of the final

rule, an agency may issue multiple withholding orders so long as the

total amount garnished from the debtor's pay for such orders does not

exceed the garnishment amount permitted under Sec. 285.11(i)(2). For

purposes of Sec. 285.11(i)(3)(iii), the term ``agency'' refers to the

agency that is owed the debt.

One commenter suggested deleting the language in NPRM

Sec. 285.11(i)(7) (renumbered as Sec. 285.11(i)(8) in the final rule)

requiring that the wage garnishment order ``indicate a reasonable

period of time within which the employer is required to commence wage

withholding'' because garnishment orders in all other contexts

typically require immediate compliance. This suggestion was not

incorporated into the final rule. The ``reasonable period of time''

given to employers allows employers adequate time to calculate

garnishment withholding payroll data involving a debtor employee

without disrupting the normal payroll cycle. It is anticipated that a

``reasonable period of time'' generally will mean that the employer

will commence withholdings within two pay cycles following receipt of

the garnishment order. This may vary given an employer's circumstances.

NPRM Sec. 285.11(j) Exclusions From Garnishment.

No changes were made to the NPRM Sec. 285.11(n). FMS did not

receive any comments applicable to this paragraph.

NPRM Sec. 285.11(k) Financial Hardship

The final rule does not incorporate one commenter's suggestion that

NPRM Sec. 285.11(k) be amended further to define the standards for

agency review of a debtor's request for an adjustment in the amount

withheld under a wage garnishment order due to ``financial hardship''

based on ``materially changed circumstances.'' NPRM Sec. 285.11(k),

unchanged in the final rule, provides illustrative examples of the type

of events which may give rise to financial hardship due to ``materially

changed circumstances,'' such as disability, divorce, or catastrophic

illness. However, whether financial hardship exists must be determined

by an agency's review of the particular facts and circumstances of a

given case.

NPRM Sec. 285.11(l) Ending Garnishment

The final rule does not incorporate a commenter's suggestion that

the rule clarify whether collection costs need to be collected before

terminating the garnishment action. NPRM Sec. 285.11(l), unchanged in

the final rule, clearly requires termination of garnishment only after

the agency ``has fully recovered the amounts owed by the debtor,

including interest, penalties and administrative costs consistent with

the FCCS (Federal Claims Collection Standards).'' See 31 U.S.C. 3717(e)

and 4 CFR 102.13 regarding the collection of administrative costs

associated with a debt.

NPRM Sec. 285.11(m) Actions Prohibited by the Employer

No changes were made to NPRM Sec. 285.11(m). FMS did not receive

any comments applicable to this paragraph.

NPRM Sec. 285.11(n) Refunds

No changes were made to NPRM Sec. 285.11(n). FMS did not receive

any comments applicable to this paragraph.

NPRM Sec. 285.11(o) Right of Action.

The final rule does not incorporate a commenter's suggestion that

NPRM Sec. 285.11(o) be amended to remove the requirement that a Federal

agency must ``terminate collection action'' as a prerequisite to

commencing suit against a debtor's employer for failure to withhold

amounts from wages pursuant to a wage garnishment order. The DCIA

specifically provides that ``suit (against an employer) may not be

filed before the termination of the collection action, unless earlier

filing is necessary to avoid expiration of any applicable statute of

limitations period.'' 31 U.S.C. 3720D(f)(2)(B).

However, FMS has amended NPRM Sec. 285.11(o) in the final rule to

incorporate a suggestion by another commenter that the rule be changed

to clarify that ``termination of the collection action'' merely refers

to the particular debtor/employee, rather than the debt. This change

gives agencies flexibility to terminate collection action against one

of the debtors and file suit against that debtor's employer for failing

to withhold that debtor's wages pursuant to a wage garnishment order.

At the same time, the agency could continue collection efforts

involving the other debtors who are jointly and severally liable to the

agency on the debt.

Regulatory Analysis

This rule is not a significant regulatory action as defined in

Executive Order 12866. It is hereby certified that this regulation,

including the certification referenced in this final rule (see

paragraph (h) of this section), will not have a significant economic

impact on a substantial number of small entities. Although a

substantial number of small entities will be subject to this regulation

and to the certification requirement in this rule, the requirements

will not have a significant economic impact on these entities.

Employers of delinquent debtors must certify certain information about

the debtor such as the debtor's employment status and earnings. This

information is contained in the employer's payroll records. Therefore,

it will not take a significant amount of time or result in a

significant cost for an employer to complete the certification form.

Even if an employer is served withholding orders on several employees

over the course of a year, the cost imposed on the employer to complete

the certifications would not have a significant economic impact on that

entity. Employers are not required to vary their normal pay cycles in

order to comply with a withholding order issued pursuant to this rule.

List of Subjects in 31 CFR Part 285

Administrative practice and procedure, Claims, Debts, Garnishment

of wages, Hearing and appeal procedures, Salaries, Wages.

Authority and Issuance

For the reasons set forth in the preamble, 31 CFR part 285 is

amended as follows:

PART 285--DEBT COLLECTION AUTHORITIES UNDER THE DEBT COLLECTION

IMPROVEMENT ACT OF 1996

1. The authority citation for part 285 is revised to read as

follows:

Authority: 26 U.S.C. 6402; 31 U.S.C. 321, 3701, 3711, 3716,

3720A, 3720D; E.O. 13019; 3 CFR, 1996 Comp., p. 216.

2. Section 285.11 is added to Subpart B to read as follows:

Sec. 285.11 Administrative wage garnishment.

(a) Purpose. This section provides procedures for Federal agencies

to collect money from a debtor's

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disposable pay by means of administrative wage garnishment to satisfy

delinquent nontax debt owed to the United States.

(b) Scope. (1) This section applies to any Federal agency that

administers a program that gives rise to a delinquent nontax debt owed

to the United States and to any agency that pursues recovery of such

debt.

(2) This section shall apply notwithstanding any provision of State

law.

(3) Nothing in this section precludes the compromise of a debt or

the suspension or termination of collection action in accordance with

applicable law. See, for example, the Federal Claims Collection

Standards (FCCS), 4 CFR parts 101-105.

(4) The receipt of payments pursuant to this section does not

preclude a Federal agency from pursuing other debt collection remedies,

including the offset of Federal payments to satisfy delinquent nontax

debt owed to the United States. A Federal agency may pursue such debt

collection remedies separately or in conjunction with administrative

wage garnishment.

(5) This section does not apply to the collection of delinquent

nontax debt owed to the United States from the wages of Federal

employees from their Federal employment. Federal pay is subject to the

Federal salary offset procedures set forth in 5 U.S.C. 5514 and other

applicable laws.

(6) Nothing in this section requires agencies to duplicate notices

or administrative proceedings required by contract or other laws or

regulations.

(c) Definitions. As used in this section the following definitions

shall apply:

Agency means a department, agency, court, court administrative

office, or instrumentality in the executive, judicial, or legislative

branch of the Federal Government, including government corporations.

For purposes of this section, agency means either the agency that

administers the program that gave rise to the debt or the agency that

pursues recovery of the debt.

Business day means Monday through Friday. For purposes of

computation, the last day of the period will be included unless it is a

Federal legal holiday.

Certificate of service means a certificate signed by an agency

official indicating the nature of the document to which it pertains,

the date of mailing of the document, and to whom the document is being

sent.

Day means calendar day. For purposes of computation, the last day

of the period will be included unless it is a Saturday, a Sunday, or a

Federal legal holiday.

Debt or claim means any amount of money, funds or property that has

been determined by an appropriate official of the Federal Government to

be owed to the United States by an individual, including debt

administered by a third party as an agent for the Federal Government.

Delinquent nontax debt means any nontax debt that has not been paid by

the date specified in the agency's initial written demand for payment,

or applicable agreement, unless other satisfactory payment arrangements

have been made. For purposes of this section, the terms ``debt'' and

``claim'' are synonymous and refer to delinquent nontax debt.

Debtor means an individual who owes a delinquent nontax debt to the

United States.

Disposable pay means that part of the debtor's compensation

(including, but not limited to, salary, bonuses, commissions, and

vacation pay) from an employer remaining after the deduction of health

insurance premiums and any amounts required by law to be withheld. For

purposes of this section, ``amounts required by law to be withheld''

include amounts for deductions such as social security taxes and

withholding taxes, but do not include any amount withheld pursuant to a

court order.

Employer means a person or entity that employs the services of

others and that pays their wages or salaries. The term employer

includes, but is not limited to, State and local Governments, but does

not include an agency of the Federal Government.

Garnishment means the process of withholding amounts from an

employee's disposable pay and the paying of those amounts to a creditor

in satisfaction of a withholding order.

Withholding order means any order for withholding or garnishment of

pay issued by an agency, or judicial or administrative body. For

purposes of this section, the terms ``wage garnishment order'' and

``garnishment order'' have the same meaning as ``withholding order.''

(d) General rule. Whenever an agency determines that a delinquent

debt is owed by an individual, the agency may initiate proceedings

administratively to garnish the wages of the delinquent debtor.

(e) Notice requirements. (1) At least 30 days before the initiation

of garnishment proceedings, the agency shall mail, by first class mail,

to the debtor's last known address a written notice informing the

debtor of:

(i) The nature and amount of the debt;

(ii) The intention of the agency to initiate proceedings to collect

the debt through deductions from pay until the debt and all accumulated

interest, penalties and administrative costs are paid in full; and

(iii) An explanation of the debtor's rights, including those set

forth in paragraph (e)(2) of this section, and the time frame within

which the debtor may exercise his or her rights.

(2) The debtor shall be afforded the opportunity:

(i) To inspect and copy agency records related to the debt;

(ii) To enter into a written repayment agreement with the agency

under terms agreeable to the agency; and

(iii) For a hearing in accordance with paragraph (f) of this

section concerning the existence or the amount of the debt or the terms

of the proposed repayment schedule under the garnishment order.

However, the debtor is not entitled to a hearing concerning the terms

of the proposed repayment schedule if these terms have been established

by written agreement under paragraph (e)(2)(ii) of this section.

(3) The agency will keep a copy of a certificate of service

indicating the date of mailing of the notice. The certificate of

service may be retained electronically so long as the manner of

retention is sufficient for evidentiary purposes.

(f) Hearing--(1) In general. Agencies shall prescribe regulations

for the conduct of administrative wage garnishment hearings consistent

with this section or shall adopt this section without change by

reference.

(2) Request for hearing. The agency shall provide a hearing, which

at the agency's option may be oral or written, if the debtor submits a

written request for a hearing concerning the existence or amount of the

debt or the terms of the repayment schedule (for repayment schedules

established other than by written agreement under paragraph (e)(2)(ii))

of this section.

(3) Type of hearing or review. (i) For purposes of this section,

whenever an agency is required to afford a debtor a hearing, the agency

shall provide the debtor with a reasonable opportunity for an oral

hearing when the agency determines that the issues in dispute cannot be

resolved by review of the documentary evidence, for example, when the

validity of the claim turns on the issue of credibility or veracity.

(ii) If the agency determines that an oral hearing is appropriate,

the time and location of the hearing shall be established by the

agency. An oral hearing may, at the debtor's option, be conducted

either in-person or by telephone conference. All travel

[[Page 25141]]

expenses incurred by the debtor in connection with an in-person hearing

will be borne by the debtor. All telephonic charges incurred during the

hearing will be the responsibility of the agency.

(iii) In those cases when an oral hearing is not required by this

section, an agency shall nevertheless accord the debtor a ``paper

hearing,'' that is, an agency will decide the issues in dispute based

upon a review of the written record. The agency will establish a

reasonable deadline for the submission of evidence.

(4) Effect of timely request. Subject to paragraph (f)(13) of this

section, if the debtor's written request is received by the agency on

or before the 15th business day following the mailing of the notice

described in paragraph (e)(1) of this section, the agency shall not

issue a withholding order under paragraph (g) of this section until the

debtor has been provided the requested hearing and a decision in

accordance with paragraphs (f)(10) and (f)(11) of this section has been

rendered.

(5) Failure to timely request a hearing. If the debtor's written

request is received by the agency after the 15th business day following

the mailing of the notice described in paragraph (e)(1) of this

section, the agency shall provide a hearing to the debtor. However, the

agency will not delay issuance of a withholding order unless the agency

determines that the delay in filing the request was caused by factors

over which the debtor had no control, or the agency receives

information that the agency believes justifies a delay or cancellation

of the withholding order.

(6) Hearing official. A hearing official may be any qualified

individual, as determined by the head of the agency, including an

administrative law judge.

(7) Procedure. After the debtor requests a hearing, the hearing

official shall notify the debtor of:

(i) The date and time of a telephonic hearing;

(ii) The date, time, and location of an in-person oral hearing; or

(iii) The deadline for the submission of evidence for a written

hearing.

(8) Burden of proof. (i) The agency will have the burden of going

forward to prove the existence or amount of the debt.

(ii) Thereafter, if the debtor disputes the existence or amount of

the debt, the debtor must present by a preponderance of the evidence

that no debt exists or that the amount of the debt is incorrect. In

addition, the debtor may present evidence that the terms of the

repayment schedule are unlawful, would cause a financial hardship to

the debtor, or that collection of the debt may not be pursued due to

operation of law.

(9) Record. The hearing official must maintain a summary record of

any hearing provided under this section. A hearing is not required to

be a formal evidentiary-type hearing, however, witnesses who testify in

oral hearings will do so under oath or affirmation.

(10) Date of decision. The hearing official shall issue a written

opinion stating his or her decision, as soon as practicable, but not

later than sixty (60) days after the date on which the request for such

hearing was received by the agency. If an agency is unable to provide

the debtor with a hearing and render a decision within 60 days after

the receipt of the request for such hearing:

(i) The agency may not issue a withholding order until the hearing

is held and a decision rendered; or

(ii) If the agency had previously issued a withholding order to the

debtor's employer, the agency must suspend the withholding order

beginning on the 61st day after the receipt of the hearing request and

continuing until a hearing is held and a decision is rendered.

(11) Content of decision. The written decision shall include:

(i) A summary of the facts presented;

(ii) The hearing official's findings, analysis and conclusions; and

(iii) The terms of any repayment schedules, if applicable.

(12) Final agency action. The hearing official's decision will be

the final agency action for the purposes of judicial review under the

Administrative Procedure Act (5 U.S.C. 701 et seq.).

(13) Failure to appear. In the absence of good cause shown, a

debtor who fails to appear at a hearing scheduled pursuant to paragraph

(f)(4) of this section will be deemed as not having timely filed a

request for a hearing.

(g) Wage garnishment order. (1) Unless the agency receives

information that the agency believes justifies a delay or cancellation

of the withholding order, the agency shall send, by first class mail, a

withholding order to the debtor's employer within 30 days after the

debtor fails to make a timely request for a hearing (i.e., within 15

business days after the mailing of the notice described in paragraph

(e)(1) of this section), or, if a timely request for a hearing is made

by the debtor, within 30 days after a final decision is made by the

agency to proceed with garnishment.

(2) The withholding order sent to the employer under paragraph

(g)(1) of this section shall be in a form prescribed by the Secretary

of the Treasury on the agency's letterhead and signed by the head of

the agency or his/her delegatee. The order shall contain only the

information necessary for the employer to comply with the withholding

order. Such information includes the debtor's name, address, and social

security number, as well as instructions for withholding and

information as to where payments should be sent.

(3) The agency will keep a copy of a certificate of service

indicating the date of mailing of the order. The certificate of service

may be retained electronically so long as the manner of retention is

sufficient for evidentiary purposes.

(h) Certification by employer. Along with the withholding order,

the agency shall send to the employer a certification in a form

prescribed by the Secretary of the Treasury. The employer shall

complete and return the certification to the agency within the time

frame prescribed in the instructions to the form. The certification

will address matters such as information about the debtor's employment

status and disposable pay available for withholding.

(i) Amounts withheld. (1) After receipt of the garnishment order

issued under this section, the employer shall deduct from all

disposable pay paid to the applicable debtor during each pay period the

amount of garnishment described in paragraph (i)(2) of this section.

(2)(i) Subject to the provisions of paragraphs (i)(3) and (i)(4) of

this section, the amount of garnishment shall be the lesser of:

(A) The amount indicated on the garnishment order up to 15% of the

debtor's disposable pay; or

(B) The amount set forth in 15 U.S.C. 1673(a)(2) (Restriction on

Garnishment). The amount set forth at 15 U.S.C. 1673(a)(2) is the

amount by which a debtor's disposable pay exceeds an amount equivalent

to thirty times the minimum wage. See 29 CFR 870.10.

(3) When a debtor's pay is subject to withholding orders with

priority the following shall apply:

(i) Unless otherwise provided by Federal law, withholding orders

issued under this section shall be paid in the amounts set forth under

paragraph (i)(2) of this section and shall have priority over other

withholding orders which are served later in time. Notwithstanding the

foregoing, withholding orders for family support shall have priority

over withholding orders issued under this section.

(ii) If amounts are being withheld from a debtor's pay pursuant to

a withholding order served on an employer before a withholding order

[[Page 25142]]

issued pursuant to this section, or if a withholding order for family

support is served on an employer at any time, the amounts withheld

pursuant to the withholding order issued under this section shall be

the lesser of:

(A) The amount calculated under paragraph (i)(2) of this section,

or

(B) An amount equal to 25% of the debtor's disposable pay less the

amount(s) withheld under the withholding order(s) with priority.

(iii) If a debtor owes more than one debt to an agency, the agency

may issue multiple withholding orders provided that the total amount

garnished from the debtor's pay for such orders does not exceed the

amount set forth in paragraph (i)(2) of this section. For purposes of

this paragraph (i)(3)(iii), the term agency refers to the agency that

is owed the debt.

(4) An amount greater than that set forth in paragraphs (i)(2) and

(i)(3) of this section may be withheld upon the written consent of

debtor.

(5) The employer shall promptly pay to the agency all amounts

withheld in accordance with the withholding order issued pursuant to

this section.

(6) An employer shall not be required to vary its normal pay and

disbursement cycles in order to comply with the withholding order.

(7) Any assignment or allotment by an employee of his earnings

shall be void to the extent it interferes with or prohibits execution

of the withholding order issued under this section, except for any

assignment or allotment made pursuant to a family support judgment or

order.

(8) The employer shall withhold the appropriate amount from the

debtor's wages for each pay period until the employer receives

notification from the agency to discontinue wage withholding. The

garnishment order shall indicate a reasonable period of time within

which the employer is required to commence wage withholding.

(j) Exclusions from garnishment. The agency may not garnish the

wages of a debtor who it knows has been involuntarily separated from

employment until the debtor has been reemployed continuously for at

least 12 months. The debtor has the burden of informing the agency of

the circumstances surrounding an involuntary separation from

employment.

(k) Financial hardship. (1) A debtor whose wages are subject to a

wage withholding order under this section, may, at any time, request a

review by the agency of the amount garnished, based on materially

changed circumstances such as disability, divorce, or catastrophic

illness which result in financial hardship.

(2) A debtor requesting a review under paragraph (k)(1) of this

section shall submit the basis for claiming that the current amount of

garnishment results in a financial hardship to the debtor, along with

supporting documentation. Agencies shall consider any information

submitted in accordance with procedures and standards established by

the agency.

(3) If a financial hardship is found, the agency shall downwardly

adjust, by an amount and for a period of time agreeable to the agency,

the amount garnished to reflect the debtor's financial condition. The

agency will notify the employer of any adjustments to the amounts to be

withheld.

(l) Ending garnishment. (1) Once the agency has fully recovered the

amounts owed by the debtor, including interest, penalties, and

administrative costs consistent with the FCCS, the agency shall send

the debtor's employer notification to discontinue wage withholding.

(2) At least annually, an agency shall review its debtors' accounts

to ensure that garnishment has been terminated for accounts that have

been paid in full.

(m) Actions prohibited by the employer. An employer may not

discharge, refuse to employ, or take disciplinary action against the

debtor due to the issuance of a withholding order under this section.

(n) Refunds. (1) If a hearing official, at a hearing held pursuant

to paragraph (f)(3) of this section, determines that a debt is not

legally due and owing to the United States, the agency shall promptly

refund any amount collected by means of administrative wage

garnishment.

(2) Unless required by Federal law or contract, refunds under this

section shall not bear interest.

(o) Right of action. The agency may sue any employer for any amount

that the employer fails to withhold from wages owed and payable to an

employee in accordance with paragraphs (g) and (i) of this section.

However, a suit may not be filed before the termination of the

collection action involving a particular debtor, unless earlier filing

is necessary to avoid expiration of any applicable statute of

limitations period. For purposes of this section, ``termination of the

collection action'' occurs when the agency has terminated collection

action in accordance with the FCCS or other applicable standards. In

any event, termination of the collection action will have been deemed

to occur if the agency has not received any payments to satisfy the

debt from the particular debtor whose wages were subject to

garnishment, in whole or in part, for a period of one (1) year.

Dated: April 30, 1998.

Richard L. Gregg,

Commissioner.

[FR Doc. 98-11966 Filed 5-5-98; 8:45 am]

BILLING CODE 4810-35-P