31 Cfr 901_2

§ 901.2

31 CFR Ch. IX (7–1–04 Edition)

(6) Is exempt from this requirement
based on a determination by the Secretary that exemption for a certain
class of debt is in the best interest of
the United States. Agencies may request that the Secretary exempt specific classes of debts.
(f) Agencies operating Treasury-designated debt collection centers are authorized to charge a fee for services
rendered regarding referred or transferred debts. The fee may be paid out of
amounts collected and may be added to
the debt as an administrative cost (see
§ 901.10).
§ 901.2 Demand for payment.
(a) Written demand as described in
paragraph (b) of this section shall be
made promptly upon a debtor of the
United States in terms that inform the
debtor of the consequences of failing to
cooperate with the agency to resolve
the debt. The specific content, timing,
and number of demand letters shall depend upon the type and amount of the
debt and the debtor’s response, if any,
to the agency’s letters or telephone
calls. Generally, one demand letter
should suffice. In determining the timing of the demand letter(s), agencies
should give due regard to the need to
refer debts promptly to the Department of Justice for litigation, in accordance with § 904.1 of this chapter or
otherwise. When necessary to protect
the Government’s interest (for example, to prevent the running of a statute
of limitations), written demand may be
preceded by other appropriate actions
under parts 900–904 of this chapter, including immediate referral for litigation.
(b) Demand letters shall inform the
debtor of:
(1) The basis for the indebtedness and
the rights, if any, the debtor may have
to seek review within the agency;
(2) The applicable standards for imposing any interest, penalties, or administrative costs;
(3) The date by which payment
should be made to avoid late charges
(i.e. interest, penalties, and administrative costs) and enforced collection,
which generally should not be more
than 30 days from the date that the demand letter is mailed or hand-delivered; and

(4) The name, address, and phone
number of a contact person or office
within the agency.
(c) Agencies should exercise care to
ensure that demand letters are mailed
or hand-delivered on the same day that
they are dated. There is no prescribed
format for demand letters. Agencies
should utilize demand letters and procedures that will lead to the earliest
practicable determination of whether
the debt can be resolved administratively or must be referred for litigation.
(d) Agencies should include in demand letters such items as the agency’s willingness to discuss alternative
methods of payment; its policies with
respect to the use of credit bureaus,
debt collection centers, and collection
agencies; the agency’s remedies to enforce payment of the debt (including
assessment of interest, administrative
costs and penalties, administrative
garnishment, the use of collection
agencies, Federal salary offset, tax refund offset, administrative offset, and
litigation); the requirement that any
debt delinquent for more than 180 days
be transferred to the Department of
the Treasury for collection; and, depending on applicable statutory authority, the debtor’s entitlement to
consideration of a waiver.
(e) Agencies should respond promptly
to communications from debtors, within 30 days whenever feasible, and
should advise debtors who dispute
debts to furnish available evidence to
support their contentions.
(f) Prior to the initiation of the demand process or at any time during or
after completion of the demand process, if an agency determines to pursue,
or is required to pursue, offset, the procedures applicable to offset should be
followed (see § 901.3). The availability
of funds or money for debt satisfaction
by offset and the agency’s determination to pursue collection by offset shall
release the agency from the necessity
of further compliance with paragraphs
(a), (b), (c), and (d) of this section.
(g) Prior to referring a debt for litigation, agencies should advise each
person determined to be liable for the
debt that, unless the debt can be collected administratively, litigation may
be initiated. This notification should

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Federal Claims Collection Standards, Treasury
comply with Executive Order 12988 (3
CFR, 1996 Comp., pp. 157–163) and may
be given as part of a demand letter
under paragraph (b) of this section or
in a separate document. Litigation
counsel for the Government should be
advised that this notice has been given.
(h) When an agency learns that a
bankruptcy petition has been filed with
respect to a debtor, before proceeding
with further collection action, the
agency should immediately seek legal
advice from its agency counsel concerning the impact of the Bankruptcy
Code on any pending or contemplated
collection activities. Unless the agency
determines that the automatic stay
imposed at the time of filing pursuant
to 11 U.S.C. 362 has been lifted or is no
longer in effect, in most cases collection activity against the debtor should
stop immediately.
(1) After seeking legal advice, a proof
of claim should be filed in most cases
with the bankruptcy court or the
Trustee. Agencies should refer to the
provisions of 11 U.S.C. 106 relating to
the consequences on sovereign immunity of filing a proof of claim.
(2) If the agency is a secured creditor,
it may seek relief from the automatic
stay regarding its security, subject to
the provisions and requirements of 11
U.S.C. 362.
(3) Offset is stayed in most cases by
the automatic stay. However, agencies
should seek legal advice from their
agency counsel to determine whether
their payments to the debtor and payments of other agencies available for
offset may be frozen by the agency
until relief from the automatic stay
can be obtained from the bankruptcy
court. Agencies also should seek legal
advice from their agency counsel to determine whether recoupment is available.
§ 901.3 Collection by administrative
offset.
(a) Scope. (1) The term ‘‘administrative offset’’ has the meaning provided
in 31 U.S.C. 3701(a)(1).
(2) This section does not apply to:
(i) Debts arising under the Social Security Act, except as provided in 42
U.S.C. 404;
(ii) Payments made under the Social
Security Act, except as provided for in

§ 901.3

31 U.S.C. 3716(c) (see 31 CFR 285.4, Federal Benefit Offset);
(iii) Debts arising under, or payments
made under, the Internal Revenue Code
(see 31 CFR 285.2, Tax Refund Offset) or
the tariff laws of the United States;
(iv) Offsets against Federal salaries
to the extent these standards are inconsistent with regulations published
to implement such offsets under 5
U.S.C. 5514 and 31 U.S.C. 3716 (see 5 CFR
part 550, subpart K, and 31 CFR 285.7,
Federal Salary Offset);
(v) Offsets under 31 U.S.C. 3728
against a judgment obtained by a debtor against the United States;
(vi) Offsets or recoupments under
common law, State law, or Federal
statutes specifically prohibiting offsets
or recoupments of particular types of
debts; or
(vii) Offsets in the course of judicial
proceedings, including bankruptcy.
(3) Unless otherwise provided for by
contract or law, debts or payments
that are not subject to administrative
offset under 31 U.S.C. 3716 may be collected by administrative offset under
the common law or other applicable
statutory authority.
(4) Unless otherwise provided by law,
administrative offset of payments
under the authority of 31 U.S.C. 3716 to
collect a debt may not be conducted
more than 10 years after the Government’s right to collect the debt first
accrued, unless facts material to the
Government’s right to collect the debt
were not known and could not reasonably have been known by the official or
officials of the Government who were
charged with the responsibility to discover and collect such debts. This limitation does not apply to debts reduced
to a judgment.
(5) In bankruptcy cases, agencies
should seek legal advice from their
agency counsel concerning the impact
of the Bankruptcy Code, particularly 11
U.S.C. 106, 362, and 553, on pending or
contemplated collections by offset.
(b) Mandatory centralized administrative offset. (1) Creditor agencies are required to refer past due, legally enforceable nontax debts which are over
180 days delinquent to the Secretary
for collection by centralized administrative offset. Debts which are less
than 180 days delinquent also may be

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