E8-25324. Debt Collection; Clarification of Administrative Wage Garnishment Regulation and Reassignment of Hearing Official

AGENCY:

Small Business Administration.

ACTION:

Direct final rule.

SUMMARY:

The U.S. Small Business Administration (SBA) is amending its Debt Collection regulations by clarifying terminology within the regulation and streamlining administrative wage garnishment hearing procedures. These modifications are few in number and result in revisions to the definition of terms and the process by which a debtor requests a hearing regarding administrative wage garnishment.

SBA believes that this rule is routine and noncontroversial, and the Agency anticipates no significant adverse comment. If SBA receives a significant adverse comment, it will withdraw the rule.

DATES:

This rule is effective December 11, 2008, without further action, unless SBA receives a significant adverse comment by November 26, 2008. If SBA receives any significant adverse comments, the Agency will publish a timely withdrawal of this rule in the Federal Register.

ADDRESSES:

You may submit comments, identified by RIN: 3245-AF72, by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting documents.
• Mail, for paper, disk, or CD-ROM submissions: Walter C. Intlekofer, Chief, Portfolio Management Division, 409 Third Street, SW., Mail Code 7024, Washington, DC 20416.
• Hand Delivery/Courier: Walter C. Intlekofer, Chief, Portfolio Management Division, 409 Third Street, SW., Mail Code 7024, Washington, DC 20416.

SBA will post all comments on http://www.regulations.gov. If you wish to submit confidential business information (CBI) as defined in the User Notice at http://www.regulations.gov, please submit the information to Walter C. Intlekofer, Chief, Portfolio Management Division, 409 Third Street, SW., Mail Code 7024, Washington, DC 20416, or send an e-mail to [e-mail]. Highlight the information that you consider to be CBI and explain why you believe SBA should hold this information as confidential. SBA will review the information and make its final determination of whether it will publish the information or not.

FOR FURTHER INFORMATION CONTACT:

Walter C. Intlekofer, Chief, Portfolio Management Division, 409 Third Street, SW., Mail Code 7024, Washington, DC 20416, [phone] or [e-mail].

SUPPLEMENTARY INFORMATION:

SBA regulations at 13 CFR 140.11 set forth the scope and processes by which SBA may institute administrative wage garnishment (“AWG”) against individuals in the collection of debts, as well as the process by which an individual may contest AWG. These regulations were promulgated in conjunction with U.S. Department of Treasury regulations concerning AWG. The process of AWG is implemented by Treasury on behalf of SBA through Treasury's debt cross-servicing program (in which Treasury pursues debts on behalf of SBA). Under the current § 140.11, debtors subject to AWG may request a hearing with SBA's Office of Hearings and Appeals (“OHA”) to contest the existence or amount of the debt, or the terms of repayment.

On implementation of AWG through the cross-servicing program, SBA became aware of certain issues regarding hearings requested by debtors regarding their AWG. First, § 140.11(d) and (e) refer to the authority of SBA to initiate AWG against its debtors and states that “SBA will send a written notice” of the AWG to the debtor. However, through cross-servicing, it is Treasury and its private contractors, not SBA, who initiate AWG on SBA's behalf, by sending the written notice. Thus, since § 140.11 was implemented in part to implement cross-servicing, it has become necessary to clarify the terminology throughout § 140.11 to make clear that not only SBA, but also public and private entities pursuing debt on SBA's behalf, may implement AWG against SBA's debtors.

This purpose is accomplished by redefining the term “Agency” in § 140.11, to include not only SBA, but also public and private entities that pursue debt on SBA's behalf. Thereafter, all other references throughout § 140.11 to “SBA” performing functions related to the implementation of AWG are changed to the “Agency” performing those functions, to make clear that not only SBA, but also public and private entities pursuing debt on SBA's behalf, may perform those functions under the regulation.

The second issue that arose on the implementation of AWG through the cross-servicing program relates to the hearing process itself. Under the current regulation, debtors who wish to contest the existence or amount of their debt, or the terms of repayment, must file for a hearing with an Administrative Judge at OHA, who is SBA's currently designated hearing official for SBA under § 140.11. Thereafter, those hearings are governed by the procedural rules set forth at Part 134 of Title 13 of the CFR. OHA procedures include full administrative litigation, with formal filings, deadlines, and motion practice. Additionally, SBA and Treasury discovered that the process of providing notice to debtors of their rights to request a hearing necessitated lengthy descriptions of the debtor's rights and duties to be transmitted with the notice of AWG.

Thus, OHA and SBA's Office of Financial Assistance have determined that by removing OHA's Administrative Judges and OHA procedures from the AWG hearing process, that process can be greatly simplified for not only debtors subject to AWG, but also to SBA. This purpose is accomplished by replacing references to OHA and the Administrative Judge in § 140.11 with a “hearing official,” the definition of which, at § 140.11(f)(6), will be amended to replace “Judge” with “qualified official designated in the pre-garnishment notice.” Further, § 140.11(f)(1) will be amended to remove the reference to OHA regulations and be replaced with language stating that the entirety of the hearing procedures are contained within § 140.11.

These changes will bring § 140.11 more closely in line with Treasury's AWG and cross-servicing regulations at 31 CFR 285.11 and 285.12, upon which § 140.11 is based and which do not contemplate any additional hearing procedures than those that exist at 31 CFR 285.11 (such as the OHA at 13 CFR 134, incorporated into § 140.11).

Consideration of Comments

This is a direct final rule, and SBA will review all comments. SBA believes that this rule is routine and noncontroversial, and SBA anticipates no significant adverse comments to this rulemaking. If SBA receives any significant adverse comments, it will publish a timely withdrawal of this direct final rule.

Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 U.S.C. 601-612)

OMB has determined that this direct final rule is not a “significant” regulatory action for purposes of Executive Order (E.O.) 12866. This direct final rule results in changes to nomenclature and hearing procedure.

For purposes of E.O. 12988, SBA has determined that this rule is drafted, to the extent practicable, under the standards established in that order.

For purposes of E.O. 13132, SBA has determined that this rule does not have any federalism implications warranting the preparation of a Federalism Assessment.

For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this rule does not impose any new reporting or recordkeeping requirements.

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires administrative agencies to consider the effect of their actions on small entities, including small businesses. Pursuant to the RFA, when an agency issues a rule, the agency must prepare an analysis to determine whether the impact of the rule will have a significant economic impact on a substantial number of small entities. However, the RFA requires analysis of a rule only where notice and comment rulemaking are required. Rules are exempt from Administrative Procedure Act (APA) notice and comment requirements, and therefore from the RFA requirements, when the agency for good cause finds (and incorporates the finding and brief statement of reasons in the rules issued) that notice and public procedure thereon is impracticable, unnecessary or contrary to the public interest. In this case it would be unnecessary in light of the non-controversial nature of the rule.

List of Subjects in 13 CFR Part 140

• Claims
• Government employees
• Income taxes
• Wages

For the reasons set forth in the preamble, SBA amends 13 CFR Part 140 as follows:

PART 140—DEBT COLLECTION

1. The authority citation for Part 140 continues to read as follows:

Authority: 5 U.S.C. 5514; 15 U.S.C. 634(b)(6); 31 U.S.C. 3711, 3716, 3720, 3720A and 3720D.

Subpart C—Administrative Wage Garnishment

§ 140.11

[Amended]

2. Section 140.11 is amended as follows:

a. In § 140.11(c) revise the definition for the term, “ Agency” to read as set forth below.

b. Remove the words “SBA” or “the SBA” and add, in their place, the words “the Agency,” wherever they appear in the following places:

1. § 140.11(c), in the definition for the term, Evidence of Service,

2. § 140.11(d),

3. § 140.11(e) heading, (e)(1) introductory text, and (e)(1)(ii),

4. § 140.11(e)(3),

5. § 140.11(f)(4),

6. § 140.11(f)(5),

7. § 140.11(f)10),

8. § 140.11(g)(1) introductory text and (g)(1)(i),

9. § 140.11(g)(3),

10. § 140.11(h),

11. § 140.11(i)(3)(i), (ii), and (iii),

12. § 140.11(i)(4),

13. § 140.11(i)(5),

14. § 140.11(i)(7),

15. § 140.11(i)(8),

16. § 140.11(j),

17. § 140.11(k)(1), in the first sentence only,

18. § 140.11(k)(3),

19. § 140.11(l)(1) and (2),

20. § 140.11(m)

21. § 140.11(n)(1) introductory text and (n)(1)(ii), and

22. § 140.11(o).

c. In § 140.11(e), introductory text, remove the words “ What notice must the SBA give you before beginning an administrative wage garnishment?” and add, in their place, the words “Notice Requirements.”

d. In § 140.11(e)(2)(iii), remove the words “at SBA's Office of Hearings and Appeals (OHA)” and add, in their place, the words “before an SBA hearing official.”

e. In § 140.11(f)(1), remove the words “Unless they expressly conflict with this section, the rules of procedure governing cases before OHA apply to administrative wage garnishment hearings” and add, in their place, the words “Procedural rules for the conduct of administrative wage garnishment hearings are established in this section.”

f. Revise § 140.11(f)(6) to read as set forth below.

g. Remove the words “at OHA” and add, in their place, the words “by the Hearing Official” in the following places:

1. § 140.11(f)(4), and

2. § 140.11(f)(5).

h. Remove the word “Judge” and add, in its place, the words “Hearing Official” wherever they appear in the following places:

1. § 140.11(f)(3)(i), (ii), and (iii),

2. § 140.11(f)(4),

3. § 140.11(f)(5),

4. § 140.11(f)(7),

5. § 140.11(f)(9),

6. § 140.11(f)(10),

7. § 140.11(g).

i. Remove the word “Judge's” and add, in its place, the words “Hearing Official's” wherever they appear in the following places:

1. § 140.11(f)(10), and

2. § 140.11(f)(11)(ii).

j. Revise § 140.11(f)(12) to read as set forth below.

k. In § 140.11(g)(1)(ii), remove the words “the Judge renders a final decision” and add, in their place, the words “the final agency decision.”

The revisions read as follows:

§ 140.11

What type of debt is subject to administrative wage garnishment, and how can SBA administratively garnish your pay?

* * * * *

(c) * * *

Agency means the SBA or any entity, public or private, that pursues recovery of the debt on SBA's behalf.

* * * * *

(f) * * *

(6) Hearing official. A hearing official may be any qualified individual designated in the pre-garnishment notice.

* * * * *

(12) Final agency action. The decision of the hearing official is the final agency decision for the purposes of judicial review under the Administrative Procedure Act (5 U.S.C. 701 et seq.).

* * * * *

Sandy K. Baruah,

Acting Administrator.