[Federal Register Volume 60, Number 163 (Wednesday, August 23, 1995)]
[Rules and Regulations]
[Pages 43705-43707]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20781]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 60, No. 163 / Wednesday, August 23, 1995 /
Rules and Regulations
[[Page 43705]]
DEPARTMENT OF AGRICULTURE
Consolidated Farm Service Agency
7 CFR Part 792
Commodity Credit Corporation
7 CFR Part 1403
RIN 0560-AD78
Debt Settlement Policies and Procedures
AGENCIES: Consolidated Farm Service Agency and Commodity Credit
Corporation, USDA.
ACTION: Final rule.
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SUMMARY: A proposed rule was published in the Federal Register on
August 24, 1994, at 59 FR 43504, amending 7 CFR parts 792 and 1403,
which set forth the debt settlement policies and procedures of the
Consolidated Farm Service Agency (CFSA) and the Commodity Credit
Corporation (CCC), respectively. This final rule adopts the provisions
of the proposed rule. This final rule amends CCC's debt settlement
policies and procedures to remove references to Internal Revenue
Service Notices of Levy, except to exempt them from coverage, and
revises the rate of interest to be charged on delinquent debts. This
final rule also amends CFSA's and CCC's debt settlement policies and
procedures to provide for offset of a debtor's pro rata share of
payments due any entity which the debtor participates in, either
directly or indirectly. This regulation protects 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: August 23, 1995.
FOR FURTHER INFORMATION CONTACT: Carol Spencer, CFSA, USDA, P.O. Box
2415, Washington, DC 20013-2415, at 703-305-1422.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule has been reviewed in conformance with Executive
Order 12866 and has been determined to be a significant regulatory
action.
Paperwork Reduction Act
This action will not increase the Federal paperwork burden for
individuals, small businesses, and others and will not have a
significant impact on a substantial number of small entities.
Regulatory Flexibility Act
Neither CFSA nor CCC is 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 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, 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 Act
also provides that nothing therein shall diminish the existing
authority of the head of an agency to settle, compromise, or close
claims. The CCC Charter Act, as amended (15 U.S.C. 714, et seq.),
provides that CCC shall have the authority to make final and conclusive
settlement and adjustment of any claims by or against it irrespective
of the amount at issue. CCC is, therefore, not subject to the
provisions of the Federal Claims Collection Act of 1966 or its
implementing regulations. However, it has been CCC policy to follow the
Federal Claims Collection Standards (FCCS) to the maximum practicable
extent. The FCCS require each Federal agency to take aggressive action
to collect debts owed it.
Discussion of Final Rule
1. Impact of Interest Rate Change on CFSA and CCC and Affected Private
Interests
This rule amends 7 CFR part 1403 to change the rate of interest
which CCC charges on its delinquent debts from a rate equal to that
assessed under the Prompt Payment Act, to a rate 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. CCC currently charges
interest on delinquent debts at a rate equal to that charged under the
Prompt Payment Act. That rate was chosen because it was generally a
higher rate than the current value of funds rate required under the
Debt Collection Act, and would ensure that CCC, at a minimum, would
always recoup the cost of CCC borrowing. It was also believed to be
equitable since it is the same rate which CCC is required to pay when
its payments are late. This rule amends the rate which CCC charges on
delinquent debts to the higher of the Treasury Department's current
value of funds rate or the rate assessed under the Prompt Payment Act.
Concerning the difference in interest rates, over the past 10 years the
current value of funds rate was higher than the Prompt Payment Act rate
for only one 6-month period. The economic effect of this rate change is
likely to be minimal. This change, however, allows the late payment
interest rate assessed by CCC to conform to the late payment interest
rate assessed by CFSA, as well as, conforming to the rate required by
the Federal Claims Collection Act of 1966, as amended. As both CCC and
CFSA programs are administered by the same
[[Page 43706]]
offices, administrative costs should be reduced by having the same
interest rates apply to both programs.
2. References to IRS Notices of Levy
This rule also amends 7 CFR part 1403 regarding references to
Internal Revenue Service (IRS) Notices of Levy. It was the past policy
of CCC to treat IRS Notices of Levy the same as requests for
administrative offset from other Federal agencies. This was agreed to
in 1970 by CCC and IRS, and was documented in former regulations
dealing with offset at 7 CFR part 13. However, due to a change in
policy by IRS, changes in our previous regulations, certain court
decisions, and advice from the Office of the General Counsel, it has
been determined that IRS Notices of Levy can no longer be treated as
offset requests, but should be honored only as required by statute,
including taking priority over assignments of CFSA and CCC payments.
Therefore, this final rule amends the CCC debt settlement regulations
to remove all references to IRS Notices of Levy, except to specifically
exempt them from coverage in 7 CFR 1403.7. This change will create
little cost or benefit to CCC.
3. Expanded Offset
Finally, this rule amends 7 CFR parts 792 and 1403 to provide for
an expanded ability to offset payments from debtors to collect
delinquent debt. During 1993, CFSA and CCC collected approximately $76
million, of which $32 million or 42 percent of the total was through
administrative offset. As such, it is the most effective debt
collection tool. However, in the past debtors have avoided offset of
their program payments by reorganizing their farming operations,
changing the name of their operations, transferring ownership of their
operations, receiving payments under more than one entity, or by
changing the payee in some other manner. In order to increase CFSA's
and CCC's ability to collect delinquent debts, without adversely
affecting other non-debtors, the regulations are amended to provide for
offset of a debtor's pro rata share of payments due any entity which
the debtor participates in, either directly or indirectly.
This rule also provides for offset when CFSA or CCC determines that
a debtor has established an entity, or transferred ownership of,
reorganized, or changed in some other manner, his or her operations in
order to avoid a debt. By allowing for this expanded ability to offset,
CFSA and CCC will substantially increase their ability to collect
delinquent debt in an efficient and effective manner. This will also
help ensure that those owing delinquent debts are not continuing to
receive government payments, without first satisfying their debts.
While it is not feasible to estimate the exact amount by which CFSA and
CCC collections will increase, it is likely that these circumstances
arise most often with debtors who have debts of $50,000 or more.
Therefore, increased collections could be sizeable in relation to past
collections. There should be no cost to the government created by this
change.
This regulation will 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.
A description of the amendments made by this final rule was set
forth in the proposed rule at 59 FR 43504 (August 24, 1994). The
proposed rule requested comments with respect to the proposed
amendments. No comments were received and it has been determined that
the proposal should be adopted as a final rule with modifications to
reflect the reorganization of the Department of Agriculture, and for
purposes of clarity.
List of Subjects
7 CFR Part 792
Claims, Income taxes.
7 CFR Part 1403
Claims, Income taxes, Loan programs--agriculture.
Accordingly, 7 CFR parts 792 and 1403 are amended as follows:
PART 792--DEBT SETTLEMENT POLICIES AND PROCEDURES
1. The authority citation for 7 CFR part 792 continues to read as
follows:
Authority: 31 U.S.C. 3701, 3711, 3716-3719, 3728; 4 CFR parts
101-105; 7 CFR 3.21(b).
2. Section 792.7(l) is revised to read as follows:
Sec. 792.7 Collection by administrative offset.
* * * * *
(l) Any action authorized by the provisions of this section may be
taken:
(1) Against a debtor's pro rata share of payments due any entity
which the debtor participates in, either directly or indirectly, as
determined by CFSA.
(2) When CFSA determines that the debtor has established an entity,
or reorganized, transferred ownership of, or changed in some other
manner, their operation, for the purpose of avoiding the payment of the
claim or debt.
* * * * *
PART 1403--DEBT SETTLEMENT POLICIES AND PROCEDURES
3. The authority citation for 7 CFR part 1403 continues to read as
follows:
Authority: 15 U.S.C. 714b and 714c; 7 U.S.C. 1445b-2(b).
4. Section 1403.7 is amended by:
A. Removing the word ``and'' at the end of paragraph (a)(3),
B. Removing the period at the end of paragraph (a)(4) and inserting
a semicolon in its place and adding the word ``and'',
C. Adding paragraph (a)(5),
D. Removing paragraph (m)(4),
E. Redesignating paragraphs (m)(5) and (m)(6) as paragraphs (m)(4)
and (m)(5), respectively, and
F. Revising paragraph (q) to read as follows:
Sec. 1403.7 Collection by administrative offset.
(a) * * *
(3) Cases in which CCC 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 CCC;
(4) Any case in which collection of the type of debt involved by
administrative offset is explicitly provided for or prohibited by
statute; and
(5) IRS Notices of Levy which shall be honored in accordance with
IRS statutes and regulations.
* * * * *
(q) Any action authorized by the provisions of this section may be
taken:
(1) Against a debtor's pro rata share of payments due any entity
which the debtor participates in, either directly or indirectly, as
determined by CCC.
(2) When CCC determines that the debtor has established an entity,
or reorganized, transferred ownership of, or changed in some other
manner, their operation, for the purpose of avoiding the payment of the
claim or debt.
* * * * *
5. Section 1403.9(c) is revised to read as follows:
Sec. 1403.9 Late payment interest and administrative charges.
* * * * *
(c) The late payment interest shall be expressed as an annual rate
of interest which CCC 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.
* * * * *
[[Page 43707]]
Signed at Washington, DC, on August 15, 1995.
Bruce R. Weber,
Acting Administrator, Consolidated Farm Service Agency and Acting
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 95-20781 Filed 8-22-95; 8:45 am]
BILLING CODE 3410-05-P
