94-20780. Debt Settlement Policies and Procedures  

  • [Federal Register Volume 59, Number 163 (Wednesday, August 24, 1994)]
    [Unknown Section]
    [Page 0]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 94-20780]
    
    
    [[Page Unknown]]
    
    [Federal Register: August 24, 1994]
    
    
                                                       VOL. 59, NO. 163
    
                                             Wednesday, August 24, 1994
    
    DEPARTMENT OF AGRICULTURE
    
    Agricultural Stabilization and Conservation Service
    
    7 CFR Part 792
    
    Commodity Credit Corporation
    
    7 CFR Part 1403
    
    RIN 0560-AD78
    
     
    
    Debt Settlement Policies and Procedures
    
    AGENCIES: Agricultural Stabilization and Conservation Service and 
    Commodity Credit Corporation, USDA.
    
    ACTION: Proposed rule.
    
    -----------------------------------------------------------------------
    
    SUMMARY: This proposed rule would amend the Commodity Credit 
    Corporation's (CCC's) debt settlement policies and procedures to remove 
    references to Internal Revenue Service Notices of Levy, except to 
    exempt them from coverage, and to revise the rate of interest to be 
    charged on delinquent debts. This proposed rule would also amend the 
    Agricultural Stabilization and Conservation Service's (ASCS') 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 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.
    
    DATES: Comments must be received by September 23, 1994 in order to be 
    assured of consideration.
    
    ADDRESSES: Comments concerning this proposed rule should be addressed 
    to Director, Financial Management Division, ASCS, U.S. Department of 
    Agriculture, P.O. Box 2415, Washington, DC 20013-2415. All comments 
    submitted in response to this proposed rule will be available for 
    public inspection in room 1206, Park Office Center, 3101 Park Center 
    Drive, Alexandria, VA, between 8:30 a.m. and 4:00 p.m., Monday through 
    Friday, except holidays.
    
    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 proposed 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 ASCS 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 proposed 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 Proposed Rule
    
    1. Impact of Interest Rate Change on ASCS and CCC and Affected Private 
    Interests
    
        This rule would amend 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 proposed rule would amend 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 proposed rate change is likely to be minimal. This 
    change, however, would allow the late payment interest rate assessed by 
    CCC to conform to the late payment interest rate assessed by ASCS, as 
    well as, conforming to the rate required by the Federal Claims 
    Collection Act of 1966, as amended. As both CCC and ASCS programs are 
    administered by the same 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 would also amend 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 ASCS and CCC payments. 
    Therefore, this proposed rule would amend 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 
    should create little cost or benefit to CCC.
    
    3. Expanded Offset
    
        Finally, this rule would amend 7 CFR parts 792 and 1403 to provide 
    for an expanded ability to offset payments from debtors to collect 
    delinquent debt. During 1993, ASCS 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 ASCS' and 
    CCC's ability to collect delinquent debts, without adversely affecting 
    other non-debtors, the regulations would be 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 would also provide for offset when ASCS 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, 
    ASCS and CCC should substantially increase their ability to collect 
    delinquent debt in an efficient and effective manner. This would 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 ASCS and 
    CCC collections would be increased, 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 proposed change.
        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.
    
    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 ASCS.
        (2) When ASCS 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: 7 U.S.C. 1445b-2(b); 15 U.S.C. 714b and 714c.
    
        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) * * *
        (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. 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.
    * * * * *
        Signed at Washington, DC, on August 11, 1994.
    Bruce R. Weber,
    Administrator, Agricultural Stabilization and Conservation Service, 
    Executive Vice President, Commodity Credit Corporation.
    [FR Doc. 94-20780 Filed 8-23-94; 8:45 am]
    BILLING CODE 3410-05-P
    
    
    

Document Information

Published:
08/24/1994
Department:
Commodity Credit Corporation
Entry Type:
Uncategorized Document
Action:
Proposed rule.
Document Number:
94-20780
Dates:
Comments must be received by September 23, 1994 in order to be assured of consideration.
Pages:
0-0 (1 pages)
Docket Numbers:
Federal Register: August 24, 1994
RINs:
0560-AD78
CFR: (3)
7 CFR 792.7
7 CFR 1403.7
7 CFR 1403.9