02-18052. Administrative Wage Garnishment

AGENCY:

Office of the Secretary, HUD.

ACTION:

Final rule.

SUMMARY:

This final rule implements the authority established under the Debt Collection Improvement Act of 1996 (DCIA) for HUD to collect the Department's past due indebtedness through administrative wage garnishment. The final rule adopts, without change, the hearing procedures issued by the Department of the Treasury implementing administrative wage garnishment under the DCIA. This final rule applies only to individuals who are not Federal employees. The final rule amends procedures for the collection of claims to conform to HUD regulations to applicable provisions of the DCIA. This final rule follows publication of a March 8, 2002, proposed rule. There were no comments on the proposed rule, and HUD is adopting the proposed regulatory amendments, with minor technical corrections, but no substantive change.

DATES:

Effective Date: August 19, 2002.

FOR FURTHER INFORMATION CONTACT:

Samuel B. Rothman, Senior Attorney, Office of General Counsel, Room 9253, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410; telephone [phone] (this is not a toll-free number). Hearing and speech-impaired persons may access this number via TTY by calling the Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

Since 1984 HUD has had regulations (subpart C of 24 CFR part 17) that govern various types of administrative offset (i.e., offset conducted administratively rather than through a court of record). These regulations, issued pursuant to the Debt Collection Act of 1982 (31 U.S.C. 3701 et seq.) and the Federal Claims Collection Standards, were promulgated jointly by the General Accounting Office and the Department of Justice (4 CFR parts 101-105).

In 1996, Congress enacted the Debt Collection Improvement Act of 1996 (Pub. L. 104-134, 110 Stat. 1321-1358, approved April 26, 1996) (DCIA), which amended the Debt Collection Act of 1982. Section 31001(o) of the DCIA authorizes collection of Federal agency debt by administrative wage garnishment (section 31001(o) is codified at 31 U.S.C. 3720D). The DCIA authorizes Federal agencies to garnish up to 15% of the disposable pay of a debtor to satisfy delinquent non-tax 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.

The DCIA directed the Secretary of the Treasury to issue implementing regulations (see 31 U.S.C. 3720D(h)). On May 6, 1998 (63 FR 25136), the Department of the Treasury published a final rule implementing the statutory administrative wage garnishment requirements at 31 CFR 285.11. Paragraph (f) of 31 CFR 285.11 provides that “[a]gencies shall prescribe regulations for the conduct of administrative wage garnishment hearings consistent with this section or shall adopt this section without change by reference.”

On March 8, 2002, HUD published a proposed rule (67 FR 10818) to implement the authority established under the DCIA for HUD to collect the Department's past due indebtedness through administrative wage garnishment. The March 8, 2002, rule proposed to adopt, without change, the hearing procedures issued by the Department of the Treasury implementing administrative wage garnishment under the DCIA and to amend procedures for the collection of claims to conform to HUD regulations to applicable provisions of the DCIA. The March 8, 2002, rule also proposed to amend HUD's regulations at 24 CFR part 17, subpart C, to adopt 31 CFR 285.11 in its entirety and to establish a new § 17.170 that would contain a cross-reference to 31 CFR 285.11 and would provide that, to the extent situations arise that are not covered by 31 CFR 285.11, those situations would be governed by the HUD hearing procedures in 24 CFR part 26, subpart A.

Additionally, the March 8, 2002, rule proposed to amend the existing regulations that govern income tax refund offset to include offset against other eligible Federal payments. Under the DCIA the Treasury Department serves as a coordinator for Federal debt collection through its Treasury Offset Program and HUD's rule proposed to recognize that status by adding the phrase “and the Department of the Treasury” immediately after references to the IRS in the existing regulations. The proposed rule advised that it would apply only to individuals who are not federal employees.

II. This Final Rule

This final rule adopts the proposed change made to HUD's regulations at 24 CFR part 17, subpart C to adopt 31 CFR 285.11 in its entirety. The public comment period for the proposed rule closed on May 7, 2002. HUD did not receive any public comments on the proposed rule. As a result, with the exception of making minor technical corrections, HUD is adopting the March 8, 2002, proposed rule without change.

Technical Corrections

The Department is correcting references in the rule to better reflect the transition of the Tax Refund Offset Program (TRO) of the Internal Revenue Service (IRS) to the Treasury Offset Program (TOP) of the Department of Treasury. Accordingly, in the rule, HUD substitutes “Department of the Treasury” for “IRS” since TOP replaced TRO and agencies no longer certify delinquent debts to the IRS nor provide any direct notice or certification to IRS regarding tax refund offsets.

III. Findings and Certifications

Impact on Small Entities

The Secretary, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed and approved this final rule, and in so doing certifies that this final rule does not have a significant economic impact on a substantial number of small entities. Although many small employers will be subject to the requirements of this final 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 an entity. Employers are not required to vary their normal pay cycles in order to comply with a withholding order issued pursuant to this final rule.

Environmental Impact

In accordance with 24 CFR 50.19(c)(1) of the Department's regulations, this final rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, or establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. Therefore, this final rule is categorically excluded from the requirements of the National Environmental Policy Act (42 U.S.C. 4321 et seq.).

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on State and local governments and is not required by statute, or the rule preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This final rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This rule would not impose a Federal mandate on any State, local, or tribal government, or on the private sector, within the meaning of the Unfunded Mandates Reform Act of 1995.

List of Subjects in 24 CFR Part 17

• Administrative practice and procedure
• Claims
• Government employees
• Income taxes
• Wages

Accordingly, for the reasons described in the preamble, HUD amends 24 CFR part 17 as follows:

PART 17—ADMINISTRATIVE CLAIMS

1. The authority citation for 24 CFR part 17, subpart C is revised to read as follows:

Authority: 5 U.S.C. 5514; 31 U.S.C. 3701, 3711, 3716-3720E; and 42 U.S.C. 3535(d).

2. The undesignated center heading immediately preceding § 17.150 is revised to read as follows:

IRS Tax Refund and Federal Payment Offset Provisions and Administrative Wage Garnishment

3. Revise § 17.150 to read as follows:

§ 17.150

Scope.

(a) The standards set forth in §§ 17.150 through 17.161 are the Department's procedures for requesting the Department of the Treasury to offset Federal payments due debtors who have a past-due debt obligation to the Department. These procedures apply to the collection of debts under common law, 31 U.S.C. 3716 or other statutory authority.

(b) The Secretary will use the Department of the Treasury's Federal payment offset to collect claims which are certain in amount, past due and legally enforceable, and which are eligible for tax refund or Federal payment offset under regulations issued by the Secretary of the Treasury.

(c) The Secretary will report debts to the Department of the Treasury for the purpose of using the offset procedures described in §§ 17.150 through 17.161. Debts of less than $100.00, exclusive of interest and other charges, will not be reported.

(d) If not legally enforceable because of lapse of statute of limitations but otherwise valid, the debt will be reported to the IRS as a cancelled debt on Form 1099C. (Form 1099C is an information return which Government agencies file with the IRS and the Department of the Treasury to report forgiven debt, and the forgiven amount is considered income to the taxpayer.) (See § 17.159.)

4. Amend § 17.151 by revising the introductory text and paragraph (b) to read as follows:

§ 17.151

Notice requirements before offset.

A request for deduction from a Federal payment will be made only after the Secretary makes a determination that an amount is owed and past due and provides the debtor with 65 calendar days written notice. This Notice of Intent will state:

* * * * *

(b) That unless the debt is repaid within 65 days from the date of the Notice, the Secretary intends to collect the debt by requesting the Department of Treasury to reduce any amounts payable to the debtor by an amount equal to the amount of the debt and all accumulated interest and other charges;

* * * * *

5. Amend § 17.153 by revising paragraph (c) to read as follows:

§ 17.153

Determination of the Administrative Judge.

* * * * *

(c) If the Administrative Judge's decision affirms that all or part of the debt is past due and legally enforceable, the Secretary will notify the Department of the Treasury after the Administrative Judge's determination has been issued under paragraph (a) of this section and a copy of the determination is received by the Department's Chief Financial Officer. No referral will be made to the IRS or the Department of the Treasury if review of the debt by the Administrative Judge reverses the initial decision that the debt is past due and legally enforceable.

6. Amend § 17.154 by revising paragraph (a) to read as follows:

§ 17.154

Postponements, withdrawals and extensions of time.

(a) Postponements and withdrawals. The Secretary may, for good cause, postpone or withdraw referral of the debt to the Department of Treasury. (For example, a delay in the mail between the debtor and the Secretary could normally warrant a postponement; a mathematical error or computer malfunction could be the reason for a withdrawal.)

* * * * *

7. Revise § 17.156 to read as follows:

§ 17.156

Stay of offset.

If the debtor timely notifies the Secretary that he or she is exercising a right described in § 17.152(a) and timely submits evidence in accordance with § 17.152(b), any notice to the IRS or the Department of the Treasury will be stayed until the issuance of a written decision by the Administrative Judge which determines that a debt or part of a debt is past-due and legally enforceable.

8. Revise § 17.157 to read as follows:

§ 17.157

Application of offset funds: Single debt.

If the debtor does not timely notify the Secretary that he or she is exercising a right described in § 17.152, the Secretary will notify the Department of the Treasury of the debt no earlier than 65 calendar days from the date of the Department's Notice of Intent, and will request that the amount of the debt be offset against any amount payable by the Department of the Treasury as a Federal payment. Normally, recovered funds will be applied first to costs of collection, then to any special charges provided for in HUD regulations or contracts, then to interest and finally, to the principal owed by the debtor.

9. Revise § 17.159, including the section heading, to read as follows:

§ 17.159

Application of offset funds: Federal payment is insufficient to cover amount of debt.

If an offset of a Federal payment is insufficient to satisfy a debt, the Secretary will continue the certification to the Department of the Treasury to collect further on the debt. If, in the following year, the debt has become legally unenforceable because of the lapse of the statute of limitations, the debt will be reported to the IRS as a cancelled debt in accordance with § 17.150(d).

10. Amend § 17.160 by revising the section heading and paragraph (a) to read as follows:

§ 17.160

Time limitation for notifying the Department of the Treasury to request offset of Federal payments due.

(a) The Secretary may not initiate offset of Federal payments due to collect a debt for which authority to collect arises under 31 U.S.C. 3716 more than 10 years after the Secretary's right to collect the debt first accrued, unless facts material to the Secretary's right to collect the debt were not known and could not reasonably have been known by the officials of the Department who were responsible for discovering and collecting such debts.

* * * * *

11. Amend § 17.161 by revising paragraph (c) to read as follows:

§ 17.161

Correspondence with the Department.

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(c) All other correspondence shall be addressed to the Department Claims Officer, Office of the Chief Financial Officer, Department of Housing and Urban Development, 451 Seventh Street, SW, Washington, DC 20410.

12. Add new undesignated center heading following § 17.161 and add new § 17.170 to read as follows:

Administrative Wage Garnishment

§ 17.170

Administrative wage garnishment.

(a) General. The Secretary may collect a debt by using administrative wage garnishment. Regulations in 31 CFR 285.11 governs collection through administrative wage garnishment. To the extent situations arise that are not covered by 31 CFR 285.11, those situations shall be governed by part 26, subpart A of this title.

(b) Hearing official. Any hearing required to establish the Secretary's right to collect a debt through administrative wage garnishment shall be conducted by an Administrative Judge of the HUD Board of Contract Appeals.

Dated: July 11, 2002.

Mel Martinez,

Secretary.