Agency Debt Management | TFX: Treasury Financial Experience

Agency Cross-Servicing Responsibilities

Introduction

This TFM chapter describes how the U.S. Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service) provides delinquent nontax debt collection services through its Cross-Servicing program to federal agencies. It describes:

Federal agencies' responsibilities to transfer eligible delinquent debts to the Cross-Servicing program for collection action,
Fiscal Service’s responsibilities to provide delinquent debt collection services for federal agencies, and
Fees charged by Fiscal Service for delinquent debt collection services.

Section 5010—Scope and Applicability

The provisions of this TFM chapter:

Apply to all federal agencies that are required or authorized to transfer debts to the Cross-Servicing program per 31 U.S.C. § 3711(g), and
Govern the collection of debts that have been transferred to the Cross-Servicing program per 31 U.S.C. § 3711(g).

This TFM chapter does not apply to Fiscal Service’s operation of Centralized Receivables Service (CRS) nor the Treasury Offset Program (TOP). However, a federal agency complies with the requirement to notify Treasury of a debt for offset pursuant to 31 U.S.C. §§ 3716(c)(6) and 3720A(a) when it: (1) transfers a debt to the Cross-Servicing program at 121 days or less delinquent, and (2) through the agency profile form, authorizes Fiscal Service to refer the debt to TOP for collection through offset of all eligible payments.

Section 5015—Authority

5015.10—Authority to Promulgate Regulations and Service Debts

Fiscal Service is authorized to promulgate regulations and establish guidelines to assist federal agencies in the performance of debt collection activities, including the referral of eligible, nonexempt debts to the Cross-Servicing program. See 31 U.S.C. §§ 3711(g) and 3711 note, and 31 CFR § 285.12.

As Treasury’s designated debt collection center pursuant to 31 CFR § 285.12(a), Fiscal Service is responsible for collecting and otherwise servicing transferred debts.

5015.20—Authority to Charge Fees

Fiscal Service is authorized to charge creditor agencies fees to cover up to the full cost of servicing transferred debts, which creditor agencies generally must pass on to debtors as costs of collection. 31 U.S.C.§§ 3711(g)(6),3717(e). For a further discussion of fees and costs, see Subsection 5040, Fees and Costs.

5015.30—Authority to Collect and Compromise

Fiscal Service provides services through the Cross-Servicing program pursuant to its statutory authorities to service, collect, or compromise transferred debts, or to suspend or terminate collection action thereon. See 31 U.S.C. § 3711(g).

With regard to debts that have been transferred to the Cross-Servicing program, Fiscal Service generally has the same authority available to the head of the creditor agency to compromise transferred debts or collect transferred debts in installments. In addition, the Department of Justice has delegated to Fiscal Service the authority to compromise debts with a principal balance of up to $500,000. In general, Fiscal Service may accept proposed compromises of debts with a principal balance of over $500,000 only with the approval of the Department of Justice.

5015.40—Authority to Suspend and/or Terminate Collection Action

Per 31 U.S.C. §§ 3711(g)(1)(B), 3711(g)(4), and 3711(g)(5), and the authority delegated to Fiscal Service by the Department of Justice, Fiscal Service is authorized to suspend and/or terminate collection action on transferred debts with a principal balance of up to $500,000. Fiscal Service generally may approve the suspension or termination of collection action for debts with a principal balance of over $500,000, only with the approval of the Department of Justice.

Per subsection 5035.60, Suspend and/or Terminate Collection Action, Fiscal Service may suspend and/or terminate collection action in accordance with applicable federal law, including the Federal Claims Collection Standards (31 CFR Parts 900-904).

Section 5030—Creditor Agency Responsibilities

5030.10—Complete an Agency Profile Form

Each creditor agency must identify the programs under which debts arise. For each program, before transferring debts to the Cross-Servicing program, the creditor agency must complete an agency profile form. Creditor agencies may combine programs with the same requirements on one agency profile form. Creditor agencies must transfer debts secured by collateral under a separate agency profile than unsecured debts. Creditor agencies must update this form as necessary to reflect program changes. Agencies are encouraged to use the electronic version of the form available through the Cross-Servicing system.

In the agency profile form, the creditor agency must:

Authorize Fiscal Service to use all available collection tools to service the debts, including administrative wage garnishment, compromise, and collection of its debts through installment agreements (for any duration determined by Fiscal Service to be appropriate), except as provided in subsection 5030.30,
List and describe any statutory or regulatory provisions or policies that uniquely affect its collection activities,
State whether it anticipates submitting any protected health information (as defined under the Health Insurance Portability and Accountability Act of 1996, as amended, and associated regulations) and, if so, advise of any limitations on re-disclosure,
If the head of the creditor agency does not have full authority with regard to the compromise of its debts and/or the collection of its debts in installments (or if there is a legal prohibition on the delegation of this authority to Fiscal Service), specify such limitations, including citations to specific legal authorities, and
Provide any other information requested by Fiscal Service.

5030.20—Certify Debt

To certify its debt meets certain requirements, the creditor agency must execute an annual written agreement with Fiscal Service, which must include a statement that any debt the creditor agency is transferring to Fiscal Service is valid and legally enforceable.

The creditor agency must ensure that any person authorized to transfer debt to the Cross-Servicing program for the creditor agency understands that, by transferring the debt, he or she is making a certification to Fiscal Service under penalty of perjury that, among other things, the debt is valid and legally enforceable. The creditor agency must ensure that only appropriate persons are authorized to transfer debts to the Cross-Servicing program.

5030.30—Comply with Relevant Laws and Authorize Use of All Appropriate Debt Collection Tools

The creditor agency must comply with all relevant statutes and regulations and must advise Fiscal Service of any statutory or regulatory provisions that uniquely affect the creditor agency’s debt collection activities.

In the agency profile form, creditor agencies must authorize Fiscal Service to use all collection tools listed in subsection 5040.10, Collect and Compromise Transferred Debt. Alternatively, if after consultation with Fiscal Service, the creditor agency determines that the use of a particular collection tool is not in the best interest of the government or is not legally authorized, then the creditor agency must provide to Fiscal Service a written explanation of its determination. Fiscal Service, in its discretion, will make the final determination regarding whether the use of a collection tool is not in the best interest of the government, or is not legally authorized. Fiscal Service will inform the creditor agency of its determination.

Creditor agencies should consult with their counsel for assistance with establishing regulations and/or procedures. Creditor agencies must establish regulations and/or procedures with regard to:

Collection of delinquent debt, generally,
Collection of delinquent debt through offset of federal nontax payments and state payments (including salary offset) and tax refund offset,
Reporting delinquent debt to credit bureaus;
Collection of delinquent debt through administrative wage garnishment,
Responding to debt disputes and credit bureau disputes;
Responding to requests for additional information and, if applicable, requests to accept proposed compromise or installment agreements, and
Collection of delinquent debt through any other debt collection tools for which regulations and/or established procedures are required.

5030.40—Transfer Eligible Debts to the Cross-Servicing Program; Provide Debt and Debtor Information to Fiscal Service

5030.40a—Transfer Eligible Debts

Fiscal Service strongly encourages creditor agencies to transfer all eligible delinquent debts to the Cross-Servicing program as early as legally allowable. Creditor agencies must transfer all nonexempt debts that are more than 120 days delinquent to the Cross-Servicing program and must allow the Cross-Servicing program to refer its debts to TOP (unless a request by the creditor agency not to do so is approved by Fiscal Service, as described below).

If a creditor agency requests that the Cross-Servicing program not refer its debts to TOP and Fiscal Service agrees, the creditor agency must: (1) itself refer debts delinquent 120 days or more directly to TOP, and (2) separately transfer those debts to the Cross-Servicing program by or before the time that they are 180 days delinquent. If an agency refers separately to TOP and Cross-Servicing, the agency must keep the balances in both systems updated appropriately.

Except as otherwise stated in the agency profile form, by transferring a receivable to the Cross-Servicing program, the creditor agency delegates to the Fiscal Service the authority for Fiscal Service to take all appropriate action to collect the debt, including, but not limited to the actions listed in Section 5040.10—Collect and Compromise Transferred Debt.

5030.40b—Prerequisites to Transfer

Before transferring debt to the Cross-Servicing program, the creditor agency must make written demand from the debtor for payment and must provide the debtor with all required due process.

At the time of transfer, the creditor agency must provide Fiscal Service, in the form that Fiscal Service directs, the following information:

Name of the debtor,
Address of the debtor,
Taxpayer identification number, if available,
Principal balance of the debt and any other components of the debt, including pre-transfer administrative costs and accrued interest and penalties,
Date on which the debt became delinquent,
Applicable statute of limitations for pursuing litigation, if available, and
Any other information Fiscal Service requires to be included in the transfer file.

In addition, at the time of transfer or as soon thereafter as practicable, the creditor agency must provide Fiscal Service with accurate, appropriate information, in the manner that Fiscal Service directs, to facilitate the performance of Fiscal Service’s debt collection operations and to support the validity of the debt, including, if applicable:

Copies of signed promissory notes,
Copies of citations and/or notifications of fines or penalties,
Copies of initial demand letters establishing debts,
Copies of due-process notices, and
Any other supporting documentation, as appropriate or as may be requested by Fiscal Service.

Unless otherwise agreed to by Fiscal Service, the creditor agency will transfer each debt to the Cross-Servicing program in a separate record (which may be combined in a batch file) and may not aggregate more than one debt into a single record unless the aggregated debts: (i) have the same delinquency date, (ii) bear interest at the same rate, (iii) incur the same penalty charge, and (iv) will be assessed the same administrative costs.

5030.40c—Coordination

After transferring a debt to the Cross-Servicing program, the creditor agency should cease all collection activity and all communication with the debtor with regard to the debt and must refer all inquiries about the debt to Fiscal Service. If the creditor agency determines that communication with the debtor or other parties is necessary, the creditor agency will inform Fiscal Service to ensure that Fiscal Service remains adequately informed of any such communications.

To ensure that the same debt is not transferred to the Cross-Servicing program from more than one agency, the creditor agency will coordinate with any other agencies that have been involved with incurring, establishing or collecting a debt, including the Department of Justice or any agency providing shared services (including salary paying agencies) to the creditor agency.

5030.50—Post-Transfer Responsibilities

5030.50a—Continued Validity and Enforceability of the Debt

The creditor agency remains solely responsible for ensuring the continued validity and enforceability of the debt.

5030.50b—Assist with Responding to Debtors and Defending Litigation; Notify Fiscal Service of Updates about Debt or Debtor

The creditor agency must promptly notify Fiscal Service about any litigation resulting from Fiscal Service’s collection efforts or impacting the government’s debt collection authorities. The creditor agency also must assist Fiscal Service in defending any litigation, resulting from Fiscal Service’s or the agency’s collection efforts, including by, upon request, providing supporting documentation, live witnesses, or other litigation support. In addition, with regard to Fiscal Service’s efforts to collect debt through affirmative litigation, the creditor agency must, upon request, assist Fiscal Service by providing supporting documentation, live witnesses, and other litigation support.

The creditor agency must reply within 30 business days to any request by Fiscal Service for information regarding a transferred debt or debtor, including requests for:

Information needed to respond to a dispute (whether received from the debtor or another source),
Approval of a compromise agreement, if the creditor agency could not delegate full compromise authority to Fiscal Service,
Information needed to respond to inquiries resulting from the government’s collection efforts. Such inquiries may be from Congress, inspectors general, requestors under the Freedom of Information Act (FOIA) or the Privacy Act, or other relevant parties, and
Any other supporting documentation requested by Fiscal Service.

The creditor agency must provide Fiscal Service with any updated information it receives about a debtor in a timely manner, including:

Updated addresses,
Taxpayer identification numbers,
Responses to disputes, reviews, and/or hearings, if requested by Fiscal Service or as otherwise required by law, and
Other information needed to collect debts.

5030.50c—Maintain Records

The creditor agency must maintain timely and accurate delinquent debt records, including updated information such as debtor information and debt balances. The creditor agency remains the owner of the debt throughout Fiscal Service's debt collection process.

Per subsection 5035.30, Modify Records, Fiscal Service will, if appropriate, update and/or modify its delinquent debt and debtor records with information obtained from its skip tracing and asset location services. The creditor agency must notify Fiscal Service as soon as it learns that any such updates or modifications to such records are incorrect.

5030.50d—Recall Transferred Debt

The creditor agency must recall a transferred debt immediately if:

The debtor has filed for bankruptcy and the automatic stay is in effect,
The debt is not enforceable,
The debt is not delinquent,
The debt is not valid,
The federal agency discovers that it incorrectly certified the debt,
The federal agency discovers any other reason that would render its certification invalid, or
The federal agency, after consultation with Fiscal Service, agrees the federal agency should service the debt.

Upon the recall of a debt in accordance with this section or the return of a debt by Fiscal Service in accordance with subsection 5035.50, Return Transferred Debt, the creditor agency must service, collect, or compromise the debt, or must suspend or terminate collection action on the debt. If the creditor agency determines that termination of collection action is authorized and appropriate, it should consider whether offset per 31 U.S.C. § 3716 might still be appropriate.

The creditor agency may transfer previously returned or recalled debts back to the Cross-Servicing program for servicing, if appropriate.

Contact Us

Detailed Contacts

Direct inquiries concerning this TFM chapter to:

Department of the Treasury
Bureau of the Fiscal Service
Debt Management Services

3201 Pennsy Drive, Building E
Landover, MD 20785

202-874-6810
debt-tfm@fiscal.treasury.gov

Standards For A Debt Collection Center Designation

Introduction: This Treasury Financial Manual (TFM) chapter sets forth the standards and procedures that the Department of the Treasury (Treasury), acting through the Bureau of the Fiscal Service (Fiscal Service), uses to designate debt collection centers. It also outlines the responsibilities of designated debt collection centers. This TFM chapter replaces and supersedes all versions of the “Federal Debt Collection Center Designation: Policies, Procedures, and Standards” issued by Treasury. Any prior decisions under those standards remain in effect until or unless expressly revoked. The term debt collection center has the same definition as set forth in 31 CFR 285.12(a). For the purposes of this TFM chapter, debt collection center does not include Fiscal Service (including Fiscal Service’s Cross-Servicing Program).

Section 5410—Background: Federal agencies generally must refer debt that has been delinquent for a period of 180 days to Fiscal Service’s Cross-Servicing Program for collection action. However, debts that have been referred to a designated debt collection center are exempt, for a period determined by the Secretary, from this requirement.

Section 5420—Scope

The provisions of this TFM chapter:

address certain responsibilities of debt collection centers,
prescribe the standards under which the Secretary will evaluate and respond to requests for an initial designation as a debt collection center pursuant to 31 U.S.C. § 3711(g)(3), and to requests for a renewal of such a designation, and
explain how a federal agency may seek a designation or renewal.

Section 5440—Authority: The Secretary has the authority to designate and withdraw the designation of debt collection centers operated by federal agencies. See 31 U.S.C. § 3711(g)(3). The Secretary is also authorized to establish standards for the designation and operation of debt collection centers. See 31 U.S.C. § 3711(g)(10) and 31 CFR 285.12(f).

Section 5450—Authorities and Responsibilities of Debt Collection Centers

5450.10—Referral of Debts from Client Agencies

After designation by Fiscal Service, and to the extent permitted by the designation, debt collection centers may solicit client agencies to refer debts.

5450.20—Use of Debt Collection Tools

The debt collection center must take appropriate action to collect (or suspend or terminate collection action) on any referred debts. A debt collection center must use all appropriate debt collection tools, consistent with the debt collection strategy it submitted with its application for designation or renewal. A debt collection center must be equipped with the appropriate systems, policies, and debt collection strategies that enable it to use all authorized debt collection tools.

A debt collection center must notify Fiscal Service of any substantial change in its debt collection processes (via the address in section 5470.10 of this TFM chapter) prior to implementation.

5450.30—Referral of Debts to Fiscal Service for Collection by the Treasury Offset Program (TOP)

Where appropriate or required by law, a debt collection center must refer debts to Fiscal Service for collection through TOP, including tax refund offset and offset of certain other federal and state payments.

5450.40—Referral of Debts to the Department of Justice

Where appropriate or required by law, a debt collection center must refer debts to the Department of Justice for litigation, compromise, suspension, or termination of collection activity.

With regard to any debt-based in whole or in part on conduct in violation of the antitrust laws or to any debt involving fraud, the presentation of a false claim, or misrepresentation on the part of the debtor or any party having an interest in the claim, a debt collection center must promptly refer the case to the Department of Justice for action.

5450.50—Debt Collection Data and Report on Debts

A debt collection center must have the ability to age debts, know where a specified debt is in the collection process, and determine collections on delinquent debt versus current debt. A debt collection center must also keep accurate records on all debts (including proper accrual and assessment of interest, penalties, and administrative costs on all debts).

A debt collection center must also provide sufficient information to client agencies so that its client agencies can maintain internal debt records and accurately and completely report information on the TROR. If so agreed, between any client-agency and the debt collection center, the debt collection center may complete any required TROR reporting on the client agency’s behalf.

5450. 60—Fees for Debt Collection Services

Debt collection centers may charge fees to client agencies up to the full cost of debt collection services provided. See 31 U.S.C. §§ 3711(g)(6)-(8) and 31 CFR § 285.12(j).

Section 5460—Standards for Initial Designation and Renewal

5460.10—General Guidelines

The Secretary may designate (or renew the existing designation of) an agency as a debt collection center. The Secretary will make such a designation (or renewal) for specific types of debt and for a specified period of time.

5460.20—Standards for Initial Designation and Renewal

While no one factor is determinative, when analyzing an agency’s application for designation as a debt collection center or renewal of such designation, the Secretary will consider whether the agency:

can more effectively service debts compared with Fiscal Service’s Cross-Servicing Program,
has an effective debt collection strategy that provides for use of all appropriate debt collection tools, complies with relevant debt collection law,
to the extent applicable, demonstrates the historical ability to collect its own debts and debts owed to other agencies, and
to the extent applicable, charges fees to client agencies using appropriate legal authorities and an appropriate cost methodology.

To the extent that an agency proposes to service debts that are already exempt from the requirement to refer the debt to Fiscal Service’s Cross-Servicing Program pursuant to TFM Volume I, Part 3, Chapter 5200, Exemption of a Class of Debt from Referral to the Treasury Cross-Servicing Program, the Secretary may determine that some of these factors are not relevant.

Section 5470—Applications for Initial Designation or Renewal of Designation

5470.10—Informal Discussions

If, after reviewing the guidelines in this chapter, an agency believes that a debt collection center designation (or renewal of a designation) may be warranted, agency officials should contact Fiscal Service to discuss the need for a designation (or renewal of a designation) and other options that may be available to address the agency’s concerns. If the agency decides to proceed with seeking designation, it should submit a written draft application (see section 5470.20b, below) to Fiscal Service for review and comment before submitting its formal request for designation. Fiscal Service will review the draft application and initiate informal discussions. The contact at Fiscal Service for these preliminary steps is as follows:

Department of the Treasury
Bureau of the Fiscal Service
Debt Management Services
Director, Receivables Management & Debt Services Division

3201 Pennsy Drive, Building E
Landover, MD 20785

202-874-6810

5470.20—Formal Application 5470.20a—Generally

If, after informal discussions with Fiscal Service in accordance with subsection 5470.10 of this TFM chapter, an agency determines that it wishes to make a formal request for an initial designation (or a renewal of an existing designation), the request must be made, in writing, by the head of the agency or, if appropriately delegated, by the Chief Financial Officer or other senior agency official of an equivalent level.

5470.20b—Required Information

In its application, the agency should:

identify what types of debts it wishes to service,
address whether and how it meets the standards specified in section 5460.20 of this TFM chapter, including by:
- describing why it is better suited to service the debts compared with Fiscal Service’s Cross-Servicing Program,
- describing its debt collection strategy, including the timeframes for the use of its debt collection tools. Debt collection tools include, but are not limited to due process notices, opportunities for review and inspection of records, demand and other letters, phone calls, credit bureau reporting, private collection agencies, litigation, offset, including internal offset and referral to TOP, administrative wage garnishment, and 1099-C reporting. The agency should detail specific actions that the agency takes or will take on delinquent debt, including when these actions are or will be taken,
- providing historical data that supports and confirms the use of all appropriate debt collection tools outlined in the agency’s debt collection strategy,
- providing annual collection rates for the past five years (dollar amounts collected compared to dollar amount of debt outstanding, and number of collections compared to number of debts) on all debt owed to the agency or that the agency is servicing, including delinquent debt. The data should separately detail collection rates for current debt, debt delinquent for 180 days or less, and debts more than 180 days delinquent,
- providing information on the direct and indirect costs of collections, including data on the agency’s actual and projected costs for financial system modernization and/or maintenance of legacy financial systems over the next three to five years,
- indicating whether it charges its client agencies fees and, if so, providing information regarding the authority under which those fees are charged, and an explanation of its fee and costs methodology, and
include evidence that the agency can fulfill all the responsibilities of being a debt collection center, including those listed in section 5450 of this TFM chapter.

5470.20c—Addressing the Application

The request should be addressed to:

Commissioner
Bureau of the Fiscal Service
Department of the Treasury

3201 Pennsy Drive,Building E
Landover,MD 20785

and send a copy to:

Department of the Treasury
Bureau of the Fiscal Service
Debt Management Services
Director, Receivables Management & Debt Services Division

3201 Pennsy Drive, Building E
Landover, MD 20785

5470.30—Fiscal Service Request for Additional Information

If Fiscal Service determines that an application is incomplete or that it needs more information, Fiscal Service will notify the agency and describe the specific information that must be submitted to complete the application. If, after a reasonable period, the Secretary has not received this additional information, Fiscal Service will notify the requesting official that it considers the agency’s application withdrawn.

Section 5480—Secretary’s Response to an Agency Request for Initial Designation or Renewal

The Secretary will evaluate an agency’s application for an initial designation as a debt collection center (or for renewal of an existing designation) based on the standards listed in Section 5460. The Secretary may take any action regarding the designation decision that he or she determines to be in the best interest of the federal government. Such action may include granting, denying, or limiting the designation in whole or in part, or taking alternative actions, as appropriate. In general, designations or renewals of designations should be for a set period.

The Secretary may designate a debt collection center to collect its own debt and/or debt owed to other federal agencies.

Fiscal Service will provide written notification to the agency of the Secretary’s decision.

Section 5490—Reviews and Withdrawals of Debt Collection Center Designations

5490.10—Agency-Requested Withdrawals

An agency may request in writing that the Secretary withdraws its debt collection center designation at any time. The withdrawal request must include a specific date for termination of the designation and provide an exit strategy to ensure that there is no interruption in the collection of any debts being serviced by the debt collection center.

In response to an agency’s request, the Secretary will routinely withdraw such designations unless the Secretary determines that the exit strategy and/or the proposed date for termination would substantially interfere with the collection of referred debt, in which case Fiscal Service and the agency will negotiate a mutually agreeable exit strategy and termination date.

5490.20—Reviews and Treasury-Directed Withdrawals

Fiscal Service may, in its discretion, conduct periodic reviews of a designated debt collection center. Debt collection centers must provide information requested by Fiscal Service to facilitate this review.

The Secretary may determine, based on information and data submitted by the debt collection center for review or any other appropriate data, that it is in the federal government’s best interest to withdraw a debt collection center’s designation. If such a determination is made, the Fiscal Service will notify the head of the agency operating the debt collection center in writing of the decision. The notice will identify the effective date for withdrawal of the designation, which generally will be at least 60 days from the date of the written notice (unless the Secretary determines that an earlier withdrawal date is warranted).

5490.30—Duty to Transfer Referred Debts Upon Withdrawal

Promptly following the withdrawal of a debt collection center’s designation for any reason, the previously-designated debt collection center must transfer the referred accounts (including all relevant data concerning such accounts) to another debt collection center or the client-agency, as directed by Fiscal Service. The previously-designated debt collection center must take timely and good faith action to ensure that the financial interests of the federal government are not jeopardized.

Contact Us

Detailed Contacts

Direct inquiries concerning this TFM chapter to:

Department of the Treasury
Bureau of the Fiscal Service
Debt Management Services
Receivables Management & Debt Services Division

3201 Pennsy Drive, Building E
Landover, MD 20785

202-874-6810
debt-tfm@fiscal.treasury.gov