Treasury Debt Management

Treasury Offset Program (TOP)

Overview

Introduction

This section explains how the Treasury Offset Program (TOP) works with the offset of assigned payments.

Background

The Department of Treasury, Bureau of the Fiscal Service (Fiscal Service) serves as the primary disbursing office for the federal government. Fiscal Service also operates TOP to collect delinquent federal and state debts by offsetting or levying payments made to delinquent debtors.

A frequent scenario involving assigned payments is the award of attorney’s fees under the Equal Access to Justice Act (EAJA), where the “prevailing party” (i.e., party entitled to payment, or PEP) wants to assign an EAJA award to his or her attorney, 28 U.S.C. § 2412. In such cases, the agency may recognize the assignment only if the prevailing party does not owe any debts that could be collected through offset of the EAJA payment. The Supreme Court unanimously held in Astrue v. Ratliff, 560 U.S. 586 (2010), that the EAJA term "prevailing party" refers to a claimant and not the claimant's attorney, and thus the offset of an EAJA award to collect a claimant's debt to the government is proper.

Scope

The provisions of this section describe how centralized administrative offset (i.e., TOP) works with payments that have been assigned by the party that the United States is legally required to pay (i.e., PEP).

Relevant Legal Authorities

Relevant legal authorities include: 5 U.S.C. § 5514; 26 U.S.C. §§ 6331(h), § 6402; 31 U.S.C. §§ 3716, 3720A, and 3727; and implementing regulations at 31 CFR Part 285, Subpart A.

Treasury Offset Operations

Treasury Offset Program Operations: What is TOP?

TOP is a fully automated system that manages, in accordance with various federal laws, the collection of delinquent federal and state debts by intercepting payments disbursed by federal and state agencies.

Federal and state agencies to which debts are owed (referred to as “creditor agencies”) submit information about delinquent debts to TOP. Debts referred to TOP include federal tax and nontax debts, child support debts, and other debts owed to states.

How are Payments Offset?

Federal agencies that make payments (referred to as “payment agencies”) prepare and certify payment vouchers to federal disbursing officials (including those at Fiscal Service, the Department of Defense, the U.S. Postal Service, and other federal entities), who disburse payments, 31 U.S.C. § 3325; see also 31 U.S.C. § 3716(c)(1)(A). The payment voucher contains information about the payment, including information about the person entitled to receive payment. Prior to disbursing a payment, TOP compares the payment information with debtor information in the TOP database. If there is a match between a person who owes a debt that has been referred to TOP and the person to whom a payment is owed, the disbursing official offsets that payment, in whole or in part, to satisfy the debt. Amounts collected are then transmitted to the appropriate creditor agency or agencies.

The offset of state payments works differently: States that participate in the State Reciprocal Program receive extracts of federal nontax debt records from TOP. Before making a payment, a state will compare its payment information with the debtor information in the extract. The state will then offset the payment, in whole or in part, to satisfy the debt. It will then transmit amounts collected to Fiscal Service, which will in turn, transmit the amounts to the appropriate creditor agency or agencies.

How are Assigned Payments Treated?

Generally, assigned payments are legally subject to offset debts of both the assignor (i.e., the PEP) and the assignee (i.e., the person to whom the payment was assigned). A request by a PEP to make the payment to a third party is typically referred to as an “assignment.” For a valid assignment, the “transfer” or “assignment” of a claim against the United States, including the assignment of an attorney’s fees award, must meet the requirements of applicable law, including the Anti-Assignment Act, 31 U.S.C. § 3727, and the laws that apply to TOP. If the requirements are not satisfied, the assignment, as a practical matter, is not valid as to the United States.

Operationally, a payment agency generally must make a payment to the assignor, unless the payment agency confirms that the assignor does not owe any debts in TOP, in which case the payment may be made to the assignee.

How Often Can Creditor Agencies Refer Debts to TOP, and How Does This Impact Payment Agencies’ Authority to Recognize Assignments?

Creditor agencies can refer debts to TOP (or update information on debts previously referred) seven days a week, 24 hours a day. Because TOP can be updated at almost any moment, any information obtained from TOP is only accurate as of the time that the inquiry is made. As such, in the situation where the payment agency would like to determine whether it may recognize an assignment of a payment, it is imperative that the payment agency determine the existence of a debt that may be subject to offset no later than 30 days prior to the date of disbursement. This protects the United States’ interest in collecting delinquent debt owed to federal and state agencies.

Where the disbursement involves EAJA attorney’s fees, for example, checking for debts when the plaintiff files a petition for an award of fees, before the government responds to the petition, or at any time before the court issues its order, will be premature because any debt incurred by the plaintiff before a payment is disbursed is subject to offset. Treasury properly pays EAJA attorney’s fees directly to attorneys only in cases where “the plaintiff does not owe a debt to the government and assigns the right to receive the fees to the attorney.” See Ratliff, 560 U.S. at 597. As such, a court may not require the government to waive its right of offset by ordering it to recognize an agreement between the plaintiff and attorney regarding the payment of attorney’s fees.

Disclosure of TOP Information

Legal Authorities

TOP information is protected from unauthorized disclosure, including by the Privacy Act of 1974 and by section 6103 of the Internal Revenue Code.

The Privacy Act permits disclosure of information in several instances. For example, disclosure of whether a debt has been referred to TOP is generally not precluded by the Privacy Act if: (a) the debt is owed by a non-individual; (b) an individual requests the information about him or herself; (c) an individual provides written authorization for disclosure of his or her information to a third party; or (d) disclosure is authorized by a routine use published in a “systems of records” notice (SORN). Routine uses must be consistent with the purpose for which the data was collected and not prohibited by other law. Fiscal Service’s SORN relating to TOP records has several routine uses that are consistent with the purpose for which Fiscal Service maintains such records: to collect debt. See Treasury/FMS .014--Debt Collection Operations System, 77 Fed. Reg. 8947 (2012).

Both information about tax debts and the offset of federal tax refund payments is protected by section 6103 of the Internal Revenue Code. The restrictions of section 6103 apply to both individuals and non-individuals.

Authorized Disclosures of TOP Information

Whether Fiscal Service can disclose information from the TOP database depends on the requestor, the type of information being requested, and the justification for permitting disclosure.

Debtor Request

An individual can request information about his or her own debts by contacting the federal or state agency to which the debt is owed. If unsure of whether or to whom they owe a debt, debtors may contact Fiscal Service by calling the TOP Interactive Voice Response (IVR) system at 800-304-3107, or by mail at:

Department of the Treasury
Bureau of the Fiscal Service

P.O. Box 1686
Birmingham, AL 35201-1686

In response to a debtor’s request for his or her own information, the IVR will disclose the existence of a federal nontax or state debt that is currently subject to collection through TOP, the creditor agency name, and contact information for the creditor agency.

Authorized Third Party

An individual may authorize Fiscal Service to disclose information about his or her debts to any third party. Authorized third parties may also obtain information through the TOP IVR at 800-304-3107, or by mail at:

Department of the Treasury
Bureau of the Fiscal Service

P.O. Box 1686
Birmingham, AL 35201-1686

Authorized by Routine Use

Fiscal Service may disclose certain information to the Department of Justice or another federal agency when requested in connection with a legal proceeding, or when needed to facilitate the collection of a debt through offset.

Guidance for Payment Agencies Regarding Assigned Payments

Requirement to Determine Whether Debts Exist

Before recognizing the request of a PEP to make payment directly to a third party, the payment agency must determine that recognizing the assignment will not negatively impact the government’s ability to collect a debt. Nothing in this guidance requires the payment agency to recognize an assignment, even if the PEP does not owe any delinquent debts.

In practical terms, this requires that the payment agency determine that the PEP does not owe any debts currently subject to collection through TOP.

How to Determine Whether Debts Exist

To make such a determination, the payment agency may request that Fiscal Service disclose whether the PEP owes any debts referred to TOP. Because the payment agency does not have a need to know the debt balance, delinquency date, creditor agency, and other information regarding the debt, Fiscal Service will generally not disclose additional information. To the extent a payment agency needs additional information, it can make a written case for why additional information regarding the debt at issue should be disclosed under the Privacy Act and other applicable law. Fiscal Service will review such requests to determine whether such additional disclosure is permissible.

No Split Disbursements

As the disbursing office, Fiscal Service performs an essentially ministerial task by paying the person or entity that the payment agency directs it to pay. However, because Fiscal Service is generally not authorized to disclose the amount of debt to the payment agency, the payment agency cannot direct Fiscal Service on how to split the funds if there is debt. In addition, Fiscal Service is not operationally capable of making split disbursements.

Exemption of a Class of Federal Payments from the Treasury Offset Program (TOP)

This section of payments exempt from TOP prescribes the standards and procedures regarding the exemption of classes of payments from centralized administrative offset. This section supersedes the “Standards and Procedures: Exemption of Classes of Federal Payments from the Treasury Offset Program,” which was issued on January 4, 2001, and updated on September 3, 2013. Any payment exemptions previously granted by the Secretary of the Treasury (the Secretary) remain in effect, until or unless expressly revoked.

Background

The Bureau of the Fiscal Service (Fiscal Service), a bureau of the Department of the Treasury (Treasury), serves as the primary disbursing office for the federal government. Fiscal Service also operates the Treasury Offset Program (TOP) to collect delinquent federal and state debts by offsetting or levying payments made to delinquent debtors.

Certain federal payments are statutorily exempt from centralized administrative offset. Other payments may be exempted from centralized administrative offset by the Secretary of the Treasury (Secretary) upon the request of the federal agency that issues the payments.

Scope

These provisions explain how a federal agency may submit a request to the Secretary for the exemption of a class of payments from centralized administrative offset and prescribes the standards under which the Secretary will evaluate and respond to such requests. This section does not apply to any payments made under the Internal Revenue Code of 1986.

General Rule

Federal payments are subject to offset through TOP unless exempted by federal statute or action of the Secretary.

Statutory Exemptions

There are some federal statutes that protect certain types of payments from creditors. Some of the statutes explicitly prohibit payment offset, either by use of the term “offset” or by reference to 31 U.S.C. § 3716. These types of payments are exempt from offset through TOP.

Other statutes may exempt certain payment from levies, garnishments, and “other legal process.” Because “other legal process” generally refers to a writ of process for the enforcement of a judgment, such statutes do not, on their face, exempt the payments from offset.

The head of the payment agency should notify the Secretary of any statutory exemptions from offset applicable to its payments so that Fiscal Service and the payment agency can make any necessary adjustments to the payment process to ensure such payments are not offset. This notification should be made to the individual listed in the subsection about informal discussion on this page.

Exemptions by the Secretary

Payments under Means-Tested Programs

When requested by the head of the payment agency, the Secretary will exempt from centralized administrative offset a class of payments made under a means-tested program. The Secretary may exempt classes of payments prospectively but has no authority to grant retroactive exemptions.

Payments under Programs which are Not Means-Tested

When requested by the head of the payment agency, the Secretary may exempt from centralized administrative offset a class of payments made under a program that is not means-tested. The Secretary may exempt classes of payments prospectively but has no authority to grant retroactive exemptions.

In evaluating a request for exemption of a class of payments under a non-means-tested program, the Secretary should consider the following questions.

Is the program purpose clearly articulated, and has the agency demonstrated that offset would tend to interfere substantially with or defeat this purpose?

The purpose of a program may be set forth in the program authorizing statute, accompanying legislative history, or congressional reports and other congressional materials describing an agency’s mission. The Secretary will consider whether offset would tend to interfere substantially with or defeat the articulated purpose of the program.

Example: An agency wants a state to build a single bridge. The agency makes a payment to a state to build the bridge. In this case, the bridge might not be built if the payment is offset. So, exempting the payment from offset may be warranted. If, on the other hand, the state built the bridge and then seeks reimbursement for its costs from the agency, the reimbursement payment would likely not warrant exemption. In this case, the offset of the reimbursement payment would not change the fact that the bridge was already built.

Are the proceeds received from the government earmarked, by statute or regulation, for a specific purpose? If so, has the agency demonstrated that offset will interfere substantially with or defeat the program’s purpose because the payment recipient would be unable to use the proceeds for the earmarked purpose?

The Secretary will consider whether payments made under a particular program must be used by the recipient for a specific purpose and whether offset will interfere substantially with or defeat that purpose.

Example: An agency awards a grant to a state. As specified in statute, the proceeds of the grant must be used solely for the development of a vaccine. If the grant payment is offset for debts unrelated to vaccine development, the offset would violate the terms of the grant. In this case, exemption may be warranted. Contrast this with recipients of federal salary payments who can use the funds for whatever purpose they choose.

Is administrative offset cost-effective?

The Secretary will consider whether the benefits of conducting administrative offset outweigh the costs. In considering this factor, the Secretary will consider the volume and dollar amounts of the payments for which an exemption is sought and, if available, historical offset information.

Example: An agency that does not disburse its payments through Fiscal Service makes a small number of payments each year under a single program. Based on the volume and dollar amount of the payments, it is unlikely that collections that result from offset, even in the long term, will exceed the system development costs necessary to offset the payments. In this case, exemption may be warranted.

Is administrative offset administratively feasible?

The Secretary will consider the administrative feasibility of conducting offsets.

Example: If payments made under a program include both means-tested and non-means tested components within a single payment, and the various components cannot be individually identified without great cost (as compared to what might be collected through offset), exemption may be warranted for both the non-means tested and the means-tested components.

Will administrative offset tend to interfere substantially with or defeat an important national interest?

The Secretary will consider whether offset would tend to interfere substantially with or defeat an important national interest, such as national security, foreign relations, or law enforcement. If so, the Secretary will consider whether that interest outweighs the U.S. Government’s interest in collecting delinquent debts with regard to the class of payments at issue.

Submitting Exemption Requests

Informal discussions

If a payment agency believes an exemption for a specific class of payments may be warranted, it should contact Fiscal Service to discuss informally the need for an exemption and other options to meet the agency’s concerns.

The contact point for these informal discussions is:

Director
Treasury Offset Program Division
Debt Management Services

3201 Pennsy Drive, Bldg E,
Landover, MD 20785

202-874-6810

Fax: 202-874-6474

Formal Request for Exemption: Generally

If, after informal discussions with Fiscal Service, a payment agency determines that a formal request for exemption is appropriate, the head of the payment agency may request that the class of payments be exempted from centralized administrative offset. This request must be in writing.

Required Information for All Exemption Requests

The requesting agency must submit information that clearly supports the request for exemption, including each of the following items:

a narrative statement that clearly identifies the class of payments for which an exemption is requested,

the specific purpose of the program,

whether the agency believes the program is means-tested or non-means-tested, and

citations to the relevant statutes and regulations governing the program.

Required Information for Exemption Requests for Means-Tested Payments

In addition to the information specified in the Exemptions by the Secretary subsection, the requesting agency must provide each of the following items:

a clear indication that the program purpose is to provide an adequate standard of living to program beneficiaries, and

a description of the beneficiaries of the program and the criteria used in the program to determine if the beneficiaries need program assistance.

Required Information for Exemption Requests for Non-Means-Tested Payments

In addition to the information specified in the subsection about Required Information for All Exemption Requests, the requesting agency must provide each of the following items:

a detailed justification for the exemption pursuant to any applicable standards set forth in Payments Under Programs which are Not Means Tested in this section.

if the request for exemption is justified in whole or in part on the basis that offset is not cost effective or administratively feasible, the total number and dollar amounts of payments in the class that are estimated to be disbursed on an annual basis in the foreseeable future.

Addressing the Request

The agency must send the request to:

Commissioner
Bureau of the Fiscal Service
U.S. Department of the

3201 Pennsy Drive, Bldg E
Landover, MD 20785

The agency should send a copy of the request to:

Director
Treasury Offset Program Division
Debt Management Services

3201 Pennsy Drive, Bldg E,
Landover, MD 20785

Request for additional information

If Fiscal Service determines that a request is incomplete or that it needs more information, Fiscal Service will notify the requesting agency that the request is incomplete and describe the specific information that must be submitted to complete the exemption request.

If, after a reasonable period of time, the Secretary has not received this additional information, Fiscal Service will notify the requesting official that the request is considered withdrawn.

Secretary’s Response

The Secretary will provide a written response to the request after submission of a completed request.

In responding to any request for exemption, the Secretary may grant the exemption in whole or in part, or deny the exemption in whole or in part. The Secretary may also suggest alternative actions.

Revoking Exemption

In general, exemptions granted by the Secretary are permanent. However, the Secretary may revoke a previously-granted exemption if the Secretary determines it is appropriate to do so. Fiscal Service will notify the payment agency of any such revocation.

Fiscal Service Cross Servicing Responsibilities

Overview

Background

Federal agencies are required to aggressively pursue collection action on all debts arising out of their activities. Debts owed to the United States can arise from various Federal Government programs and actions, including loan and loan guarantee programs; overpayments to beneficiaries, Federal employees, or contractors; or penalties and fines owed from violations of law, etc. Each Federal agency should establish and implement effective collection strategies that suit its needs. Collection strategies must meet all statutory and regulatory requirements, and should include use of all authorized and appropriate debt collection tools. One such tool is the referral of nontax debts to Fiscal Service for debt collection services.

The Debt Collection Improvement Act of 1996 (DCIA) generally requires Federal agencies to transfer any nontax debt delinquent 180 days or more to Fiscal Service for debt collection services. After transfer, Fiscal Service must take appropriate action to service, collect, compromise, or suspend or terminate collection action on the debt (commonly referred to as “Cross-Servicing”). The Digital Accountability and Transparency Act of 2014 amended the DCIA to require agencies to notify Fiscal Service of all debts delinquent over 120 days for purposes of administrative offset.

Fiscal Service has been providing delinquent debt collection services to Federal agencies since the enactment of the DCIA in 1996. Before publication of this TFM chapter, Fiscal Service and Federal agencies entered into Letters of Agreement describing their respective roles and responsibilities. This TFM chapter replaces and supersedes all existing Letters of Agreement. To the extent that this TFM chapter changes current processes, Fiscal Service will work with each Federal agency to implement the provisions of this TFM chapter.

Scope

There are two provisions requiring Federal agencies to submit debts to Fiscal Service for collection:

31 U.S.C. § 3711(g) requires Federal agencies to transfer any nontax debt delinquent 180 days or more to Fiscal Service for general debt collection services; and

31 U.S.C. § 3716(c)(6) requires Federal agencies to notify Fiscal Service of all nontax debts delinquent over 120 days for purposes of administrative offset.

The provisions of this TFM chapter:

Apply to all Federal agencies that are required or authorized to transfer debts to Fiscal Service per 31 U.S.C. § 3711(g); and

Govern the collection of debts required to be, or that have been, transferred to Fiscal Service per 31 U.S.C. § 3711(g).

When a Federal agency refers a debt to Fiscal Service pursuant to 31 U.S.C. § 3711(g) at 120 days or less delinquent, and authorizes Fiscal Service in the agency’s profile form to submit the debt to the Treasury Offset Program, the agency will also be in compliance with the requirement to notify Treasury of the debt for administrative offset purposes at or prior to 120 days delinquent.

General Rule

Creditor agencies must transfer all nonexempt debts that are delinquent 180 days or more to Fiscal Service for debt collection services. However, if an agency relies on Fiscal Service to submit its debts for administrative offset on the agency’s behalf, the agency must transfer the debts to Fiscal Service no later than 120 days delinquent. Fiscal Service strongly encourages creditor agencies to transfer all eligible delinquent debts to Fiscal Service for debt collection services as early as possible without waiting for the debt to be 120 days delinquent. Fiscal Service provides delinquent debt collection services to creditor agencies in compliance with applicable law. Creditor agencies are strongly encouraged to use all available debt collection tools.

Authority

Fiscal Service Authority to Service Debts and Promulgate Regulations

This TFM chapter is issued under the authority of Section 31001(m)(1) of the Debt Collection Improvement Act of 1996, Public Law 104-134, 110 Stat. 1321-358 (1996), codified at 31 U.S.C. § 3711(g), and corresponding regulations codified at 31 CFR § 285.12. Fiscal Service, as a designated debt collection center, is responsible for collecting and otherwise servicing transferred debts. Fiscal Service is also responsible for promulgating regulations governing the roles and responsibilities of Fiscal Service and creditor agencies regarding the collection of delinquent Federal nontax debt.

Fiscal Service Authority to Charge Fees

Per 31 U.S.C. § 3711(g)(6), Fiscal Service is authorized to charge fees to creditor agencies to cover the costs of servicing transferred debts. Per 31 U.S.C. § 3717(e), creditor agencies are generally required to charge debtors for the costs of collection, including the fees charged by Fiscal Service for the servicing of such debts. For a further discussion of fees and costs, see Section 4045, Fees and Costs.

Fiscal Service Authority to Compromise Debts and/or Collect Debts in Installments

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 take appropriate action to collect or compromise transferred debts. With regard to debts that have been transferred to Fiscal Service for debt collection services, Fiscal Service 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. 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.

Fiscal Service may collect and/or compromise debts in accordance with applicable Federal law, including the Federal Claims Collection Standards (31 CFR Parts 900-904). Prior to transferring debts, the creditor agency must provide to Fiscal Service a detailed description of any agency or debt-specific laws, policies, and procedures that govern the compromise and/or collection of its debts. See subsection 4035.10, Complete an Agency Profile Form.

Fiscal Service 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 terminate collection action on transferred debts with a principal balance of up to $500,000. Fiscal Service may approve the 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 4035.20, Certify Debt, when a creditor agency transfers a debt to Fiscal Service, the creditor agency certifies that the debt is valid, legally enforceable, and that all requisite due process has been completed. Fiscal Service may, but is not obligated to, suspend collection activity if Fiscal Service determines that the creditor agency’s certification is incomplete, inaccurate, or unreliable, or if Fiscal Service determines that facts have changed since the creditor agency certified the debt and the debt is no longer valid and/or legally enforceable. In addition, 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).

Fiscal Service Responsibilities

Collect and Compromise Transferred Debt

Fiscal Service, or its private collection contractor in accordance with Fiscal Service’s contract requirements, will take appropriate action to collect and/or compromise transferred debts per applicable statutory and regulatory requirements. Fiscal Service, or its private collection contractor, will take one or more of the following actions, if authorized by the creditor agency in the agency profile form, as Fiscal Service deems appropriate:

Send demand letters;

Call the debtor;

Refer the debt to TOP;

Enter into repayment agreements;

Enter into compromise agreements;

Refer the debt to private collection contractors;

Report the debt to credit bureaus;

Gather information about the debtor, including purchasing credit reports to assist in the collection effort and using skiptracing and asset-location services;

Administratively garnish wages after: Locating the debtor’s employer, sending any required due-process notice to the debtor,Issuing the garnishment order to the employer, and Taking necessary steps to enforce the order against the employer, including, if necessary, initiating litigation;

Refer the debt to the Department of Justice for litigation;

Report compromised debt to the Internal Revenue Service on the appropriate Form 1099-C, if instructed to do so by the creditor agency; and

Take any additional steps necessary to enforce recovery.

Maintain and Update Records

Fiscal Service will make available to the creditor agency sufficient information for the creditor agency to update its delinquent debt records, maintain accurate debt balance information, reconcile its debt information, and run status reports on all collection activities. Fiscal Service will provide the creditor agency with a complete accounting of all fees charged (per Section 4045, Fees and Costs), if requested by the creditor agency.

As appropriate, Fiscal Service will provide the creditor agency with access to other relevant information regarding transferred debts.

Modify Records

Fiscal Service will, if appropriate, update and/or modify its delinquent debt and debtor records with information obtained from its skiptracing and asset-location services. This information may include, among other things, contact information for the debtor (including mailing addresses, physical addresses, phone numbers, and email addresses), alternative debtor names (including alternative spellings, maiden names, married names, nicknames, and other aliases), taxpayer identification numbers, and employer information.

Respond to Disputes and Inquiries

Fiscal Service, or its private collection contractor in accordance with Fiscal Service’s contract requirements, will respond to all debtor inquiries during the time period that Fiscal Service is servicing the debt. As necessary, Fiscal Service will consult with the creditor agency to assist with its responses.

If a debtor (or someone on the debtor’s behalf) disputes the validity or enforceability of a debt, Fiscal Service may, if appropriate, submit such disputes to the creditor agency for resolution. Disputes may be based on assertions that the debt is not owed, that the debt was repaid, that the automatic stay in bankruptcy precludes collection, that the debt was discharged in bankruptcy, or a variety of other bases.

Fiscal Service will provide the information necessary for the creditor agency 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 or the Privacy Act, or other relevant parties.

Fiscal Service will assist the creditor agency in defending litigation resulting from the Government’s collection efforts.

Return Transferred Debt

Fiscal Service may, but is not required to, return a debt to the creditor agency if Fiscal Service determines that one or more of the following factors is met:

The balance of the debt, as reported to Fiscal Service by the creditor agency, is $0;

Fiscal Service has been unable to locate the debtor;

Fiscal Service has been unsuccessful in its debt collection efforts;

The creditor agency has requested the debt be returned, and Fiscal Service, in its discretion, believes that return is appropriate;

The creditor agency’s certification is incomplete, inaccurate, or unreliable, including because:

  • The debtor has filed for bankruptcy and the automatic stay is in effect, or
  • The debt is invalid or unenforceable;

Facts have changed since the creditor agency certified the debt, and the debt is no longer valid and/or legally enforceable;

The debtor (if an individual) is deceased;

The debtor (if an entity) is no longer in business and has dissolved in accordance with applicable law;

The debtor has an inability to pay; or

Fiscal Service determines that return is appropriate.

A return based on a circumstance above is not a final determination by Fiscal Service that such a circumstance exists. The creditor agency must make the final determination about whether the circumstance exists.

Suspend and/or Terminate Collection Action

Fiscal Service may suspend collection action on its own initiative or, if appropriate, at the request of the creditor agency.

If appropriate, upon return of a transferred debt with a principal balance of up to $500,000, Fiscal Service may approve the termination of collection action. Return of a debt, by itself, does not constitute Fiscal Service’s approval to terminate collection action. However, unless otherwise specified, if Fiscal Service returns a debt with a principal balance of up to $500,000 for any of the following reasons, Fiscal Service will be deemed to have granted its approval to terminate collection action:

Fiscal Service has been unable to locate the debtor;

Fiscal Service has been unsuccessful in its debt collection efforts;

Fiscal Service has discovered that the debtor (if an individual) is deceased, unless a claim may be filed against the decedent’s estate; or

The debtor (if an entity) is no longer in business and has dissolved in accordance with applicable law.

The creditor agency is responsible for determining whether it is appropriate to terminate collection action.

Credit Collections to the Creditor Agency

Fiscal Service will credit collections (less the fees charged to the creditor agency, per Section 4045, Fees and Costs) to the appropriate Agency Location Code via the Intra-governmental Payment and Collection System (IPAC).

If Fiscal Service’s collection efforts result in a collection of funds greater than the total amount of debt owed by a debtor or result in a collection of funds in violation of law, the creditor agency is responsible for refunding such erroneous collections, if such a refund is appropriate. If Fiscal Service is aware that an erroneous collection may have occurred, Fiscal Service will notify the creditor agency of the possible erroneous collection.

Fees and Costs

Fees Charged to the Creditor Agency

Fiscal Service Fees

The creditor agency must pay fees to Fiscal Service. The fees are set forth in the Debt Management Services Fee Schedule, which Fiscal Service will make available to creditor agencies. Fees are based on all collections received after the transfer of the debt from the creditor agency to Fiscal Service (and before the debt has been returned to or recalled by the creditor agency), other than collections generated by the creditor agency through internal offset.

Other Fees

In addition to the fees described in subsection 4045.10a, Fiscal Service Fees, the creditor agency must pay other fees and charges due to Fiscal Service for debt collection-related costs, including fees charged by private collection contractors, the Department of Justice, or the Internal Revenue Service. These fees are set forth in the Debt Management Services Fee Schedule.

Refund of Fees

Fiscal Service will retain its fees from amounts collected on behalf of the creditor agency, regardless of whether the collection on which the fee is based was, or is required to be, returned by the creditor agency to the debtor.

Notwithstanding, Fiscal Service will refund to the creditor agency any fees (if such fees are more than $10):

If Fiscal Service, through no fault of the creditor agency, collects an amount greater than the debt balance and charged fees on such overcollections; or

If Fiscal Service erroneously charged the creditor agency a fee, regardless of whether Fiscal Service or the creditor agency caused the error.

Costs Charged to the Debtor

Unless prohibited or otherwise provided for by law, the creditor agency, pursuant to 31 U.S.C. § 3717, must charge the debtor for the costs of processing and handling the transferred debts, including any fees the creditor agency is charged by Fiscal Service.

The creditor agency must credit each debt with all payments made by a debtor on account of a debt, including payments for fees paid by the creditor agency to Fiscal Service.

Exemption of Debt from Treasury Cross-Servicing Program

Introduction

This section provides the standards that the Department of the Treasury (Treasury), acting through the Bureau of the Fiscal Service (Fiscal Service), uses to exempt federal agencies from the requirement to transfer a specific class of delinquent debt to Treasury for collection pursuant to 31 U.S.C. § 3711(g).

Scope

These provisions include:

Apply to all federal agencies seeking an exemption of a class of debts from the mandatory transfer requirement, and

Supersede all versions of the “Standards and Procedures for Exemption of Classes of Debts from the Requirement of Referral to Treasury under the Debt Collection Improvement Act of 1996 (DCIA)" previously issued by Treasury.

Any prior decisions to exempt, deny or withdraw an exemption for a class of debts from mandatory transfer to the Treasury remain in effect.

Authority

The Secretary has the authority to grant, deny, and withdraw exemptions for specific classes of debts from the requirement to transfer debts to the Cross-Servicing Program. See 31 U.S.C. § 3711(g)(2)(B). The DCIA also authorizes the Secretary to establish rules, regulations, and procedures for granting exemptions pursuant to 31 U.S.C. § 3711(g)(10).

Background

The DCIA generally requires federal agencies to transfer any debt that is more than 180 days delinquent to the Cross-Servicing Program. There are five specific statutory exemptions from this requirement. These exemptions cover debts: (1) in litigation or foreclosure, (2) disposed of under an established asset sales program within a specific timeframe, (3) referred to a private collection contractor for a period of time determined by Treasury, (4) referred by, or with the consent of, the Secretary to a Treasury-designated debt collection center for a period of time determined by the Secretary, or (5) collected by the agency through internal offset if such offset is sufficient to collect the claim within three years of delinquency. Treasury regulations at 31 CFR 285.12 include, among other things, more specific descriptions of the exemptions described above.

In addition to the five specific exemptions, the DCIA also granted the Secretary authority to exempt, or withdraw the exemption for, any other class of debts from the mandatory transfer requirement. The Secretary may grant such exemptions at the request of a federal agency or upon the Secretary’s own initiative.

Standards for Issuance of an Exemption: General Rule

When analyzing a potential exemption, the Secretary will determine if granting the exemption is in the best interest of the United States. See 31 CFR 285.12(d)(5). To do so, the Secretary will consider three factors:

Factor 1: Whether an exemption is the best means to protect the government’s financial interest.

Factor 2: Whether transfer of the class of debts to Treasury interferes with the program’s goals.

Factor 3: Whether an exemption is consistent with the purposes of the DCIA.

The Secretary will give appropriate weight to these factors based on the circumstances and the specific exemption at issue. The Secretary may consider other factors in his or her discretion.

Factor 1: Best Means to Protect the Government’s Financial Interest

The Secretary will consider whether collections by the government would be greater, costs of collection would be lower, and/or some other type of financial gain would accrue to the government, if the agency does not transfer the applicable class of debts to the Cross-Servicing Program. The Secretary will consider the number, dollar amount, age, and collection rates of the applicable class of debts.

Factor 2: Transfer to Treasury Would Interfere with Program Goals

The Secretary will also consider whether transfer of the applicable class of debts to the Cross-Servicing Program would interfere with the goals of the program under which the debts arose.

Factor 3: Exemption is Consistent with the Purposes of the DCIA

Finally, the Secretary will consider whether the exemption of the class of debts is consistent with the purposes of the DCIA, which are:

To maximize collections of delinquent debts owed to the government by ensuring quick action to enforce recovery of debts and the use of all appropriate tools.

To minimize the cost of collection by consolidating related functions and activities and utilizing interagency teams.

To reduce losses arising from debt management activities by requiring proper screening of potential borrowers, aggressive monitoring of all accounts, and sharing of information within and among federal agencies.

To ensure that the public is fully informed of the federal government’s debt collection policies, and that debtors are cognizant of their financial obligations to repay amounts owed to the federal government.

To ensure that debtors have all appropriate due process rights, including the ability to verify, challenge, and request compromise of claims, and that they also have access to administrative appeals procedures which are both reasonable and protect the interests of the United States.

To encourage agencies, when appropriate, to sell delinquent debts, particularly debts with underlying collateral.

To rely on the experience and expertise of private sector professionals to provide debt collection services to federal agencies.

Submitting Exemption Requests: Informal Discussions

If an agency believes an exemption for a specific class of debts may be warranted, it should contact Fiscal Service to discuss informally the need for an exemption and other options to meet the agency’s concerns. The contact point for these informal discussions is listed in the "Contact" section of this section.

Formal Request for Exemption: Generally

If, after informal discussions with Fiscal Service in accordance with the subsection about informal discussions above, an agency determines that a formal request for exemption is appropriate, the head of the agency may request exemption of the class of debts from mandatory transfer. Formal requests should be addressed and sent as stated the subsection Addressing the Request above.

Required Information for All Exemption Requests

The requesting agency must submit a narrative statement that clearly identifies the class of debts for which it is seeking an exemption, and that describes whether and how each of the factors described in the Standards for Issuance of an Exemption above apply. The requesting agency must also provide citations to any specific statutes and regulations applicable to the class of debts (e.g., laws that detail program purposes or provide the agency authority to utilize unique debt collection tools).

Required Information to Support Factor 1, Best Financial Interest of the Government

If the requesting agency asserts that an exemption is in the best financial interest of the government, it must, to the extent possible, document the following with regard to the specific class of debts for which the agency is seeking an exemption:

For each of the last five years, the total number and aggregate dollar amount of: (1) debts in the class (including both current and delinquent debt); (2) all delinquent debt in the class; (3) debts in the class less than or equal to 180 days delinquent; (4) debts in the class more than 180 days delinquent.

For each of the last five years, annual collection rates for each of the four categories listed above.

For each of the last five years, annual collection costs for each of the four categories listed above.

The agency’s use of all appropriate tools to collect delinquent debt (including, for example, due process notices, opportunities for review and inspection of records, demand and other letters, phone calls, credit bureau reporting, private collection agencies, litigation, offset, administrative wage garnishment, 1099-C reporting, and implementation of procedures to ensure that delinquent debtors do not receive financial assistance in the form of federal loans or loan guaranties). The description should also describe any unique tools available to the agency to collect the class of debts for which it is requesting an exemption, along with applicable statutory or regulatory citations.

Any unique characteristics of the debts within the class that would make collection by the Cross-Servicing Program less effective, or which better positions the agency to maximize collections and/or minimize costs.

A detailed explanation of its debt collection processes. The explanation should outline the steps the agency takes (or will take) in collecting delinquent debt and describe the agency’s collection strategy for debts. The strategy should address the timeframes for, and use of, all appropriate debt collection tools.

Required Information to Support Factor 2, Interference with Program Goals

If the requesting agency is asserting that the transfer of a class of debts would interfere with program goals, it must provide a written explanation that describes:

Specific goals to be achieved by the program.

Adverse impact transfer of debts to the Cross-Servicing Program has (or is expected to have) on the agency meeting its program goals.

Why the agency cannot sufficiently mitigate any adverse impact that transfer would have.

Required Information to Support Factor 3, Consistency with DCIA’s Purposes

If the requesting agency is asserting that exemption of the class of debts is consistent with some or all of the purposes of the DCIA, it must provide a written explanation addressing:

The specific purposes of the DCIA that would be fulfilled by exemption.

Specific tools and resources that the agency has to collect debts within the class in furtherance of the DCIA’s purposes.

Any other data or information that supports the agency’s position that exemption will be consistent with the DCIA.

Addressing the Request

The agency should address the request to:

Commissioner
Bureau of the Fiscal Service
Department of the Treasury

3201 Pennsy Drive, Building E
Landover, MD 20785

And send the request to:

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

3201 Pennsy Drive, Building E
Landover, MD 20785

Request for Additional Information

If Fiscal Service determines that a request is incomplete, or that it needs more information, Fiscal Service will promptly notify the requesting agency that the request is incomplete and describe the specific information that must be submitted to complete the exemption request.

If, after a reasonable period of time, the Secretary has not received this additional information or notification from the requesting agency that more time is needed to provide the additional information, Fiscal Service will notify the requesting official that the request is considered withdrawn.

Response to an Agency Request for Exemption

The Secretary will provide a written response to the request after submission of a completed request.

In responding to any request for exemption, the Secretary may grant the exemption in whole or in part, or deny the exemption in whole or in part. The Secretary may also suggest alternative actions.

Exemptions Initiated by the Secretary

The Secretary has the authority to grant exemptions on his or her own initiative. If the Secretary determines that such an exemption is appropriate, the Secretary will communicate this decision to impacted agencies. Because exempt debts may, but are not required to be, transferred to the Cross-Servicing Program, an agency may still refer its debts to the Cross-Servicing Program even if the Secretary grants such an exemption.

Withdrawing Exemption

In general, exemptions granted by the Secretary are permanent. However, the Secretary may withdraw a previously-granted exemption if the Secretary determines it is appropriate to do so. Fiscal Service will notify the payment agency of any such revocation.

Federal Financial Management Standards

Functions and Activities

Delinquent Debt Collection FFM.070.010

Generate and send dunning notices, with due process language, to alert the payers of debt delinquent status;

Determine allocation of amounts collected (e.g., first to penalties and administrative costs, second to interest, then to accounts receivable);

Update receivables based on agency negotiated installment plan or compromise agreement;

Request agency internally offset a federal payment;

Consult agency’s legal counsel to determine whether to refer debts to the Department of Justice for litigation or use other litigation authority;

Refer debts to Treasury’s Debt Management Services (DMS) for cross-servicing based on agency advice and as soon as due process requirements are met (i.e., 120 days delinquent);

Includes processing of fines, penalties, and administrative fees

Federal Financial Management System Requirements (FFMSR)

Managing Debt (2.5.1)

Capture debt category (for example, bankruptcy and at private collection agency) to support debt reporting consistent with the TFM.

Managing Debt (2.5.2)

Match delinquent debtor information with payment recipient information within and between federal agencies to affect administrative debt offsets (for example, by administrative wage garnishment and request for paying agency to collect the offset) as required by the CFR as well as OMB Circular No. A-129, and consistent with the TFM.

Managing Debt (2.5.6)

Refer debt for collection (for example, to Treasury if delinquent more than 120 days and to the Department of Justice whenever the agency determines debt is uncollectable) as required by OMB Circular No. A-129 and consistent with the TFM.

Reporting on Debt (2.6.1)

Provide receivable and collection status data to support the receivable and collection reporting activities as defined in OMB Circular No. A-129 and as specified in the TFM.

Use Cases

Bill to Collect

Treasury Financial Manual (TFM)

TFM Volume I Part 3 Chapter 6100; Centralized Offset of assigned Payments

TFM Volume I Part 3 Chapter 6200; Exemption of a Class of Federal Payments from the Treasury Offset Program (TOP)

TFM Volume I Part 3 Chapter 5200; Exemption of a Class of Debt from Transfer to the Treasury Cross-Servicing Program

TFM Volume I, Part 4, Chapter 4000; Debt Management Services Collection of Delinquent Nontax Debt

Other Resources

Office of Management and Budget (OMB)

The Office of Management and Budget (OMB) oversees the implementation of the President’s vision across the Executive Branch. OMB carries out budget development and execution that is applicable to Collections and Receivables.

Contact Information

Contact Details

Direct inquiries concerning Debt Management to:

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

3201 Pennsy Drive, Building E
Landover, MD 20785

202-874-6810

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Debt Management

This page was last updated on May 24, 2021.