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Debt Management

Treasury Debt Management

Treasury Offset Program (TOP)

Introduction

This Treasury Financial Manual (TFM) chapter explains how the Treasury Offset Program (TOP) works with the offset of assigned payments.

Section 6110—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.

Section 6120—Scope

The provisions of this TFM chapter 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).

Section 6140—Treasury Offset Program Operations

6140.10—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.

6140.20—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.

6140.30—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.

6140.40—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.

6140.50—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.

Section 6150—Disclosure of TOP Information

6150.10—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.

6150.20—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.

6150.20a—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.

6150.20b—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

 

6150.20c—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.

Section 6160—Guidance for Payment Agencies Regarding Assigned Payments

6160.10—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.

6160.20—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.

6160.30—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.

Contact Us: Federal Agencies and States with Questions

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 

 

Federal agencies and states with questions, should contact TOP at 
 
or


Exemption Of A Class Of Federal Payments From The Treasury Offset Program (TOP)

Introduction

This Treasury Financial Manual (TFM) chapter prescribes the standards and procedures regarding the exemption of classes of payments from centralized administrative offset. This TFM chapter replaces and 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.

Section 6210—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 upon the request of the federal agency that issues the payments.

Section 6220—Scope

The provisions of this TFM chapter 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 TFM chapter does not apply to any payments made under the Internal Revenue Code of 1986.

Section 6240—General Rule

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

Section 6250—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 subsection 6270.10 of this TFM chapter.

Section 6260—Exemptions by the Secretary

6260.10—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.

6260.20—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 ofa class of payments under a non-means-tested program, the Secretary should consider the following questions.

6260.20a—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.

6260.20b—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.

6260.20c—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.

6260.20d—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.

6260.20e—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.

Section 6270—Submitting Exemption Requests

6270.10—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
Disbursing and Debt Management
topfederalpayments@fiscal.treasury.gov

6270.20—Formal Request for Exemption

6270.20a—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 made in writing and sent via email.

6270.20b—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.

6270.20c—Required Information for Exemption Requests for Means-Tested Payments

In addition to the information specified in subsection 6270.20b of this TFM chapter, 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.

6270.20d—Required Information for Exemption Requests for Non-Means-Tested Payments

In addition to the information specified in subsection 6270.20b of this TFM chapter, the requesting agency must provide each of the following items:

  • a detailed justification for the exemption pursuant to any applicable standards set forth in subsection 6260.20 in this TFM chapter, and
  • 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.

6270.20e—Addressing the Request

The agency must send the request to:
Commissioner 
Bureau of the Fiscal Service 
U.S. Department of the Treasury
topfederalpayments@fiscal.treasury.gov

With a copy to: 
Director 
Treasury Offset Program Division
Disbursing and Debt Management
topfederalpayments@fiscal.treasury.gov

Section 6280—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.

Section 6285—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.

Section 6290—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

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 5025—Background

The Cross-Servicing program is a Fiscal Service program managed by its Debt Management Services (DMS) area. It provides collection services on delinquent debt owed to federal agencies. It collects debt through various means, including by contacting debtors through demand letters and telephone calls, negotiating payment agreements, referring debts to private collection contractors, referring debts to the Department of Justice for litigation, reporting debts to credit bureaus, initiating administrative wage garnishment, and submitting debts to the TOP for offset of federal and state payments.

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.

Section 5035—Fiscal Service Responsibilities

5035.10—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, and Fiscal Service procedures. Fiscal Service, or its private collection contractor, will take one or more of the following actions unless the creditor agency and Fiscal Service agree that such actions are not legally permitted or otherwise not in the best interest of the government:

  • Send demand letters,
  • Call the debtor,
  • Refer the debt to TOP for all types of offset, including the offset of payments made by States that participate in the State Reciprocal Program, tax refund payments, salary payments, and other federal nontax payments,
  • Enter into installment payment 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 skip tracing 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,
    • If requested by or on behalf of the debtor, providing the hearing request to the creditor agency for adjudication or, if agreed to by the creditor agency providing the hearing on the creditor agency's behalf, 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, and
  • Take any additional appropriate steps necessary to service the debt.

5035.20—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 5040, 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.

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. 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.

5035.40—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 received while Fiscal Service is servicing the debt. Fiscal Service will consult with the creditor agency as necessary to receive assistance 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 paid in full, that an automatic stay in bankruptcy precludes collection, that the debt was discharged in bankruptcy, or a variety of other bases.

If the creditor agency determines that it must communicate directly with third parties about a matter while Fiscal Service is servicing the debt (see Section 5030.40c, Coordination) or thereafter, Fiscal Service will provide the information necessary for the creditor agency to respond to inquiries. Such inquiries may be from Congress, inspectors general, requestors under the FOIA 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.

5035.50—Return Transferred Debt

Fiscal Service may 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 below $25.00,
  • 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 of the debt 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,
    • The debt is invalid or unenforceable, or
    • Collection is otherwise precluded.
  • 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 a total inability to pay, or
  • Fiscal Service otherwise determines that the return of the debt 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 its own determination.

5035.60—Suspend and/or Terminate Collection Action

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

If appropriate, upon return of a transferred debt with a principal balance of $500,000 or less, Fiscal Service may recommend 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, Fiscal Service will be deemed to have recommended termination of collection action on the debt if Fiscal Service returns a debt with a principal balance of $500,000 or less for any of the following reasons:

  • 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.

If Fiscal Service returns a debt, the creditor agency is responsible for determining whether it is appropriate to terminate collection action.

If Fiscal Service returns a debt due to the filing of a bankruptcy petition, Fiscal Service will not be deemed to recommend termination of debt collection action. The creditor agency remains responsible for collecting the debt in compliance with applicable bankruptcy rules or suspending or terminating collection action on the debt, if appropriate.

5035.70—Credit Collections to the Creditor Agency

Fiscal Service will credit collections (less the fees charged to the creditor agency, per Section 5040, 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 the 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.

Section 5040—Fees and Costs

5040.10—Fees Charged to the Federal Entity

5040.10a—Fiscal Service Fees

The creditor agency must pay fees to Fiscal Service. These fees will be for up to the full cost of servicing transferred debts, including, but not limited to, Fiscal Service’s internal costs and amounts charged by private collection contractors or the Department of Justice (including private counsel under contract with the Department of Justice).

Fiscal Service will announce its fee structure and fee amounts to creditor agencies prior to implementing any new fees, generally prior to the start of each Fiscal Year. 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), not including collections generated and properly identified by the creditor agency as collections through internal offset.

5040.10b—Refund of Fees

Except as specified below, 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.

Fiscal Service generally will review and evaluate requests for refunds to the creditor agency fees in consideration of the following:

  • Fiscal Service, through no fault of the creditor agency, collected an amount greater than the debt balance and charged fees on such over collections,
  • Fiscal Service, through no fault of the creditor agency, collected on a debt after it has been recalled by the creditor agency and charged fees on such collections, or
  • On a case-by-case basis, if: (1) the creditor agency’s error caused the fee to be charged, (2) the fee charged did not relate to collections generated by Fiscal Service, and (3) Fiscal Service learned of the error within 12 months of charging the fees.

Fiscal Service will make the final determination on requests for refunds of collection fees, based on its sole discretion.

5040.20—Costs Charged to the Debtor

Unless otherwise prohibited or provided for by law, 31 U.S.C. § 3717 (e) requires creditor agencies to charge the debtor for the costs of processing and handling transferred debts, including fees charged by Fiscal Service.

The creditor agency must credit all payments made by a debtor to the debt, including payments for fees charged by Fiscal Service to the creditor agency.

Exemption Of A Class Of Debt From Transfer To The Treasury Cross-Servicing Program

Introduction

This Treasury Financial Manual (TFM) chapter 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).

Section 5210—Scope

The provisions of this TFM chapter:

  • 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.

Section 5230—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).

Section 5240—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.

Section 5250—Standards for Issuance of an Exemption

5250.10—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.

5250.20—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.

5250.30—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.

5250.40—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.
Section 5260—Submitting Exemption Requests

5260.10—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 chapter.

5260.20—Formal Request for Exemption

5260.20a—Generally

If, after informal discussions with Fiscal Service in accordance with subsection 5260.10, 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 in Section 5260.20f (Addressing the Request).

5260.20b—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 Section 5250 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).

5260.20c—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.

5260.20d— 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.

5260.20e— 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.

5260.20f—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

 

5260.20g—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.

5260.30—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.

Section 5270—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.

Section 5280—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.

Contact Us: Bureau of the Fiscal Service 

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