Uncle Sam beefs up debt-collection apparatus

Federal agencies for many years have withheld money from their employees' pay to recover debts owed to them. However, armed with new legislation, agencies are rolling out a larger, governmentwide effort to collect debts.

The Debt Collection Improvement Act of 1996 made changes in agency debt-collection procedures to maximize the collection of delinquent debts owed to the government.

The DCIA requires all federal agencies that have outstanding debts to participate in an annual computer match of their delinquent debt records with records of federal employees. The purpose of this exercise is to see whether any of an agency's outstanding delinquent debt is recoverable from federal employees' salaries. The Treasury Department is responsible for establishing this centralized salary-offset/computer matching system and issue regulations for this program.

In addition, under DCIA, agencies must notify Treasury of all debts that are more than 180 days delinquent. This includes debts owed by federal employees that the agency wants to collect from the employee's pay account at another agency. For example, the Internal Revenue Service might want to collect a tax bill from a fed.

Treasury and other federal funds-disbursing officials are required to match payments the federal government makes, such as salary payments, against this file of delinquent debts. Where a match occurs and all the requirements for offset have been met, the payment the federal government would ordinarily make is offset to satisfy the outstanding debt.

The DCIA amended the existing salary-offset rules for federal employees as follows:

* Pay adjustments made to correct clerical or administrative errors or delays that occurred within the four pay periods that precede the adjustment are excluded from the normally required administrative procedures (e.g., notice and hearing). Ditto for debts of $50 or less. What that means is that the government can just take your money if it determines that you owe it. You can appeal later, but meanwhile, the government has your money.

* The definition of ''agency'' was modified to clarify that it includes "executive departments and agencies; the U.S. Postal Service; the Postal Rate Commission; the U.S. Senate; the U.S. House of Representatives; any court, court administrative office or instrumentality in the judicial or legislative branches of the government; and government corporations."

This provision means that anyone receiving a government check is subject to this offset procedure.

The Office of Personnel Management's regulations clarify that in a salary-offset notice to a federal employee, the amount of a deduction may be expressed as a percentage of pay that is not to exceed 15 percent of disposable pay.

What I am not sure I understand is why it is easier for an agency to notify a federal employee that 15 percent of his pay is being withheld than to tell him the exact amount. After all, the disbursing office knows the amount, so what's the big deal?

Debt-Collection Centers

The new law calls for the formation of debt-collection centers. A center may act on behalf of a creditor agency to collect claims through salary offset, subject to any limitations on its authority established by the creditor agency it represents or by the Treasury. A debt-collection center may enter into a written agreement with an indebted employee regarding a repayment schedule or, if there is no agreement, it can establish the terms of a repayment schedule.

I think it makes sense for the government to establish a centralized mechanism for collecting debts owed by federal employees.

However, what happens if a fed responds to a notice received from a debt-collection center by challenging the correctness of the debt? As these regulations are written, the most a debt-collection center can do is arrange for a hearing on the existence or amount of the debt or the repayment schedule by an administrative law judge or, alternatively, another hearing official who is not under the supervision or control of the head of the creditor agency or the debt collection center.

Why not give the debt-collection center the whole ball of wax? On the one hand, a centralized debt-collection facility is being created to streamline the handling of debts, but its effectiveness is then being undermined by not being allowed to deal with employee challenges directly. I think this is a mistake, but I am not surprised. Agencies do not like to give up their turf. Uncle Sam makes progress slowly, one step at a time.

The bottom line: Pay your bills, especially those due to the government.

(Cite: Federal Register, April 16, 1998. Vol. 63, No. 73. Pages 18,850-18,852.)

-- Bureaucratus is a retired federal employee who contributes regularly to Federal Computer Week.


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