Frequently Asked Questions About Debt Collection Improvement Act

"Debt" or "claim" (used synonymously) means any amount of funds or property that an appropriate official of the Federal Government has determined is owed to the United States by a person, organization, or entity other than another federal agency. Most of the debt collection provisions of the DCIA apply to non-tax debt.

A debt or receivable is created when an appropriate federal official determines that an amount is owed. There is no requirement that an amount be litigated or adjudicated prior to its consideration as a debt.

• Funds owed on account of Loans made, insured or guaranteed by the government, including deficiency amounts due after foreclosure or sale of collateral [examples: student direct and guaranteed loans, SBA loans, HUD loans];
• Expenditures of non-appropriated funds [example: value of an object stolen from a military commissary];
• Overpayments, including payments disallowed by Inspector General audits [examples: salary or benefit overpayments, duplicate payments, misused grant funds];
• Any amount the U.S. Government is authorized by statute to collect for the benefit of any person [example: FTC consumer redress];
• The unpaid share of any non-federal partner [i.e., States or local governments] in a program involving a federal payment and a matching or cost-sharing payment by the non-federal partner [example: state share of benefit matching program];
• Any fines or penalties assessed by an agency [examples: civil monetary penalties, OSHA fines for mine safety violations];
• Other amounts of money or property owed to the government [examples: license fees, FOIA fees].

Yes. When an agency sells a property on which it holds a mortgage to satisfy a delinquent debt, the agency must subtract the price it obtained from the amount of the debt owed to it. The difference is a debt which the debtor owes the government.

A debt is delinquent if it has not been paid by the payment date or by the end of any grace period contractually provided. The date of delinquency is the payment due date for an installment payment and the date of mailing of notice for an administrative debt. The date of delinquency starts the clock for the 180-day period contained in the DCIA.

Yes, under certain circumstances debts owed to a State (including the District of Columbia, American Samoa, Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, or the Commonwealth of Puerto Rico) may be collected through TOP.

Child support debts, State income tax obligations, and unemployment compensation debts may be collected through the offset of federal tax refund payments.

In addition, for States that participate in the State Reciprocal Program, TOP can collect debts owed to States through to offset of federal nontax payments (excluding benefit payments).

See also: 31 CFR Section 285.8 - Offset of Tax Refund Payments to Collect State Income Tax Obligations

Before sending a debt to TOP, a creditor agency must provide each debtor with: (a) a written notification of the nature and the amount of the debt, the intention of the agency to collect the debt through administrative offset, and an explanation of the debtor's rights; (b) an opportunity to inspect and copy the records of the agency; (c) an opportunity for review within the agency; and (d) an opportunity to enter into a written repayment agreement.

After the debt has been referred for administrative offset and an offset is taken, the disbursing official conducting the offset must notify the debtor/payee that the offset has occurred (including the amount and type of payment that was used to pay the debt) and the identity of the creditor agency requesting the offset, including a contact name. Regardless of the type of payment, failure of the debtor to receive notice will not affect the legality of the offset (withholding).

5 U.S.C. Sections 552a(o) and (p) were enacted as part of the Computer Matching and Privacy Protection Act of 1988, an amendment to the Privacy Act of 1974. Section 552a(o) requires matching agreements for computer matching programs. Section 552a(p) requires that, prior to taking an adverse action against an individual, an agency must independently verify the information acquired by a computer match and provide the individual with an opportunity to contest the findings.

Treasury has the authority to waive the requirements of 5 U.S.C., Sections 552a (o) and (p) for administrative offset upon written certification that an agency has complied with the administrative due process notice requirements, namely that the agency has provided the debtor with: (a) written notification of the nature and amount of the debt, the intention of the agency to collect the debt through administrative offset, and an explanation of the debtor's rights; (b) an opportunity to inspect and copy the records of the agency; (c) an opportunity for review within the agency; and (d) an opportunity to enter into a written repayment agreement. This certification will be provided by an agency to Treasury when debts are referred for administrative offset and will not need to be duplicated.

No. The DCIA requires that Treasury's Data Integrity Board report to OMB on the matching activities conducted for the purposes of administrative offset (withholding). Reporting does not need to be duplicated by the agencies.

Where the Treasury delinquent debtor database is matched with disbursement records of non-Treasury disbursing officials in order to conduct administrative offset, no matching agreement is required since the waiver authority would have already been exercised. [However, such computerized comparisons with other federal and state disbursing records concerning individuals would remain "matching programs" as defined under the Computer Matching and Privacy Protection Act of 1988. Treasury would meet the requirements for publication of notice of the matching program in the Federal Register, for completing a cost benefit analysis for such matches, and for reporting to Congress and OMB].

Yes, all federal payments are subject to offset unless expressly exempt by statute or by action of the Secretary of the Treasury.

Yes. An agency may obtain a credit report or comparable credit information, such as a summary report, on any individual or entity responsible for a delinquent debt.

Yes. The DCIA requires agencies to report delinquent commercial and consumer non-tax debt to credit bureaus. The DCIA did not change the requirement that an agency must comply with Privacy Act requirements and provide a 60-day notice to the debtor before reporting a delinquent consumer debt.

Yes. An agency is required to obtain TINs in any case which may give rise to a receivable where the individual or entity is considered to be “doing business” with the government. Persons “doing business” with the government would include lenders and servicers under federal guaranteed or insured loan programs; applicants for and recipients of federal licenses, permits, rights-of-way, grants, or benefit payments; contractors; and entities and individuals owing fines, fees, royalties, or penalties to the agency.

Yes. Providing a TIN has now become a condition of receiving such a benefit.

Yes, unless other federal laws prevent disclosure of the TIN.

Yes. The DCIA allows for increasing an administrative claim by the cost of living adjustment in lieu of charging interest and penalties. This adjustment must be computed annually. It is figured by taking the difference between the Consumer Price Index in June of the year before the adjustment [CPI-1] and comparing it to the Consumer Price Index in June of the calendar year in which the claim was first determined or last adjusted, as the case may be [CPI-2]. The cost of living adjustment becomes the percentage that CPI-1 exceeds CPI-2.

This alternative is only applicable to all debt that is not based on extension of government credit through loans, guarantees, or insurance. Examples of debts where this alternative is applicable are fines, penalties, and overpayments.

An agency must by regulation adjust for inflation its civil monetary penalties 180 days after the date of enactment of the DCIA (due by 10/23/96) and at least once every 4 years after that. This does not apply to penalties under the Internal Revenue Code of 1986, the Tariff Act of 1930, the Occupational Safety and Health Act of 1970 or the Social Security Act. Agencies must publish regulations by 10/23/96 and the first adjustment may not exceed 10 percent of the penalty.

Yes, agencies generally must assess interest and penalties on delinquent debt owed by State and local governments.

Yes, the agency must deny credit to a debtor who is delinquent on a federal nontax debt, unless this requirement is waived by the head of the agency. This waiver authority may be delegated only to the Chief Financial Officer or Deputy Chief Financial Officer. The delinquency can be resolved or fixed by the debtor entering into a repayment plan for collection of the amount of the delinquency or by paying the amount of the delinquency in full.