PART 140—DEBT COLLECTION Authority: 5 U.S.C. 5514; 15 U.S.C. 634(b)(6); 31 U.S.C. 3711, 3716, 3720, 3720A and 3720D. Source: 60 FR 62191, Dec. 5, 1995, unless otherwise noted. Subpart A—Overview § 140.1 What does this part cover? This part establishes procedures which SBA may use in the collection, through offset or administrative wage garnishment, of delinquent debts owed to the United States. SBA's failure to comply with any provision of the regulations in this part is not available to any debtor as a defense against collection of the debt through judicial process or otherwise. [70 FR 17587, Apr. 7, 2005] Subpart B—Offset § 140.2 What is a debt and how can the SBA collect it through offset? (a) A debt means an amount owed to the United States from loans made or guaranteed by the United States, and from fees, leases, rents, royalties, services, sales of real or personal property, overpayments, fines, penalties, damages, interest, forfeitures, or any other source. You are a debtor if you owe an amount to the United States from any of these sources. (b) SBA may collect past-due debts through offset by using any of three procedures: administrative offset, salary offset, or IRS tax refund offset. A past-due debt is one which has been reduced to judgment, has been accelerated, or has been due for at least 90 days. (1) Administrative offset. (2) Salary offset. (i) Any amount deducted from salary in any one pay period will not exceed 15 percent of a debtor's disposable pay, unless the debtor agrees in writing to a greater percentage. (ii) SBA also may collect against travel advances, training expenses, disallowed payments, retirement benefits, or any other amount due the employee, including lump-sum payments. (iii) If an employee has terminated employment after salary offset has been initiated, there are no limitations on the amount that can be withheld or offset. (3) IRS tax refund offset. § 140.3 What rights do you have when SBA tries to collect a debt from you through offset? (a) SBA must write to you and tell you that it proposes to collect the debt by reducing your federal paycheck, withholding money the Government owes you, and/or reducing your tax refund. (b) In its written notice to you, SBA must tell you the nature and amount of the debt; that SBA will begin procedures to collect the debt through reduction of your federal paycheck, administrative offset, or reduction of your tax refund; that you have an opportunity to inspect and copy Government records relating to the debt at your expense; and that, before collection begins, you have an opportunity to agree with SBA on a schedule for repayment of your debt. (c) SBA also must tell you that unless you respond within 60 days from the date of the notice, it will disclose to consumer reporting agencies (also known as credit bureaus or credit agencies) that you are responsible for the debt and the specific information it intends to disclose in order to establish your identity. The amount, status, history of the debt, and agency program under which it arose also will be disclosed. (d) If you respond to SBA within 60 days from the date of the notice, SBA will not disclose the information to consumer reporting agencies until it considers your response and determines that you owe a past-due, legally enforceable debt. (e) Within 60 days of the notice you may present evidence that all or part of the debt is not past due or not legally enforceable. (1) Where a salary offset or administrative offset is proposed, you will have the opportunity to present your evidence to SBA's Office of Hearings and Appeals (“OHA”). The rules in part 134 of this title govern the procedural rights to which you are entitled. In order to have a hearing before OHA, you must request a hearing within 15 days of receipt of the written notice described in this section. An OHA judge will issue a decision within 60 days of the date you filed your petition/request for a review or hearing with OHA, unless you were granted additional time within which to file your request for review. (2) Where an income tax refund offset is proposed, you will have the opportunity to request a review and present your evidence to the appropriate SBA Commercial Loan Servicing Center at the address provided in the notice. (f) SBA must consider any evidence you present and must first decide that a debt is past due and legally enforceable. A debt is legally enforceable if there is any forum, including a State or Federal Court or administrative agency, in which SBA's claim would not be barred on the date of offset. Non-judgment debts are enforceable for ten years; judgment debts are enforceable beyond ten years. You will be notified of SBA's decision at least 30 days before any offset deduction is made. You also will be notified of the amount, frequency, proposed beginning date, and duration of the deductions, as well as any obligation to pay interest, penalties, and administrative costs. (g) If there is any substantial change in the status or amount of your debt, SBA will promptly report that change to each consumer reporting agency it originally contacted. (h) SBA will obtain satisfactory assurances from each consumer reporting agency that the consumer reporting agency has complied with all federal laws relating to provision of consumer credit information. (i) If your debt is being repaid by reduction of your income tax refund and you make any additional payments to SBA, SBA will notify the IRS of these payments and your new balance within 10 business days of receiving your payment. (j) When the debt of a federal employee is reduced to court judgment, the employee is not entitled to further review by SBA, but is only entitled to notice of a proposed salary offset resulting from the judgment. The amount deducted may not exceed 15% of disposable pay, except when the deduction of a greater amount is necessary to completely collect the debt within the employee's remaining period of employment. (k) When another federal agency asks SBA to offset a debt for it, SBA will not initiate the requested offset until it has received from the creditor agency a written certification that the debtor owes a debt, its amount, and that the provisions of all applicable statutes and regulations have been complied with fully. (l) SBA may make an offset prior to completion of the procedures described in this part, if: (1) Failure to make an offset would substantially prejudice the government's ability to collect the debt; and (2) The time before the payment would otherwise be made to you does not reasonably permit the completion of the procedures. (3) Such prior offset then must be followed by the completion of the procedures described in this part. (m) Where an IRS tax refund offset is sought, SBA must follow the Department of the Treasury's regulations governing offset of a past-due, legally enforceable debt against tax overpayment. Subpart C—Administrative Wage Garnishment § 140.11 What type of debt is subject to administrative wage garnishment, and how can SBA administratively garnish your pay? (a) General. (b) Scope. (2) This section applies despite any State law. (3) Nothing in this section prevents SBA from settling for less than the full amount of a debt. See, for example, the Federal Claims Collection Standards (FCCS), 31 CFR parts 900-904. (4) SBA's receipt of payments under this section does not prevent SBA from pursuing other debt collection remedies. SBA may pursue debt collection remedies separately or together with administrative wage garnishment. (5) This section does not apply to the collection of delinquent non-tax debt owed to the United States from the wages of Federal employees. Federal pay is subject to the Federal salary offset procedures set forth in 5 U.S.C. 5514 and other laws, including subpart B of this part. (6) Nothing in this section requires SBA to duplicate notices or administrative proceedings required by contract, other laws, or regulations. (c) Definitions. Agency Business day Day Debt claim Debtor or Delinquent non-tax debt Disposable pay Employer Evidence of service Garnishment Withholding order (d) When may the Agency initiate administrative wage garnishment proceedings? (e) Notice Requirements. (i) The type and amount of the debt; (ii) The Agency's intent to collect the debt by making deductions from your pay until the debt is paid in full; (iii) An explanation of your rights, including those listed below, and the timeframe within which you may exercise your rights. (2) You have the right to: (i) Inspect and copy non-privileged SBA records related to the debt; (ii) Enter into a written repayment agreement with SBA under terms agreeable to SBA; and (iii) Have a hearing before an SBA hearing official in accordance with paragraph (f) of this section concerning the existence or the amount of the debt or the terms of the proposed repayment schedule under the garnishment order. However, you are not entitled to a hearing concerning the terms of the proposed repayment schedule if those terms have been established by written agreement under paragraph (e)(2)(ii) of this section. (3) The Agency will retain evidence of service showing when the Agency mailed the pre-garnishment notice. (f) What type of hearing must SBA give me? Procedural rules. (2) Request for hearing. (3) Type of hearing or review. (ii) If the Hearing Official determines an oral hearing is needed, he or she will set the time and location. You may choose whether the oral hearing is conducted in person or by telephone. You must pay all travel expenses for yourself and your witnesses to attend an in-person hearing. SBA will pay telephone charges for telephone hearings. (iii) If no oral hearing is needed, the Hearing Official will accord you a “paper hearing,” that is, the Hearing Official will decide the issues in dispute based upon a review of the written record. The Hearing Official will set a reasonable deadline for the submission of evidence. (4) Effect of timely request for hearing. (5) Untimely request for hearing. (6) Hearing official. (7) Procedure. (i) The date and time of a telephonic hearing; (ii) The date, time, and location of an in-person oral hearing; or (iii) The deadline for the submission of evidence for a written hearing. (8) Burden of proof. (ii) Thereafter, if you dispute the existence or amount of the debt, you must establish by a preponderance of the evidence that no debt exists or that the amount of the debt is incorrect. In addition, you may present evidence that the terms of the repayment schedule are unlawful, would cause you a financial hardship, or that collection of the debt may not be pursued due to operation of law. (9) Record. (10) Date of decision. (11) Content of decision. (i) A summary of the facts presented; (ii) The Hearing Official's findings, analysis and conclusions; and (iii) The terms of any repayment schedule, if applicable. (12) Final agency action. et seq. (13) Failure to appear. (g) Garnishment order. (i) If you did not make a timely request for a pre-garnishment hearing, within 30 days following the 15th business day after the Agency mailed the pre-garnishment notice; (ii) If you did make a timely request for a pre-garnishment hearing, within 30 days after the final agency decision to proceed with garnishment; or, (iii) As soon as reasonably possible thereafter. (2) The garnishment order will be in a form prescribed by the Secretary of the Treasury, and will contain the signature of, or the image of the signature of, SBA's Administrator or his/her delegatee. The garnishment order will contain only the information necessary for compliance, including your name, address, and social security number, the instructions for garnishing your pay, and the address for sending payments. (3) The Agency will retain evidence of service showing when it mailed the garnishment order. (h) Certification by employer. (i) Amounts withheld. (2) Except as shown in paragraphs (i)(3) and (i)(4) of this section, the amount of garnishment will be the lesser of: (i) The amount stated on the garnishment order, not to exceed 15% of your disposable pay; or, (ii) The amount in 15 U.S.C. 1673(a)(2) (Restriction on Garnishment). This is the amount by which your disposable pay exceeds an amount equivalent to thirty times the minimum wage. See 29 CFR 870.10. (3) If your pay is subject to other garnishment orders, the following applies: (i) Unless otherwise provided by Federal law, the Agency garnishment orders must be paid in the amounts in paragraph (i)(2) of this section, and will have priority over other garnishment orders issued later. However, withholding orders for family support have priority over the Agency garnishment orders. (ii) If amounts are being withheld from your pay because of a garnishment order issued before the Agency's garnishment order, or because of a garnishment order for family support issued at any time, the earlier or family support order will have priority, and the amount withheld because of the Agency garnishment order will be the lesser of: (A) The amount calculated under paragraph (i)(2) of this section, or (B) An amount equal to 25% of your disposable pay minus the amount withheld under the garnishment order(s) with priority. (iii) If you owe more than one delinquent non-tax debt, the Agency may issue multiple garnishment orders if the amount withheld from your pay does not exceed the amount in paragraph (i)(2) of this section. (4) You may give written consent for the Agency to garnish from your pay an amount greater than that in paragraphs (i)(2) and (i)(3) of this section. (5) Your employer must promptly pay to the Agency all amounts withheld under a withholding order. (6) Your employer is not required to change normal pay cycles to comply with the garnishment order. (7) No assignment or allotment of your earnings that you have requested may interfere with or prohibit execution of the Agency 's garnishment order. The one exception to this rule is that you may assign or allot earnings because of a family support judgment or order. (8) The garnishment order will state a reasonable time period within which your employer must begin wage garnishment. Your employer must withhold the designated amount from your wages each pay period until the Agency notifies your employer to stop wage garnishment. (j) Exclusions from garnishment. (k) Financial hardship. (2) If you request review under paragraph (k)(1) of this section, you must specifically state why the current amount of garnishment causes you financial hardship and you must send documentation supporting your claim. (3) If the Agency finds financial hardship, the Agency will decide how much and how long to reduce the amount garnished from your pay. The Agency will notify your employer of any reductions. (l) Ending garnishment. (2) The Agency will review your account to ensure that garnishment has stopped if you have paid your debt in full. (m) Prohibited actions. (n) Refunds. (i) A Judge, after a hearing held under paragraph (f) of this section, determines you do not owe a debt to the United States; or (ii) The Agency determines that your employer continued submitting to the Agency withheld wages after you had paid your debt in full. (2) Refunds of amounts collected will not earn interest unless required by federal law or contract. (o) Right of action. [70 FR 17587, Apr. 7, 2005, as amended at 73 FR 63628, Oct. 27, 2008]