[Federal Register: April 12, 2002 (Volume 67, Number 71)]
[Proposed Rules]
[Page 18071-18080]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ap02-23]
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Part III
Department of Education
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34 CFR Part 34
Administrative Wage Garnishment; Proposed Rule
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DEPARTMENT OF EDUCATION
34 CFR Part 34
Administrative Wage Garnishment
AGENCY: Office of the Chief Financial Officer, Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: These proposed regulations would implement for the Department
of Education the provisions for administrative wage garnishment in the
Debt Collection Improvement Act of 1996 (DCIA). The DCIA authorizes
Federal agencies to garnish administratively, that is, without court
order, the disposable pay of an individual who is not a Federal
employee to collect a delinquent nontax debt owed to the United States.
These proposed regulations would implement this authority for a debt
owed to the United States under a program administered by the
Department of Education.
DATES: We must receive your comments on or before June 11, 2002.
ADDRESSES: Address all comments about these proposed regulations to
Marian E. Currie, U.S. Department of Education, 830 First Street NE.,
room 41B4, Washington, DC 20202. If you prefer to send your comments
through the Internet, use the following address: marian.currie@ed.gov
You must include the term ``Comments on DCIA NPRM'' in the subject
line of your electronic message.
FOR FURTHER INFORMATION CONTACT: Marian E. Currie. Telephone: (202)
377-3212 or via Internet: marian.currie@ed.gov If you use a
telecommunications device for the deaf (TDD), you may call the Federal
Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person listed under FOR FURTHER
INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Invitation To Comment
We invite you to submit comments regarding these proposed
regulations. To ensure that your comments have maximum effect in
developing the final regulations, we urge you to identify clearly the
specific section or sections of the proposed regulations that each of
your comments addresses and to arrange your comments in the same order
as the proposed regulations.
We invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
take to reduce potential costs or increase potential benefits while
preserving the effective and efficient administration of the program.
During and after the comment period, you may inspect all public
comments about these proposed regulations in room 41B4, Union Center
Plaza, 830 First Street, NE., Washington, DC, between the hours of 8:30
a.m. and 4 p.m., Eastern time, Monday through Friday of each week
except Federal holidays.
Assistance to Individuals With Disabilities in Reviewing the
Rulemaking Record
On request, we will supply an appropriate aid, such as a reader or
print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of aid, please contact the person
listed under FOR FURTHER INFORMATION CONTACT.
Background
These proposed regulations would implement the wage garnishment
provision in section 31001(o) of the Debt Collection Improvement Act of
1996 (DCIA), Pub. L. 104-134, 110 Stat. 1321-358 (Apr. 26, 1996),
codified at 31 U.S.C. 3720D. Wage garnishment is a procedure by which
an employer withholds amounts from the wages of an employee who is a
debtor and pays those amounts to the employee's creditor in
satisfaction of the debt. The DCIA authorizes a Federal agency to
garnish administratively--as distinct from garnishing by court order--
up to 15 percent of the disposable pay of a debtor to satisfy
delinquent nontax debt owed to the United States. Section 31001(o) of
the DCIA preempts State laws that prohibit wage garnishment or
otherwise conflict with these wage garnishment procedures.
We have used administrative wage garnishment to collect defaulted
loan debts under section 488A of the Higher Education Act (HEA) of
1965, as amended by section 605 of the Emergency Unemployment
Compensation Act of 1991, Pub. L. 102-164, 105 Stat. 1066 (Nov. 15,
1991), codified at 20 U.S.C. 1095a. The HEA authorizes the Secretary
and student loan guarantee agencies to collect defaulted student loans
by administrative garnishment up to 10 percent of a debtor's disposable
pay under terms and due process provisions in almost all other respects
virtually identical to those enacted in the DCIA.
The Secretary has not adopted regulations governing implementation
of the HEA garnishment authority, but has followed the statutory
provisions directly. Treasury Department regulations require Federal
agencies that use the DCIA garnishment authority either to adopt
regulations promulgated by the Treasury Department Financial Management
Service (FMS) (31 CFR 285.11) or to adopt their own regulations
consistent with FMS regulations. Under these proposed regulations, we
would adopt regulations for the use of this DCIA authority by us (31
CFR 285.11(f)). In the future we will use the DCIA authority to collect
those loans we are now collecting by means of the HEA garnishment
authority.
We expect that the great majority of the debts that we would
collect using the DCIA wage garnishment authority under these proposed
regulations would be defaulted loans and grant overpayments arising
under the HEA student financial assistance programs. We would use
administrative wage garnishment under the DCIA to collect these debts
in generally the same way that we have used administrative wage
garnishment under HEA section 488A (20 U.S.C. 1095a) to collect
defaulted loans held by the Department.
A few garnishment provisions of the DCIA differ from requirements
under the HEA; two of these differences are significant. First, the
DCIA authorizes garnishment of up to 15 percent of a debtor's
disposable pay (31 U.S.C. 3720D(b)(1)), rather than 10 percent, as
under the HEA (20 U.S.C. 1095a(a)(1)). Second, under Treasury
Department regulations governing the use of DCIA garnishment, amounts
deducted from a debtor's gross pay for health insurance premiums, as
well as amounts required by law to be withheld by the employer, are
excluded from the debtor's disposable pay (31 CFR 285.11(c)). Those
amounts are not deducted in computing disposable pay under the HEA,
because HEA Sec. 488A(e) defines the term disposable pay to exclude
only those amounts required by law to be withheld. (20 U.S.C.
1095a(e)).
We may also use DCIA wage garnishment under this rule to collect
``administrative debts'' that are not based on student loan or grant
obligations, and may transfer the debt to the Treasury Department for
servicing under 31 U.S.C. 3711(g)(1). We propose
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to follow these rules for conducting wage garnishment to collect
administrative debts, but if we transfer servicing of a debt to
Treasury, wage garnishment conducted by Treasury will also be governed
by these procedures.
Significant Proposed Regulations
Under the requirements of the DCIA, these proposed regulations
would establish the following rules and procedures:
1. Notice
If you are a debtor, at least 30 days before we initiate
garnishment action, we would send you written notice informing you of
the nature and amount of the debt, our intention to collect the debt
through deductions from pay, and an explanation of your rights
regarding the proposed action.
2. Rights of the Debtor
We would provide you with an opportunity to inspect and copy
records related to the debt, to establish a repayment agreement, and to
receive a hearing concerning the existence or amount of the debt and
the rate at which the garnishment order would require withholding by
your employer. You may object to the garnishment on the grounds that
you do not owe the debt, that you do not owe a debt in the amount
stated in the notice, that you are repaying the debt under a
satisfactory repayment agreement with us, or that we cannot enforce the
debt by garnishment against you at the time because collection action
is stayed by the automatic stay on collection imposed by bankruptcy law
(11 U.S.C. 362(a)) or because you have recently been reemployed after
an involuntary separation from employment and are therefore protected
from garnishment for the first twelve-month period of reemployment (31
U.S.C. 3720D(b)(6)).
Before issuing a garnishment order, we would provide you with a
hearing if we receive your request with a postmark within 30 days of
our mailing the notice. If we did not receive your hearing request
within the 30-day period, we would provide you a hearing but would not
delay issuance of a garnishment order in the amount and at the rate
proposed in the notice of proposed garnishment.
If you are a debtor who demonstrated that you had been
involuntarily separated from employment, we, as required by the DCIA,
would not garnish your wages until you had been reemployed continuously
for at least 12 months. Exemption from garnishment on the basis of
recent reemployment, like other grounds for not proceeding with
garnishment, is a defense you would have to establish by credible
evidence.
If you've received a decision, the proposed rule would not limit
your ability to file a subsequent request for a hearing. However, you
would have to demonstrate with any subsequent request (1) that your
financial circumstances had changed materially since the initial
decision and that you thus warranted a reduction in the garnishment
rate or amount; or (2) that newly submitted evidence not previously
considered demonstrated that we should reconsider the initial decision.
We have limited resources to devote to hearing activities and must
ensure a timely hearing to any debtor who seeks a hearing in response
to a notice of proposed garnishment. Thus, in the case of a debtor who
has already received a hearing, we would review a request for
reconsideration and arrange for proceedings to implement that
reconsideration only as resources permit. We would notify the debtor
only if we agreed to reconsider the decision.
3. Financial Hardship
The DCIA, like the HEA, allows you to object to the terms of a
proposed payment schedule. As with the HEA garnishment authority, we
consider this provision to allow you to object to the amount of the
proposed garnishment only on the ground that the garnishment would
cause financial hardship to you and your dependents.
As with any other objection, you would bear the burden of proof of
a claim of hardship. For you to support a claim of financial hardship,
we would typically require you to complete a financial statement as
part of the hearing process and to report the income and expenses on
which your hardship claim rests. This statement would have to disclose
the income available from all members of your household unit whose
living expenses you claimed in this process. Thus, we would require you
to report the amount of disposable pay and other income received by
you, your spouse, and any other member of your household.
For purposes of this part, financial hardship is the inability to
meet basic living expenses using the disposable pay and other income of
you and your spouse and dependents. Basic living expenses are expenses
incurred for goods and services necessary to the survival of your
family and in amounts that are reasonable.
Drawing on a comprehensive body of empirical data, the Internal
Revenue Service (IRS) has analyzed the amounts needed to meet the
various categories of necessary living expenses for family sizes of
different income levels on a national, regional, and local level. Based
on that data, IRS has adopted standards (the ``National Standards'') to
use in determining the amount that delinquent taxpayers should be
expected to use to pay their tax obligations.
We believe that similarly situated debtors should be held to the
same levels of effort to meet their financial obligations to the
taxpayer. To achieve this goal of simple fairness to debtors, we now
use (for garnishment determinations made under the HEA garnishment
authority) and would continue to use these standards for DCIA
garnishment determinations. They would serve as an authoritative and
well-established base against which to measure the reasonableness of
the amounts claimed for necessary expenses by a delinquent debtor in
response to a garnishment action.
If you are a debtor who claims financial hardship, we consider a
necessary expense to be reasonable to the extent that the amount does
not exceed the amount spent by family units of the same size and
similar income, as those amounts are identified in the National
Standards. If you claim expenses that exceed the National Standards,
you must prove that circumstances unique to your family require the
amount you have claimed for that expense.
Case law interpreting the kind of undue hardship that a debtor must
prove in order to obtain a discharge of an educational loan or benefit
debt in bankruptcy under 11 U.S.C. 523(a)(8) offers useful guidance in
assessing financial hardship in the context of garnishment under the
DCIA (and the HEA, as well). In assessing long-term undue hardship
claims, that precedent discounts debtor preferences about expenses such
as private schooling for family members, retirement saving, automobile
ownership, vacations and entertainment, charitable contributions, and
career choices. The precedent is even more persuasive when applied to
weight given these preferences in the short-term hardship assessment
conducted in garnishment proceedings.
The facts that may justify above-average expenses would vary from
family to family, but a debtor must prove that the proposed garnishment
would cause significant short-term inability to meet basic living
expenses. Hardship is not mere inconvenience or even inability to
satisfy lifestyle choices and financial obligations already incurred in
disregard of the debt owed to the public and now collectible by
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garnishment. Repayment of a debt owed to the public, in particular,
debts arising from publicly-financed student financial assistance
received by a debtor, is not an expense to be honored only after other
expenses have been satisfied.
Hardship assessments in bankruptcy and garnishment contexts do
differ regarding the period for which each assesses the claimed
hardship. Undue hardship in bankruptcy looks to whether financial
hardship will persist over the long term--the period over which the
loan may be repaid under available options. Hardship for garnishment
purposes looks only to the short term--a six-month period--after which
the debtor may apply for reconsideration. A finding of financial
hardship in a garnishment proceeding, therefore, does not establish or
even provide persuasive support for an undue hardship claim in
bankruptcy.
4. Employer's Responsibilities
If you are the employer of a delinquent debtor, we would send you a
wage garnishment order directing that you pay a portion of the debtor's
wages to us. By incorporating a provision of the Treasury Department
regulations (31 CFR 285.11(h)), these proposed regulations would
require you to certify certain payment information about the debtor.
The certification form would serve multiple purposes. First, the
form would provide us with information necessary to monitor your
compliance with our wage garnishment order in accordance with the
requirements of the DCIA and applicable laws. The form would also
provide information enabling us to calculate anticipated collection
amounts to determine whether to pursue other collection tools. Finally,
the form would assist you in calculating the amount you must withhold
from the debtor's disposable pay. Failure to complete the certification
form as required would affect your responsibility to withhold the
appropriate garnishment amount within a ``reasonable time'' in
accordance with these proposed regulations.
The DCIA authorizes us to sue an employer for amounts not properly
withheld from the wages payable to the debtor. However, you would not
be required to vary your normal pay cycle to comply with the
garnishment order. In addition, the DCIA prohibits taking disciplinary
actions against the debtor based on the fact that the debtor's wages
are subject to administrative garnishment.
5. Use of Contractors
As Treasury Department regulations make clear, government agencies
may not contract out ``inherently governmental functions.'' (See Office
of Management and Budget (OMB) Circular A-76.) Therefore, we cannot
delegate to our contractors any ``inherently governmental function'' in
connection with garnishment action. Consistent with 31 CFR 285.11(c),
we do not delegate to our contractors ``inherently governmental
functions'' such as ruling on a debtor's objections to garnishment,
deciding to issue a garnishment order regarding an individual debtor,
or causing a garnishment order to be issued regarding an individual
debtor.
We do make extensive use of our collection contractors in
connection with collection by garnishment. These functions may include
recommending garnishment action with respect to particular debtors,
receiving and reviewing for completeness objections to garnishment and
requests for hearing, attempting to secure missing information needed
to resolve satisfactorily several kinds of objections to garnishment,
analyzing financial statements under Department guidelines to determine
affordable repayment amounts, and negotiating repayment agreements with
debtors. We may also use other contracted services to analyze debtor
objections to garnishment and propose to our hearing official
appropriate findings with respect to particular objections. However,
none of these contracted services are ``inherently governmental
functions.''
6. Multiple Garnishment Orders and Federal Limitation on Amounts
Withheld
We would recognize in these proposed regulations the limitations
imposed by the Consumer Credit Protection Act, 15 U.S.C. 1671-1677
(CCPA) on garnishment actions. Those limitations apply to garnishments
taken under the authority of the DCIA. The CCPA establishes minimum
disposable pay requirements on the wage garnishment provisions of the
DCIA and of these proposed regulations. (See CCPA, Sec. 303(a)(2),
codified at 15 U.S.C. 1673(a)(2) (maximum allowable garnishment)).
Under Sec. 34.19(b), the maximum amount that would be withheld under a
DCIA garnishment order would be the lesser of the amount indicated in
the order (up to 15 percent of the debtor's disposable pay) or the
amount specified in 15 U.S.C. 1673(a)(2). The latter is the amount by
which a debtor's disposable pay exceeds an amount equivalent to 30
times the minimum wage.
These proposed regulations would also recognize that we may issue
multiple garnishment orders so long as the total amount garnished does
not exceed the garnishment amount permitted under 15 U.S.C. 1673(a)(2).
We ordinarily do not know the amount of a debtor's disposable pay and
cannot determine whether payment of the amount stated in the order
would cause a greater amount to be withheld than permitted by the CCPA.
Because the employer knows both the debtor's disposable pay and the
amount that may be currently withheld under other garnishment orders,
if any, the employer as a practical matter will be the party best able
to determine the amount that may actually be withholdable to satisfy
our garnishment order. The order, therefore, would direct the employer
to withhold and remit the amount demanded unless to do so would--either
by itself or with other withholding orders outstanding--exceed the
amount permitted by the CCPA for that debtor. Therefore, the employer,
not the creditor, is responsible to ensure that, with regard to that
employee, the total amount withheld and paid out for all garnishment
orders--including those issued under DCIA authority--does not exceed
the limits imposed by the CCPA.
7. Effect of Deadlines for Completion of Actions
The DCIA establishes a number of time limits within which a debtor
and a creditor agency must complete various actions. Based on
experience in conducting garnishment under the HEA, we wish to clarify
the consequences of failure to meet those requirements under the HEA,
as well as under the DCIA. Because the applicable provisions in the two
statutes are identical, we would consider the same principles in the
DCIA to apply, also, to time limits established in the HEA with respect
to garnishment actions.
The debtor would be required to meet any deadline established in
these proposed regulations or in any extension of this deadline
provided by a Department official in an individual case. Failure by the
debtor to meet a deadline does not result in forfeiture of a procedural
right such as the right to access to records or the right to a hearing.
However, failure to meet a deadline does generally result in the
garnishment process moving forward, up to and including the issuance of
a garnishment order. In particular, we would provide a hearing to a
debtor who makes an untimely request for a
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hearing, but we would not suspend garnishment proceedings until that
hearing has been conducted.
The DCIA, like its HEA counterpart, directs the creditor agency to
complete any hearing within 60 days of the date on which the debtor
files a request for a hearing (31 U.S.C. 3720D(c)(3)). (See 20 U.S.C.
1095a(b).) Neither statute adopts a particular consequence for failure
to complete the hearing within 60 days. Therefore, consistent with
well-established case law, we would not consider our failure to issue a
decision within the 60-day period to invalidate a garnishment
proceeding or preclude issuance of a garnishment order when we issue a
decision beyond that period. United States v. James Daniel Good Real
Property, 510 U.S. 43, 63 (1993); United States v. Montalvo-Murillo,
495 U.S. 711 (1990); Brock v. Pierce County, 476 U.S. 253 (1986).
With respect to a debtor who files a timely hearing request,
because we would not issue a garnishment order until the requested
hearing is completed and a decision issued, that debtor would suffer no
injury if the hearing and decision are not completed within the 60-day
period.
With respect to a debtor who files an untimely hearing request,
that request would not suspend garnishment proceedings. Therefore, the
debtor's wages could be withheld before the requested hearing could be
held and a decision issued. Under these proposed regulations, we would
suspend any garnishment order with respect to that debtor if the
hearing is not completed and a decision issued within the 60-day
period. The 60-day rule, as implemented in these proposed regulations,
would thus ensure that a debtor who makes a tardy request for a hearing
would suffer only a limited injury.
The proposed regulations contain a number of provisions that would
have the Department take certain actions within specific time periods,
such as the issuance of a garnishment order within 30 days of a hearing
decision adverse to a debtor (Sec. 34.18(a)). Unless the proposed
regulations state a specific consequence for failure to complete any
action within the specified period, these provisions would not affect
the validity of the action.
Executive Order 12866
Clarity of the Regulations
Executive Order 12866 and the Presidential memorandum of June 1,
1998 on ``Plain Language in Government Writing'' require each agency to
write regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations easier to understand, including answers to questions such
as the following:
Are the requirements in the proposed regulations clearly
stated?
Do the proposed regulations contain technical terms or
other wording that interferes with their clarity?
Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
Would the proposed regulations be easier to understand if
we divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 34.1 Purpose of this part.
Could the description of the proposed regulations in the
SUPPLEMENTARY INFORMATION section of this preamble be more helpful in
making the proposed regulations easier to understand? If so, how?
What else could we do to make the proposed regulations
easier to understand?
Send any comments that concern how the Department could make these
proposed regulations easier to understand to the person listed in the
ADDRESSES section of the preamble.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. Although a substantial number of small entities would be
subject to these regulations and to the certification requirement in
these regulations, the requirements would not have a significant
economic impact on these entities.
The employer of a delinquent debtor would have to certify certain
information about the debtor such as the debtor's employment status and
earnings. This information is contained in the employer's payroll
records. Therefore, it would not take a significant amount of time or
result in a significant cost for an employer to complete the
certification form. Even if an employer serves garnishment orders on
several employees over the course of a year, the cost imposed on the
employer to complete the certifications would not have a significant
economic impact on that entity. An employer is not required to vary its
normal pay cycle to comply with a garnishment order issued under these
regulations.
Paperwork Reduction Act of 1995
These proposed regulations do not contain any information
collection requirements.
Intergovernmental Review
These proposed regulations are not subject to Executive Order 12372
and the regulations in 34 CFR part 79.
Assessment of Educational Impact
The Secretary particularly requests comments on whether these
proposed regulations would require transmission of information that any
other agency or authority of the United States gathers or makes
available.
Federalism
Executive Order 13132 requires us to ensure meaningful and timely
input by State and local elected officials in the development of
regulatory policies that have federalism implications. ``Federalism
implications'' means substantial direct effects on the States, on the
relationship between the National Government and the States, or on the
distribution of power and responsibilities among the various levels of
government. The proposed regulations in Sec. 34.2 may have federalism
implications, as defined in Executive Order 13132. We encourage State
and local elected officials to review and provide comments on these
proposed regulations.
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(Catalog of Federal Domestic Assistance Number does not apply.)
[[Page 18076]]
List of Subjects in 34 CFR Part 34
Administrative practice and procedure, Claims, Debts, Garnishment
of wages, Hearing and appeal procedures, Salaries, Wages.
Dated: April 8, 2002.
Rod Paige,
Secretary of Education.
For the reasons discussed in the preamble, the Secretary proposes
to amend title 34 of the Code of Federal regulations by adding a new
part 34 to read as follows:
PART 34--ADMINISTRATIVE WAGE GARNISHMENT
Sec.
34.1 Purpose of this part.
34.2 Scope of this part.
34.3 Definitions.
34.4 Notice of proposed garnishment.
34.5 Contents of a notice of proposed garnishment.
34.6 Rights in connection with garnishment.
34.7 Consideration of objection to the rate of withholding.
34.8 Providing a hearing.
34.9 Conditions for an oral hearing.
34.10 Conditions for a paper hearing.
34.11 Timely request for a hearing.
34.12 Request for reconsideration.
34.13 Conduct of a hearing.
34.14 Burden of proof.
34.15 Consequences of failure to appear for an oral hearing.
34.16 Issuance of the hearing decision.
34.17 Content of decision.
34.18 Issuance of the wage garnishment order.
34.19 Amounts to be withheld under a garnishment order.
34.20 Amount to be withheld under multiple garnishment orders.
34.21 Employer certification.
34.22 Employer responsibilities.
34.23 Exclusions from garnishment.
34.24 Claim of financial hardship by debtor subject to garnishment.
34.25 Determination of financial hardship.
34.26 Ending garnishment.
34.27 Actions by employer prohibited by law.
34.28 Refunds of amounts collected in error.
34.29 Enforcement action against employer for noncompliance with
garnishment order.
34.30 Application of payments and accrual of interest.
Authority: 31 U.S.C. 3720D, unless otherwise noted.
Sec. 34.1 Purpose of this part.
This part establishes procedures the Department of Education uses
to collect money from a debtor's disposable pay by means of
administrative wage garnishment to satisfy delinquent debt owed to the
United States.
Sec. 34.2 Scope of this part.
(a) This part applies to collection of any financial obligation
owed to the United States that arises under a program we administer.
(b) This part applies notwithstanding any provision of State law.
(c) We may compromise or suspend collection by garnishment of a
debt in accordance with applicable law.
(d) We may use other debt collection remedies separately or in
conjunction with administrative wage garnishment to collect a debt.
(e) To collect by offset from the salary of a Federal employee, we
use the procedures in 34 CFR part 31, not those in this part.
(Authority: 31 U.S.C. 3720D)
Sec. 34.3 Definitions.
As used in this part, the following definitions apply:
Administrative debt means a debt that does not arise from an
individual's obligation to repay a loan or an overpayment of a grant
received under a student financial assistance program authorized under
Title IV of the Higher Education Act.
Business day means a day Monday through Friday, unless that day is
a Federal holiday.
Certificate of service means a certificate signed by an authorized
official of the U.S. Department of Education (the Department) that
indicates the nature of the document to which it pertains, the date we
mail the document, and to whom we are sending the document.
Day means calendar day. For purposes of computation, the last day
of a period will be included unless that day is a Saturday, a Sunday,
or a Federal legal holiday; in that case, the last day of the period is
the next business day after the end of the period.
Debt or claim means any amount of money, funds, or property that an
appropriate official of the Department has determined an individual
owes to the United States under a program we administer.
Debtor means an individual who owes a delinquent nontax debt to the
United States under a program we administer.
Disposable pay. This term--
(a)(1) Means that part of a debtor's compensation for personal
services, whether or not denominated as wages, from an employer that
remains after the deduction of health insurance premiums and any
amounts required by law to be withheld.
(2) For purposes of this part, ``amounts required by law to be
withheld'' include amounts for deductions such as social security taxes
and withholding taxes, but do not include any amount withheld under a
court order; and
(b) Includes, but is not limited to, salary, bonuses, commissions,
or vacation pay.
Employer. This term--
(a) Means a person or entity that employs the services of another
and that pays the latter's wages or salary;
(b) Includes, but is not limited to, State and local governments;
and
(c) Does not include an agency of the Federal Government.
Financial hardship means an inability to meet basic living expenses
for goods and services necessary for the survival of the debtor and his
or her spouse and dependents.
Garnishment means the process of withholding amounts from an
employee's disposable pay and paying those amounts to a creditor in
satisfaction of a withholding order.
We means the United States Department of Education.
Withholding order. (a) This term means any order for withholding or
garnishment of pay issued by this Department, another Federal agency, a
State or private non-profit guaranty agency, or a judicial or
administrative body.
(b) For purposes of this part, the terms ``wage garnishment order''
and ``garnishment order'' have the same meaning as ``withholding
order.''
You means the debtor.
(Authority: 31 U.S.C. 3720D)
Sec. 34.4 Notice of proposed garnishment.
(a) We may start proceedings to garnish your wages whenever we
determine that you are delinquent in paying a debt owed to the United
States under a program we administer.
(b) We start garnishment proceedings by sending you a written
notice of the proposed garnishment.
(c) At least 30 days before we start garnishment proceedings, we
mail the notice by first class mail to your last known address.
(d)(1) We keep a copy of a certificate of service indicating the
date of mailing of the notice.
(2) We may retain this certificate of service in electronic form.
(Authority: 31 U.S.C. 3720D)
Sec. 34.5 Contents of a notice of proposed garnishment.
In a notice of proposed garnishment, we inform you of--
(a) The nature and amount of the debt;
(b) Our intention to collect the debt through deductions from pay
until the debt and all accumulated interest,
[[Page 18077]]
penalties, and collection costs are paid in full; and
(c) An explanation of your rights, including those in Sec. 34.6,
and the time frame within which you may exercise your rights.
(Authority: 31 U.S.C. 3720D)
Sec. 34.6 Rights in connection with garnishment.
Before starting garnishment, we provide you the opportunity--
(a) To inspect and copy our records related to the debt;
(b) To enter into a written repayment agreement with us to repay
the debt under terms we consider acceptable;
(c) For a hearing in accordance with Sec. 34.8 concerning--
(1) The existence, amount, or current enforceability of the debt;
and
(2) The rate at which the garnishment order will require your
employer to withhold pay.
(Authority: 31 U.S.C. 3720D)
Sec. 34.7 Consideration of objection to the rate or amount of
withholding.
(a) We consider objections to the rate or amount of withholding
only if the objection rests on a claim that withholding at the proposed
rate or amount would cause financial hardship to you and your
dependents.
(b) We do not provide a hearing on an objection to the rate or
amount of withholding if the rate or amount does not exceed the rate or
amount established within the 12-month period preceding the notice of
garnishment under--
(1) A repayment agreement we reached with you after a previous
notice of proposed garnishment; or
(2) A hearing decision issued under this part.
(c) We do not consider an objection to the rate or amount of
withholding based on a claim that by virtue of 15 U.S.C. 1673, no
amount of wages are available for withholding by the employer
(Authority: 31 U.S.C. 3720D)
Sec. 34.8 Providing a hearing.
(a) We provide a hearing if you submit a written request for a
hearing concerning the existence or amount of the debt or the rate of
wage withholding.
(b) At our option the hearing may be an oral hearing under
Sec. 34.9 or a paper hearing under Sec. 34.10.
(Authority: 31 U.S.C. 3720D)
Sec. 34.9 Conditions for an oral hearing.
(a) We provide an oral hearing if you--
(1) Request an oral hearing; and
(2) Show in the request a good reason to believe that we cannot
resolve the issues in dispute by review of the documentary evidence, by
demonstrating that the validity of the claim turns on the credibility
or veracity of witness testimony.
(b) If we determine that an oral hearing is appropriate, we notify
you how to receive the oral hearing.
(c)(1) At your option, an oral hearing may be conducted either in-
person or by telephone conference.
(2) We provide an in-person oral hearing with regard to
administrative debts only in Washington D.C.
(3) We provide an in-person oral hearing with regard to debts based
on student loan or grant obligations only at our regional service
centers in Atlanta, Chicago, or San Francisco.
(4) You must bear all travel expenses you incur in connection with
an in-person hearing.
(5) We bear the cost of any telephone calls we place in order to
conduct an oral hearing by telephone.
(d)(1) To arrange the time and location of the oral hearing, we
ordinarily attempt to contact you first by telephone call to the number
you provided to us.
(2) If we are unable to contact you by telephone, we leave a
message directing you to contact us within 5 business days to arrange
the time and place of the hearing.
(3) If we can neither contact you directly nor leave a message with
you by telephone--
(i) We notify you in writing to contact us to arrange the time and
place of the hearing; or
(ii) We select a time and place for the hearing, and notify you in
writing of the time and place set for the hearing.
(e) We consider you to have withdrawn the request for an oral
hearing, and we will conduct the hearing as a paper hearing, if--
(1) Within 15 days of the date of a written notice to contact us,
we receive no response to that notice;
(2) Within five business days of the date of a telephone message to
contact us, we receive no response to that message; or
(3) You do not appear in person or by telephone at the hearing as
set by agreement or by our notice.
(Authority: 31 U.S.C. 3720D)
Sec. 34.10 Conditions for a paper hearing.
We provide a paper hearing--
(a) At your request if we conclude that, by a review of the written
record, we can resolve the issues raised by your objections; or
(b) If we determine that you have withdrawn a request for an oral
hearing.
(Authority: 31 U.S.C. 3720D)
Sec. 34.11 Timely request for a hearing.
(a) A hearing request is timely if--
(1) You mail the request to the office designated in the
garnishment notice and the request is postmarked not later than the
30th day following the date of the notice; or
(2) The designated office receives the request not later than the
30th day following the date of the garnishment notice.
(b) If we receive a timely written request from you for a hearing,
we will not issue a garnishment order before we--
(1) Provide the requested hearing; and
(2) Issue a written decision on the objections you raised.
(c) If your written request for a hearing is not timely--
(1) We provide you a hearing; and
(2) We do not delay issuance of a garnishment order unless--
(i) We determine from credible representations in the request that
the delay in filing the request was caused by factors over which you
had no control; or
(ii) We have other good reason to delay issuing a garnishment
order.
(d) If we do not complete a hearing within 60 days of an untimely
request, we suspend any garnishment order until we have issued a
decision.
(Authority: 31 U.S.C. 3720D)
Sec. 34.12 Request for reconsideration.
(a) If you have received a decision on an objection to garnishment
you may file a request for reconsideration of that decision.
(b) We do not suspend garnishment merely because you have filed a
request for reconsideration.
(c) We consider your request for reconsideration if we determine
that--
(1) Your financial circumstances, as shown by evidence submitted
with the request, have materially changed since we issued the decision
so that we should reduce the amount to be garnished under the order; or
(2)(i) You submitted with the request evidence that you did not
previously submit; and
(ii) The evidence demonstrates that we should reconsider your
objection to the existence, amount, or enforceability of the debt.
(d)(1) If we agree to reconsider the decision, we notify you.
(2)(i) We may reconsider based on the request and supporting
evidence you have presented with the request; or
(ii) We may offer you an opportunity for a hearing to present
evidence.
(Authority: 31 U.S.C. 3720D)
[[Page 18078]]
Sec. 34.13 Conduct of a hearing.
(a)(1) After you request a hearing, we notify you of--
(i) The date and time of a hearing that we conduct by telephone;
(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.
(2) If you request an oral hearing, we follow the steps in
Sec. 34.9 to attempt to contact you to arrange a mutually-agreeable
date and time for that hearing.
(b)(1) A hearing official conducts any type of hearing referred to
in paragraph (a) of this section.
(2) The hearing official may be any qualified employee of the
Department whom the Department designates to conduct the hearing.
(c)(1) The hearing official conducts any hearing provided under
this section as an informal proceeding.
(2) A witness in an oral hearing must testify under oath or
affirmation.
(3) The hearing official maintains a summary record of any hearing
provided under this section.
(Authority: 31 U.S.C. 3720D)
Sec. 34.14 Burden of proof.
(a)(1) We have the burden of proving the existence and amount of a
debt.
(2) We meet this burden by including in the record and making
available to the debtor on request records that show that--
(i) The debt exists in the amount stated in the garnishment notice;
and
(ii) The debt is currently delinquent.
(b) If you dispute the existence or amount of the debt, you must
prove by a preponderance of the credible evidence that--
(1) No debt exists;
(2) The amount we claim to be owed on the debt is incorrect, or
(3) You are not delinquent with respect to the debt.
(c)(1) If you object that the proposed garnishment rate would cause
financial hardship, you bear the burden of proving by a preponderance
of the credible evidence that withholding the amount of wages proposed
in the notice would leave you unable to meet the basic living expenses
of you and your dependents.
(2) The standards for proving financial hardship are those in
Sec. 34.24.
(d)(1) If you object on the ground that applicable law bars us from
collecting the debt by garnishment at this time, you bear the burden of
proving the facts that would establish that claim.
(2) Examples of applicable law that may prevent collection by
garnishment include the automatic stay in bankruptcy (11 U.S.C.
362(a)), and the preclusion of garnishment action against a debtor who
was involuntarily separated from employment and has been reemployed for
less than a 12-month period (31 U.S.C. 3720D(b)(6)).
(e) The fact that applicable law may limit the amount that an
employer may withhold from your pay to less than the amount or rate we
state in the garnishment order does not bar us from issuing the order.
(Authority: 31 U.S.C. 3720D)
Sec. 34.15 Consequences of failure to appear for an oral hearing.
(a) If you do not appear for an in-person hearing you requested, or
you do not answer a telephone call convening a telephone hearing, at
the time set for the hearing, we consider you to have withdrawn your
request for an oral hearing.
(b) If you do not appear for an oral hearing but you demonstrate
that there was good cause for not appearing, we may reschedule the oral
hearing.
(c) If you do not appear for an oral hearing you requested and we
do not reschedule the hearing, we provide a paper hearing to review
your objections, based on the evidence in your file and any evidence
you have already provided.
(Authority: 31 U.S.C. 3720D)
Sec. 34.16 Issuance of the hearing decision.
(a) Date of decision. The hearing official issues a written opinion
stating his or her decision, as soon as practicable, but not later than
60 days after the date on which we received the request for hearing.
(b) If we do not provide you with a hearing and render a decision
within 60 days after we receive your request for a hearing--
(1) We do not issue a garnishment order until the hearing is held
and a decision rendered; or
(2) If we have already issued a garnishment order to your employer,
we suspend the garnishment order beginning on the 61st day after we
receive the hearing request until we provide a hearing and issue a
decision.
(Authority: 31 U.S.C. 3720D)
Sec. 34.17 Content of decision.
(a) The written decision includes--
(1) A summary of the facts presented;
(2) The hearing official's findings, analysis, and conclusions
regarding objections raised to the existence or amount of the debt; and
(3) The rate of wage withholding under the order, if you objected
that withholding the amount proposed in the garnishment notice would
cause an extreme financial hardship.
(b) The hearing official's decision is the final action of the
Secretary for the purposes of judicial review under the Administrative
Procedure Act (5 U.S.C. 701 et seq.).
(Authority: 31 U.S.C. 3720D)
Sec. 34.18 Issuance of the wage garnishment order.
(a)(1) If you fail to make a timely request for a hearing, we issue
a garnishment order to your employer within 30 days after the deadline
for timely requesting a hearing.
(2) If you make a timely request for a hearing, we issue a
withholding order within 30 days after the hearing official issues a
decision to proceed with garnishment.
(b)(1) The garnishment order we issue to your employer is signed by
an official of the Department designated by the Secretary.
(2) The designated official's signature may be a computer-generated
facsimile.
(c)(1) The garnishment order contains only the information we
consider necessary for your employer to comply with the order and for
us to ensure proper credit for payments received from your employer.
(2) The order includes your name, address, and social security
number, as well as instructions for withholding and information as to
where your employer must send the payments.
(d)(1) We keep a copy of a certificate of service indicating the
date of mailing of the order.
(2) We may create and maintain the certificate of service as an
electronic record.
(Authority: 31 U.S.C. 3720D)
Sec. 34.19 Amounts to be withheld under a garnishment order.
(a)(1) After an employer receives a garnishment order we issue, the
employer must deduct from all disposable pay of the debtor during each
pay period the amount directed in the garnishment order unless this
section or Sec. 34.20 requires a smaller amount to be withheld.
(2) The amount specified in the garnishment order does not apply if
other law, including this section, requires the employer to withhold a
smaller amount.
(b) The employer must comply with our garnishment order by
withholding the lesser of--
(1) The amount directed in the garnishment order; or--
(2) The amount specified in 15 U.S.C. 1673(a)(2) (Restriction on
Garnishment); that is, the amount by which a debtor's
[[Page 18079]]
disposable pay exceeds an amount equal to 30 times the minimum wage.
(See 29 CFR 870.10.)
(Authority: 31 U.S.C. 3720D)
Sec. 34.20 Amount to be withheld under multiple garnishment orders.
If a debtor's pay is subject to several garnishment orders, the
employer must comply with our garnishment order as follows:
(a) Unless other Federal law requires a different priority, the
employer must pay us the amount calculated under Sec. 34.19(b) before
the employer complies with any later garnishment orders, except a
family support withholding order.
(b) If an employer is withholding from a debtor's pay based on a
garnishment order served on the employer before our order, or if a
withholding order for family support is served on an employer at any
time, the employer must comply with our garnishment order by
withholding an amount that is the smaller of--
(1) The amount calculated under Sec. 34.19(b); or
(2) An amount equal to 25 percent of the debtor's disposable pay
less the amount or amounts withheld under the garnishment order or
orders with priority over our order.
(c)(1) If a debtor owes more than one debt arising from a program
we administer, we may issue multiple garnishment orders.
(2) The total amount withheld from the debtor's pay for orders we
issue under paragraph (c)(1) of this section does not exceed the lesser
of the amounts specified in the orders or the amount specified in
Sec. 34.19(b)(2).
(d) An employer may withhold and pay an amount greater than that
amount in paragraphs (b) and (c) of this section if the debtor gives
the employer written consent.
(Authority: 31 U.S.C. 3720D)
Sec. 34.21 Employer certification.
(a) Along with a garnishment order, we send to an employer a
certification in a form prescribed by the Secretary of the Treasury.
(b) The employer must complete and return the certification to us
within the time stated in the instructions for the form.
(c) The employer must include in the certification information
about the debtor's employment status, payment frequency, and disposable
pay available for withholding.
(Authority: 31 U.S.C. 3720D)
Sec. 34.22 Employer responsibilities.
(a)(1) Our garnishment order indicates a reasonable period of time
within which an employer must start withholding under the order.
(2) The employer must promptly pay to the Department all amounts
the employer withholds according to the order.
(b) The employer may follow its normal pay and disbursement cycles
in complying with the garnishment order.
(c) The employer must withhold the appropriate amount from the
debtor's wages for each pay period until the employer receives our
notification to discontinue wage garnishment.
(d) The employer must disregard any assignment or allotment by an
employee that would interfere with or prohibit the employer from
complying with our garnishment order, unless that assignment or
allotment was made for a family support judgment or order.
(Authority: 31 U.S.C. 3720D)
Sec. 34.23 Exclusions from garnishment.
(a) We do not garnish your wages if we have credible evidence that
you--
(1) Were involuntarily separated from employment; and
(2) Have not yet been reemployed continuously for at least 12
months.
(b) You have the burden of informing us of the circumstances
surrounding an involuntary separation from employment.
(Authority: 31 U.S.C. 3720D)
Sec. 34.24 Claim of financial hardship by debtor subject to
garnishment.
(a) You may object to a proposed garnishment on the ground that
withholding the amount or at the rate stated in the notice of
garnishment would cause financial hardship to you and your dependents.
(See Sec. 34.7)
(b) You may, at any time, object that the amount or the rate of
withholding which our order specifies your employer must withhold
causes financial hardship.
(c)(1) We consider an objection to an outstanding garnishment order
and provide you an opportunity for a hearing on your objection only
after the order has been outstanding for at least six months.
(2) We may provide a hearing in extraordinary circumstances earlier
than six months if you show in your request for review that your
financial circumstances have substantially changed after the notice of
proposed garnishment because of an event such as injury, divorce, or
catastrophic illness.
(d)(1) You bear the burden of proving a claim of financial hardship
by a preponderance of the credible evidence.
(2) You must prove by credible documentation--
(i) The amount of the costs incurred by you, your spouse, and any
dependents, for basic living expenses; and
(ii) The income available from any source to meet those expenses.
(e)(1) We consider your claim of financial hardship by comparing:
(i) The amounts that you prove are being incurred for basic living
expenses against
(ii) The amounts spent for basic living expenses by families of the
same size and similar income to yours.
(2) We regard the standards published by the Internal Revenue
Service under 26 U.S.C. 7122(c)(2) (the ``National Standards'') as
establishing the average amounts spent for basic living expenses for
families of the same size as, and with family incomes comparable to,
your family.
(3) We accept as reasonable the amount that you prove you incur for
a type of basic living expense to the extent that the amount does not
exceed the amount spent for that expense by families of the same size
and similar income according to the National Standards.
(4) If you claim for any basic living expense an amount that
exceeds the amount in the National Standards, you must prove that the
amount you claim is reasonable and necessary.
(Authority: 31 U.S.C. 3720D)
Sec. 34.25 Determination of financial hardship.
(a)(1) If we conclude that garnishment at the amount or rate
proposed in a notice would cause you financial hardship, we reduce the
amount of the proposed garnishment to an amount that we determine will
allow you to meet proven basic living expenses.
(2) If a garnishment order is already in effect, we notify your
employer of any change in the amount the employer must withhold or the
rate of withholding under the order.
(b) If we determine that financial hardship would result from
garnishment based on a finding by a hearing official or under a
repayment agreement we reached with you, this determination is
effective for a period not longer than six months after the date of the
finding or agreement.
(c)(1) After the effective period referred to in paragraph (b) of
this section, we may require you to submit current information
regarding your family income and living expenses.
(2) If we conclude from a review of that evidence that we should
increase
[[Page 18080]]
the rate of withholding or payment, we--
(i) Notify you; and
(ii) Provide you with an opportunity to contest the determination
and obtain a hearing on the objection under the procedures in
Sec. 34.24.
(Authority: 31 U.S.C. 3720D)
Sec. 34.26 Ending garnishment.
(a)(1) A garnishment order we issue is effective until we rescind
the order.
(2) If an employer is unable to honor a garnishment order because
the amount available for garnishment is insufficient to pay any portion
of the amount stated in the order, the employer must--
(i) Notify us; and
(ii) Comply with the order when sufficient disposable pay is
available.
(b) After we have fully recovered the amounts owed by the debtor,
including interest, penalties, and collection costs, we send the
debtor's employer notification to stop wage withholding.
(Authority: 31 U.S.C. 3720D)
Sec. 34.27 Actions by employer prohibited by law.
An employer may not discharge, refuse to employ, or take
disciplinary action against a debtor due to the issuance of a
garnishment order under this part.
(Authority: 31 U.S.C. 3720D)
Sec. 34.28 Refunds of amounts collected in error.
(a) If a hearing official determines under Secs. 34.16 and 34.17
that a person does not owe the debt described in our notice or that an
administrative wage garnishment under this part was barred by law at
the time of the collection action, we promptly refund any amount
collected by means of this garnishment.
(b) Unless required by Federal law or contract, we do not pay
interest on a refund.
(Authority: 31 U.S.C. 3720D)
Sec. 34.29 Enforcement action against employer for noncompliance with
garnishment order.
(a) If an employer fails to comply with Sec. 34.22 to withhold an
appropriate amount from wages owed and payable to an employee, we may
sue the employer for that amount.
(b)(1) We do not file suit under paragraph (a) of this section
before we terminate action to enforce the debt as a personal liability
of the debtor.
(2) However, the provision of paragraph (b)(1) may not apply if
earlier filing of a suit is necessary to avoid expiration of any
applicable statute of limitations.
(c)(1) For purposes of this section, termination of an action to
enforce a debt occurs when we terminate collection action in accordance
with the FCCS, other applicable standards, or paragraph (c)(2) of this
section.
(2) We regard termination of the collection action to have occurred
if we have not received for one year any payments to satisfy the debt,
in whole or in part, from the particular debtor whose wages were
subject to garnishment.
(Authority: 31 U.S.C. 3720D)
Sec. 34.30 Application of payments and accrual of interest.
We apply payments received through a garnishment in the following
order--
(a) To costs incurred to collect the debt;
(b) To interest accrued on the debt at the rate established by--
(1) The terms of the obligation under which it arises; or
(2) Applicable law; and
(c) To outstanding principal of the debt.
(Authority: 31 U.S.C. 3720D)
[FR Doc. 02-8969 Filed 4-11-02; 8:45 am]
BILLING CODE 4000-01-P