[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR140]
[Page 509-515]
TITLE 13--BUSINESS CREDIT AND ASSISTANCE
CHAPTER I--SMALL BUSINESS ADMINISTRATION
PART 140_DEBT COLLECTION
Sec.
Subpart A_Overview
140.1 What does this part cover?
Subpart B_Offset
140.2 What is a debt and how can the SBA collect it through offset?
140.3 What rights do you have when SBA tries to collect a debt from you
through offset?
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?
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
Sec. 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
Sec. 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. SBA may withhold money it owes to the
debtor in order to satisfy the debt. This procedure is an
``administrative offset'' and is authorized by 31 U.S.C. 3716.
(2) Salary offset. If the debtor is a federal employee (a civilian
employee as defined by 5 U.S.C. 2105, an employee of the U.S. Postal
Service or Postal Rate Commission, or a member of the Uniformed Services
or Reserve of the Uniformed Services), SBA may deduct payments owed to
SBA or another federal agency from the debtor's paycheck. This procedure
is a ``salary offset'' and is authorized by 5 U.S.C. 5514.
(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. SBA may request that IRS reduce a
debtor's tax refund by the amount of the debt, as authorized by 31
U.S.C. 3720A. Where available, administrative and salary offsets must be
used before collection is attempted through income tax offset. SBA may
refer a debt to the IRS for a tax refund offset and take additional
action against the debtor to collect the debt at the same time or in
sequence. When SBA makes simultaneous or sequential referrals (within
six months of the initial notice), only one review pursuant to the rules
in this part and the statutes authorizing them is required.
[[Page 510]]
Sec. 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
[[Page 511]]
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
Sec. 140.11 What type of debt is subject to administrative wage
garnishment, and how can SBA administratively garnish your
pay?
(a) General. SBA may order your employer to pay SBA a portion of
your disposable pay to satisfy delinquent non-tax debt you owe to the
United States. This process is called ``administrative wage
garnishment'' and is authorized by 31 U.S.C. 3720D.
(b) Scope. (1) This section provides procedures for SBA to collect
delinquent non-tax debts through administrative wage garnishment.
(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. In this section the following definitions apply:
Agency means the SBA.
Business day means Monday through Friday excluding Federal legal
holidays.
Day means calendar day. For purposes of computation, the last day of
the period will be included unless it is a Saturday, a Sunday, or a
Federal legal holiday.
Debt or claim means any amount of money, funds or property that has
been determined by an appropriate official of the Federal Government to
be owed to the United States by an individual, including debt
administered by a third party as an agent for the Federal Government.
Debt also includes accrued interest, administrative costs incurred in
collection efforts by SBA or a lender participating in an SBA loan
program, and penalties imposed pursuant to law or contract.
Debtor or you means an individual who owes a delinquent non-tax debt
to the United States.
Delinquent non-tax debt means any debt not related to an obligation
under the Internal Revenue Code of 1986, as amended, that has not been
paid by the date specified in SBA's initial written demand for payment,
or applicable agreement, unless other satisfactory payment arrangements
have been made. For purposes of this section, the terms ``debt'' and
``claim'' are synonymous and refer to delinquent non-tax debt.
Disposable pay means that part of the debtor's compensation
(including, but not limited to, salary, bonuses, commissions, and
vacation pay) from an employer remaining after the deduction of health
insurance premiums and any amounts required by law to be withheld. For
purposes of this section,
[[Page 512]]
``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 pursuant to a court order.
Employer means a person or entity that employs the services of
others and that pays their wages or salaries. The term employer
includes, but is not limited to, State and local Governments, but does
not include an agency of the Federal Government.
Evidence of service means information retained by the SBA indicating
the nature of the document to which it pertains, the date of mailing of
the document, and to whom the document is being sent. Evidence of
service may be retained electronically so long as the manner of
retention is sufficient for evidentiary purposes.
Garnishment means the process of withholding amounts from an
employee's disposable pay and the paying of those amounts to a creditor
in satisfaction of a withholding order.
Withholding order means any order for withholding or garnishment of
pay issued by an agency, or judicial or administrative body. For
purposes of this section, the terms ``wage garnishment order'' and
``garnishment order'' have the same meaning as ``withholding order.''
(d) When may the SBA initiate administrative wage garnishment
proceedings? Whenever SBA determines you owe a delinquent non-tax debt,
SBA may initiate administrative wage garnishment proceedings to withhold
a portion of your wages to satisfy the debt.
(e) What notice must the SBA give you before beginning an
administrative wage garnishment? (1) SBA will send a written notice by
first-class mail to your last known address at least 30 days before
initiating garnishment. This pre-garnishment notice will inform you of:
(i) The type and amount of the debt;
(ii) SBA'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 at SBA's Office of Hearings and Appeals (OHA)
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) SBA will retain evidence of service showing when SBA mailed the
pre-garnishment notice.
(f) What type of hearing must SBA give me?--(1) Procedural rules.
Unless they expressly conflict with this section, the rules of procedure
governing cases before OHA apply to administrative wage garnishment
hearings.
(2) Request for hearing. You will be provided with a hearing, if you
request one in writing disputing either the existence or amount of the
debt or the terms of the repayment schedule (except a repayment schedule
you and SBA agreed to in writing).
(3) Type of hearing or review. (i) You will have the right to an
oral hearing only if the Judge determines that the issues in dispute
cannot be resolved solely by review of the documentary evidence, for
example, when the Judge finds that the validity of the claim turns on
the issue of credibility or veracity.
(ii) If the Judge 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 Judge will accord you a
``paper hearing,'' that is, the Judge will decide the issues in dispute
based upon a review of the written record. The Judge will set a
reasonable deadline for the submission of evidence.
[[Page 513]]
(4) Effect of timely request for hearing. Subject to paragraph
(f)(13) of this section (failure to appear), if the Judge determines
your written request for a hearing was received at OHA by the 15th
business day after SBA mailed the pre-garnishment notice, SBA will not
issue a garnishment order before the Judge renders a decision.
(5) Untimely request for hearing. If the Judge determines your
written request for a hearing was not received at OHA by the 15th
business day after SBA mailed the pre-garnishment notice, SBA will
provide a hearing to you. However, SBA may proceed with the issuance of
a garnishment order and acceptance of payments unless the Judge
determines that the delay in filing the request was caused by factors
over which you had no control, or that information received justifies a
delay or cancellation of the garnishment order.
(6) Hearing official. A hearing official may be any Judge, as
designated by the Assistant Administrator for Hearings and Appeals.
(7) Procedure. After you request a hearing, the Judge will decide
what type of hearing to hold and will notify you and the SBA of:
(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. (i) The SBA will have the burden of going
forward to prove the existence or amount of the debt.
(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. The Judge must maintain a summary record of any hearing
provided under this section. A hearing is not required to be a formal
evidentiary-type hearing; however, witnesses who testify in oral
hearings will do so under oath or affirmation.
(10) Date of decision. The Judge must render a written decision
within 60 days of the date on which your request for a hearing was
received by OHA. If the Judge's decision is not rendered within that
time, and SBA had previously issued a garnishment order, SBA must
suspend garnishment beginning on the 61st day. This suspension must
continue until the Judge renders a decision.
(11) Content of decision. The written decision shall include:
(i) A summary of the facts presented;
(ii) The Judge's findings, analysis and conclusions; and
(iii) The terms of any repayment schedule, if applicable.
(12) Final agency action. The Judge's decision will be the final
agency action for the purposes of judicial review under the
Administrative Procedure Act (5 U.S.C. 701 et seq.).
(13) Failure to appear. In the absence of good cause shown, a debtor
who fails to appear at an oral hearing will be deemed as not having
timely filed a request for a hearing.
(g) Garnishment order. (1) Unless SBA receives an adverse decision
from the Judge or information it believes justifies delaying or
canceling garnishment, SBA will send the garnishment order to your
employer by first-class mail, within the following time frames:
(i) If you did not make a timely request for a pre-garnishment
hearing, within 30 days following the 15th business day after SBA mailed
the pre-garnishment notice;
(ii) If you did make a timely request for a pre-garnishment hearing,
within 30 days after the Judge renders a final 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
[[Page 514]]
pay, and the address for sending payments.
(3) SBA will retain evidence of service showing when it mailed the
garnishment order.
(h) Certification by employer. Along with the garnishment order, SBA
will send your employer a certification, in a form determined by the
Secretary of the Treasury. Your employer must complete and return this
certification to us within the time stated in the certification
instructions. The certification will include information about your
employment status and the amount of your disposable pay available for
garnishment.
(i) Amounts withheld. (1) Your employer must deduct the garnishment
amount from your disposable pay during each pay period.
(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, SBA 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 SBA garnishment
orders.
(ii) If amounts are being withheld from your pay because of a
garnishment order issued before SBA'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 SBA 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, SBA 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 SBA 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 SBA 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 SBA'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 SBA
notifies your employer to stop wage garnishment.
(j ) Exclusions from garnishment. SBA may not garnish your wages if
SBA knows you have been involuntarily unemployed at any time during the
last 12 months. You are responsible for informing SBA of the facts and
circumstances of your unemployment.
(k) Financial hardship. (1) If your wages are subject to a
garnishment order issued by SBA, you may, at any time, request a review
of the amount being withheld from your wages based on a material change
in circumstances that causes you financial hardship, such as disability,
divorce, or catastrophic illness. You may send your request to the
Director of SBA's loan servicing center in Birmingham, Alabama.
(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.
[[Page 515]]
(3) If SBA finds financial hardship, SBA will decide how much and
how long to reduce the amount garnished from your pay. SBA will notify
your employer of any reductions.
(l) Ending garnishment. (1) After SBA has recovered the amount you
owe, including interest, penalties, and administrative costs consistent
with the FCCS, SBA will send a notice to your employer to stop wage
garnishment with a copy to you.
(2) SBA will review your account to ensure that garnishment has
stopped if you have paid your debt in full.
(m) Prohibited actions. No employer may fire, refuse to employ, or
take disciplinary action against you because of a withholding order
issued by SBA.
(n) Refunds. (1) SBA must promptly refund any amount collected by
administrative wage garnishment if either--
(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) SBA determines that your employer continued submitting to SBA
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. SBA may sue your employer for any amount that
the employer fails to withhold from wages owed and payable to you in
accordance with paragraphs (g) and (i) of this section. However, SBA may
not file such a suit until the collection action involving you has ended
unless earlier filing is necessary to avoid expiration of any applicable
statute of limitations period. For purposes of this section, the
collection action involving you ends when SBA stops the collection
action in accordance with the FCCS or other applicable standards. In any
event, the collection action involving you will be deemed ended if SBA
has not received any payments from you to satisfy your debt, in whole or
in part, for a period of one (1) year.
[70 FR 17587, Apr. 7, 2005]