An Important Update on Our Recoupment Process

Over the past year, as directed by law, FEMA has re-initiated an improved process for identifying cases of improper payments made to individuals after disasters and to take steps to recover those funds. As we have explained before on this blog, several laws require FEMA and other federal agencies to conduct this process, known as “recoupment.” At the direction of our current leadership, we have worked within the legal constraints of these laws to make the process more fair and understandable for both disaster survivors and taxpayers. However, under these existing laws, FEMA was unable to waive debts.

Last week, Congress passed a law providing FEMA discretion to waive certain debts from disasters declared between August 2005 and the end of 2010 if the debt arose from an improper individual assistance payment made as a result of FEMA’s error, there was no fault on the part of the survivor, and the survivor currently has an income of $90,000 or less. The law does not apply to recoupment efforts for disasters declared after Jan. 1, 2011.

FEMA is committed to implementing the law to the fullest extent possible so that it meets its intended purpose: to offer a fair resolution to those survivors who received improper payments through no fault of their own and who may be unable to repay their debt due to their financial circumstances.

So now that the law has been passed, what next?

FEMA is currently reviewing the law and developing a plan to implement it. This includes examining the reasons for recoupment and the potential population of survivors who might be eligible to have their debts waived. We look forward to continuing to work with lawmakers and all interested stakeholders during this effort.

As we begin work on this implementation plan, FEMA is not scheduled to send any new debts to Treasury for collection before Jan. 13, 2012. We know that there are many survivors and other stakeholders who will have questions about the effects of this new law. While we are just beginning to determine how to implement this brand new law, the legislation does make clear that a recoupment case must meet all of the following criteria in order to be eligible for full forgiveness:

• The improper payment was received from disasters declared between Aug. 28, 2005 (Hurricane Katrina) and Dec. 30, 2010;
• The improper payment was a result of an error solely on FEMA’s part – not on the part of a survivor;
• The improper payment cannot have involved fraud, false claim or misrepresentation by the survivor;
• The survivor’s adjusted gross income for the last taxable year was less than $90,000 (a survivor with an income of greater than $90,000 whose case meets the other qualifying criteria could be eligible for a partial waiver) ; and
• The collection of the debt would be against “good conscience and equity.”

Our priority is to ensure that all survivors have clear and complete information about these changes once we have an implementation plan to share, and we are working to make that happen as quickly as possible.

It is important to note that Congress wrote this law to apply only to recoupment efforts for older disasters. As we have also explained before, in recent years we have taken significant steps to put strong protections in place to cut down on the percentage of improper payments disbursed after disasters – and it is now less than one percent, on average. We will continue to do everything we can to reduce the need for any potential recoupments for current and future disasters.

We want to move expeditiously on this implementation effort, but we also want to get it right. We thank all of our stakeholders – especially survivors – for their patience as we move into the next phase or this effort and look forward to working together to make these important changes a reality.