CONGRESSIONAL RECORD---HOUSE April 25, 1996 (H4087) Congressman Horn's Comments on the Debt Collection Improvement Act of 1996 Mr. LIVINGSTON. Mr. Speaker, I yield 1 minute to the gentleman from California [Mr. Horn]. (Mr. HORN asked and was given permission to revise and extend his remarks and to include extraneous material.) Mr. HORN. Mr. Speaker, I rise in very strong support of the Omnibus Appropriations Act. Included in this measure is a bill I have worked on for more than a year now, the Debt Collection Improvement Act, which was introduced on August 4, 1995. This measure was drafted with the assistance and support of the administration, particularly the chief financial officers and the inspectors general. As the bill proceeded through committee, it commanded widespread bipartisan support. The gentlewoman from New York [Mrs. Maloney] and professional staff member Mark Guiton were also helpful. Among the majority staff of the Subcommittee on Government Management, Information, and Technology, professional staff member Mark Brasher and staff director Russell George were the key staff on this legislation. My thanks go to all of the leadership staff and those on the Committee on Ways and Means and the Committee on Government Reform and Oversight who have been helpful. This measure marks a long overdue beginning of our efforts to collect delinquent debts which now are in the tens off billions--over $100 billion to be precise. This is a victory for the taxpayers of America. When this bill is implemented by the agencies, the Federal Government will find that its rising tide of delinquent debts can be stemmed. Mr. Speaker, I include for the Record the following statement in report format which clarifies the legislative intent: Debt Collection Improvement Act of 1995 This bill enhances Government-wide debt collection activities by adding a new offset authority to 31 U.S.C. 3716; by creating a new exception to the Privacy Act (5 U.S.C. 552a); by revising the salary offset authority at 5 U.S.C. 5514; by requiring agencies to obtain taxpayer identifying numbers; by permitting the reporting of non- delinquent consumer debt to credit bureaus; by adding a new subsection to 31 U.S.C. 3711 that allows the Department of the Treasury and other agencies to cross-service the debts of other agencies; by extending the authority of agencies to compromise claims; by permitting agencies to garnish the wages of delinquent debtors; by permitting agencies additional authority to sell delinquent debts; by revising the Federal Civil Monetary Penalties Act of 1990 to require adjustments for inflation every four years; by adding a new section to title 31, United States Code, that allows agencies to retain a portion of annual collections of delinquent debts; by expanding tax refund offset authority; by requiring that disbursements are conducted electronically; by requiring that disbursements are associated with a taxpayer identification number; by revising definitions at 31 U.S.C. 3701 to broaden the scope of the general debt collection procedures; by providing for monitoring and reporting on debt collection centers; and by giving the Attorney General permanent authority to contract with private counsel to collect delinquent non-tax civil debt. The debt collection authorities created under this bill will enhance the cooperation of Federal agencies in collecting Federal debt, by providing centralized administrative offset and cross-servicing authority. It is intended that the Department of the Treasury will act as the coordinator of Government-wide debt collection activities, providing a mechanism for effective administrative offset and acting as a clearinghouse to assure that Federal debts are collected in a timely and efficient manner. PART I--GENERAL DEBT COLLECTION INITIATIVES General offset authority Short Title: Effective Date: Purposes: Expansion of Administrative Offset Authority: This section amends various sections in chapter 37 of title 31, United States Code, to cover judicial agencies and instrumentalities. Currently, these sections only apply to executive and legislative departments, agencies, and instrumentalities. Enhancement of Administrative Offset Authority This section would create additional authority for conducting Government-wide Administrative Offset at the Financial Management Service of the Department of the Treasury. Under this authority, Federal payment files would be matched against Federal debtor files to determine whether any debtors were receiving payments. Those payments would be subject to offset to satisfy any Federal non-tax debt or claim owed by the debtor. Subsection (a) amends the application of administrative offset authority under 31 U.S.C. 3716 and the requirements for charging interest and penalties on claims pursuant to 31 U.S.C. 3717 to include debts owed to the United States by States and units of general local government. Subsection (b)(1) amends 31 U.S.C. 3716 to allow Federal agencies to choose between adopting, without change, regulations promulgated by the Department of Justice, the General Accounting Office or the Department of The Treasury or promulgating their own administrative offset regulations consistent with those regulations. [[Page H4088]] Subsection (b)(2) expands the application of administrative offset to every instance except where a statute explicitly prohibits the use of administrative ``offset'' or ``setoff'' for collection purposes. This should increase the funds available for offset from which delinquent claims may be offset. Subsection (b)(3), renumbers certain sections. Subsection (b)(4), amends 31 U.S.C. 3716 by adding a new subsection (c). This paragraph statutorily requires disbursing officials of the Department of the Treasury, the Department of Defense, the United States Postal Service or disbursing officials designated by the Secretary of the Treasury to offset payments made by the United States to pay delinquent claims certified to the Secretary of the Treasury by creditor agencies in accordance with requirements issued by the Secretary. This paragraph enhances administrative offset authority contained in 31 U.S.C. 3716 by providing for centralized administrative offset at the disbursing official level. Currently, administrative offset is not conducted centrally within the Federal Government and is not effectively used. Disbursing officials of the Department of Defense and the United States Postal Service and other disbursing officials at any other Federal agencies will match their certification records with the debtor records reported to the Secretary of the Treasury by creditor agencies, in order to avoid duplicative reporting by creditor agencies to disbursing agencies, and assure that payments are intercepted. Congress intends to include all eligible government payments in this centralized offset program, including the payments of all government corporations. Congress is concerned at the growing trend of fragmentation of disbursing authority, and support centralized coordination for the purpose of collecting debts and conducting offsets. Congress notes that because debt has been referred to the Department of the Treasury for offset does not necessarily mean that other debt collection tools (such as the use of private collection agencies or wage garnishment) should not be employed. The use of private collection agencies is long overdue. Agencies should use all cost-effective tools available to them to maximize the collection of delinquent debts. Under subsection 3716(c)(4), the Secretary of the Treasury is authorized to charge a fee to cover the cost of conducting administrative offsets under this subsection, and to deposit fees collected to a fund to be determined by the Secretary. It is the intent of Congress that the fee will be collected from the proceeds recovered through offset and the amount charged to each agency be apportioned according to actual offsets. See fees should be considered costs of collections and should be borne by the debtor. Section 3716(a)(5), authorizes the Secretary of the Treasury, in consultation with affected agencies, to issue regulations and procedures to implement the administrative offset authority. These regulations will include a provision for dealing with the potential of simultaneous offsets involving tax refunds under 31 U.S.C. 3720A and salary offsets under 5 U.S.C. 5514. Section 3716(c)(6) provides that any Federal agency which is owed a legally enforceable past due debt more than 180 days shall notify the Secretary of the Treasury of the debt for the purpose of conducting administrative offset. Section 3716(c)(7) requires that the payee receive the applicable offset notification. Section 3716(c)(8) makes it clear that tax levies shall have a priority in collection from disbursements to be made over requests for offset received from other agencies. Section 3716(d) clarifies that the Debt Collection Improvement Act is not intended to prohibit the use of any existing authority to perform administrative offset under statute or common law. Subsection (c) revises section 3701(a) of title 31, United States Code, to define ``non-tax debt or claim'' for the purposes of claims collection. The definition clarifies that claims arising under the tariff laws of the United States are considered non-tax claims. Subsection (d) authorizes the Secretary of the Treasury to offset amounts payable by the Federal Reserve to banks which have wrongfully negotiated forged or fraudulent Treasury checks. Exemption From Computer Matching Requirements Under the Privacy Act of 1974 This section exempts matches conducted for the purposes of administrative offset under 31 U.S.C. 3716 from certain provisions of the Computer Matching and Privacy Protection Act of 1988, as amended. This section would permit offsets, and eliminate duplicative due process notifications, as well as duplicative actions by agency Data Integrity Boards. Use of Administrative Offset Authority for Debts to States This section authorizes the Secretary of the Treasury to enter into agreements for conducting reciprocal offset agreements with a State. The Secretary has broad discretion with regards to the terms of any reciprocal offset agreement. Congress believes that intergovernmental cooperation is in the best interest of the United States, and that Treasury participation in a program of intergovernmental offset is very important. Congress intends that such agreements will allow States to report the debts of any State agency or instrumentality, and any legally constituted local subdivision or local government within the State. Congress does not intend to apply Federal resources to the collection of debts with very small denominations, or to those where the debtor has not been given any applicable due process rights. In addition, the Secretary of the Treasury should ensure that the reciprocal offset agreements authorized by this section protect the financial interests of the United States. Congress anticipates that Federal agencies will offset State debts in which there is no Federal interest or Federal/State cost-sharing (such as State tax debts). Similarly, Congress anticipates that States will offset Federal debts in which there is no State financial interest or Federal/State cost-sharing (such as debts owed to the Customs Service). It is the intent of Congress that the agreement be broadly in the mutual interests of Federal, State and local government. Technical and Conforming Amendments Subsection (a) makes several technical changes to title 31, United States Code. Subsection (b) amends 26 U.S.C. 6103 to allow disclosure of taxpayer information to the Financial Management Service for the purpose of conducting offsets of tax refunds. This change allows the tax refund offset program to be implemented at the time of disbursement, and permits the Secretary of the Treasury to consolidate its non-tax debt offset programs. Enhancement of salary offset authority Enhancement of Salary Offset Authority This section enhances current Federal salary offset authority by expanding agency coverage and by establishing annual matching requirements. Congress believes that employees of the Federal Government should be held to an exemplary standard and pay debts owed to the Federal Government. This section makes Federal salary offset mandatory. Section 5514(1)(A) amends 5 U.S.C. 5514(a)(1) by adding new language requiring all Federal agencies to participate in computer matches of delinquent debtor files against Federal employee records at least annually. This provision requires the Secretary of the Treasury to establish and maintain a consortium to implement centralized salary offset computer matching, and to promulgate regulations for that purpose. Section 5514(1)(B) and (C) facilitate the collection of debts by salary offset by exempting routine adjustments from the extensive and costly due process protections of section 5514. Taxpayer identifying numbers Access to Debtor Information This section amends section 4 of the Debt Collection Act of 1982 by requiring agencies to obtain taxpayer identifying numbers from all individuals and entities doing business with the Federal Government to facilitate the collection of any receivables which arise as the result of that business relationship. This section defines what relationships are considered ``doing business with'' the Federal Government and requires agencies to disclose the purpose of their request for taxpayer identifying numbers. The taxpayer identifying numbers are needed to facilitate the collection of delinquent debts. Creditor agencies are authorized to verify the accuracy of their debtor records with records from the Department of Health and Human Services and the Department of Labor. It is the intent of Congress that creditor agencies have access to all relevant records at those agencies, including any delinquent parent locator service and unemployment insurance records. Barring Delinquent Debtors From Obtaining Federal Loans or Loan Guarantees This section would bar debtors who are delinquent on Federal non-tax claims from receiving financial assistance in the form of a Federal direct loan or a loan guarantee. The intent of this section is to provide authority to Federal agencies which administer credit programs to refuse to approve credit to parties who are delinquent on Federal claims to resolve their debts with the appropriate agency. Congress also considered extending this debarment provision to other forms of assistance given to debtors. Agencies, in coordination with the Office of Management and Budget, should examine additional benefits, such as discretionary grants or non-mandatory benefits, which could feasibly be denied to debtors. Congress is pleased with the level of success attained by the Immigration and Naturalization Service's [INS] collection of inspection fees and the aggressiveness with which INS has pursued debtors by denying inspection services to airlines which are delinquent in the payment of certain fees owed to the INS. Congress is concerned with the growing delinquencies at the Customs Service, and note disapprovingly that the Customs Service has not responded to this situation by exercising authority to deny entry and inspection to vessels whose owners are also delinquent debtors. The Office of Management and Budget should direct the Customs Service to use these additional tools to collect debts owed to the Federal Government. Expansion and enhancement of collection authorities Disclosure to Consumer Reporting Agencies and Commercial Reporting Agencies Congress notes the success that the Department of Education has achieved with the reporting of delinquent loans to consumer reporting agencies. This section would allow [[Page H4089]] agencies to conform to private sector practice by also reporting current loans to consumer reporting agencies. This will promote better credit information and good credit risks, and especially help recently-graduated students entering the workplace for the first time. Subsection (1) amends the credit bureau reporting authority contained in 31 U.S.C. 3711(f) by requiring agencies to report delinquent debts. Subsections (2) and (3) make conforming amendments to allow commercial debts to be reported to commercial reporting agencies. Subsection (4) requires agencies to require that any participating lender in a guaranteed loan program provides information relating to the extension of credit to credit reporting bureaus. Congress is concerned that some agencies do not comply with the existing guidance in OMB Circular A- 129. In particular, the Department of Housing and Urban Development does not refer claims for assigned multifamily mortgages to credit reporting bureaus; the Departments of Agriculture and Veterans Affairs does not report nor require lending institutions to report guaranteed loans to credit reporting bureaus. Congress intends this section to fix this deficiency, and that agencies will comply. Subsection (4) also allows the head of an agency to report claims to a credit reporting agency which are current in payment. This change allows Federal credit reporting to be more consistent with private sector practice, and debtors whose accounts are current with the Federal Government shall receive the benefit of having favorable information provided to credit bureaus. Contracts for Collection Services This section permits agencies to contract with persons to locate and recover assets and pay for such services out of the proceeds that are recovered. The intent is to permit agencies to pay ``finders fees'' to persons who locate and recover assets of the United States the existence of or location of which is unknown to the applicable Federal Government agency. Congress notes that the U.S. Marshals Service provides asset locator services for U.S. Attorneys in connection with debt litigation, and is very successful at this task. Congress further notes that this essential service is hampered by limits on Full-Time Equivalents imposed by the Federal Workforce Restructuring Act (FWRA) and a reliable funding source. In view of this essential service, Congress believes that the Director of the Office of Management and Budget should grant a waiver to the FWRA and associated Executive orders and that the Secretary of the Treasury should consider using the existing expertise in the U.S. Marshals Service in providing skip-tracing services to supplement any private persons obtaining contracts under this section. Cross-Servicing Partnerships and Centralization of Debt Collection Activities in the Department of the Treasury Subsection (a) amends 31 U.S.C. 3711 by creating new subsections (g) and (h). Section 3711(g)(1) requires the heads of executive, legislative or judicial agencies to refer non-tax claims owed to the Department of the Treasury for servicing, collection, compromise or write off. The intent of this section is to improve the debt management performance of the United States by establishing a centralized cross-servicing mechanism wherein Federal agencies that do not have the expertise, personnel, or funding to implement effective claims collection policies on their own can use the services of Federal agencies that have effective claims collection processes. This section provides the referred to transferred non-tax claims will be administered by the debt collection centers consistent with existing statutory requirements and authorities. The Debt Collection Improvement Act, through its cross- servicing provision, provides independent authority for all Federal non-tax debt to be collected by those Federal agencies that are proficient in debt collection and have been designated as debt collection centers. Agencies which currently run large debt collection operations and should be considered for designation as debt collection centers by the Secretary of the Treasury include the Department of Veterans' Affairs, the Small Business Administration, the Department of Education and the Department of Housing and Urban Development. Each agency remains responsible for managing an effective debt collection program and to use effective debt collection tools, such as private collection contractors, debt collection centers, and litigation through the Department of Justice. Consistent with other initiatives in the Debt Collection Improvement Act, general oversight and operational responsibility for cross-servicing and effective debt collection has been delegated to the Department of the Treasury. Section 3711(g)(2) describes exemptions to the requirement that agencies transfer debts to the Department of the Treasury under Section 3711(g)(1). Congress carefully structured these exemptions so that exemptions will only apply to those debts associated with a demonstrated repayment source. Congress believes the Secretary of the Treasury should exempt from transfer under this section collateralized obligations of the Government National Mortgage Association. Congress cautions the Secretary of the Treasury with liberal use of the Secretary's discretion in exemption claims from the transfer requirement, and note that the Secretary is responsible for government-wide debt collection. The exemption from this requirement should only be provided when it is demonstrated that an exemption is the best means to protect the Federal Government's financial interest in collecting the delinquent debt or claim. Section 3711(g)(3) authorizes the Secretary of the Treasury to designate debt collection centers. It is anticipated that the Secretary of the Treasury shall monitor the performance of these centers, since ultimately, the Secretary is responsible for the work they perform. A debt collection center's degree of success, which is the basis of their designation as a debt collection center, may be dependent upon the type of claim referred to the center. In order to fairly establish a performance baseline, the Secretary should examine collection success of similar types and maturities of debts at private collection agencies and at other Federal agencies. Section 3711(g)(4) authorizes the referral of debts by the Secretary of the Treasury to a debt collection center, a private collection agency, or to the Department of Justice. In referring debts to private collection agencies, the Congress has purposely given latitude to the Secretary of the Treasury to determine the most appropriate private collection agent. Debts may be referred to a private debt collector, collection agency or commercial attorney. This subsection does not authorize a commercial attorney to represent the Federal Government in a litigation action in the absence of supervision of the Department of Justice. Section 3711(g)(5) describes the authorities and responsibilities of the Secretary of the Treasury with regards to debt collection. It is the intent of Congress to give contracting authority for the purposes of debt collection to the Secretary of the Treasury broadly similar to that given to the Department of Education. Congress commends the Department of Education for the steps it has taken to rely successfully on the expertise of private collection contractors, and would like to see similar success at the Department of the Treasury and at the Internal Revenue Service in particular. Section 3711(g)(6) and (7) authorize the executive department or agency operating a debt collection center to charge a fee to cover costs of program implementation, and provide that fees may be collected from recoveries. Congress intends to give agencies authority to pay debt collection centers and contractors from collection proceeds, and that costs of recovery shall be borne by the debtor. Section 3711(g)(8) requires that amounts collected as fees which are not needed for debt collection purposes in the fiscal year shall be deposited into the Treasury as miscellaneous receipts. Section 3711(g)(9) requires that agencies take appropriate steps in the collection process to collect delinquent debts prior to writeoff or discharge, including administrative offset, tax refund offset, Federal salary offset, referral to private collection contractors or agency debt collection centers, credit bureau reporting, wage garnishment and litigation or foreclosure. Under Section 3711(g)(10) the Secretary of the Treasury is authorized to issue regulations and procedures to implement this subsection. Section 3711(h) authorizes agencies to employ a consumer report to evaluate collection efforts with respect to an individual. Such data can be particularly helpful in evaluating whether to terminate collection action and determine repayment schedules. Agencies should develop policies on when the use of a credit report is appropriate based on its cost and potential benefit. Subsection (b) creates a new procedure whereby agencies may, in lieu of filing a return required under Section 6050P of the Internal Revenue Code, provide to the Secretary of the Treasury, or his designee, the data necessary to accomplish this task. It is anticipated that the Financial Management Service will perform this task for the Secretary of the Treasury. Congress is concerned about the problem of inadequate reporting to the Internal Revenue Service related to discharges of indebtedness. The Office of Management and Budget, with the assistance of the Department of the Treasury, should monitor agencies to ensure compliance with the requirements of Section 6050P. Compromise of Claims This section clarifies that the increased authority of a head of an agency to compromise a claim under 31 U.S.C. 3711(a)(2) contained in the Administrative Dispute Resolution Act is a permanent authority and is not subject to the sunset provision contained in that Act. Wage Garnishment Requirement This section authorizes agencies to garnish administratively the wages of delinquent debtors. It is the intent of Congress that every debtor that has a job or income should be in a repayment schedule. The Congress considered making this a mandatory tool, and agencies should consider aggressive use of wage garnishment to compel repayment of delinquent debts. The section also describes the procedures that an agency must follow to administratively garnish a debtor's wages, including a description of the debtor's due process rights and limitations on agency authority. Debt Sales by Agencies This section amends 31 U.S.C. 3711 to include a new subsection (h)(1) authorizing [[Page H4090]] sales of debts delinquent for more than 90 days. It is the intent of Congress to increase debt sales where appropriate. Debt sales are an appropriate collection tool which results in the privatization of the liability for a debt and the costs of collection. Congress is impressed with the results of loan sales at the Department of Housing and Urban Development. This example should be followed by other Federal agencies which lack the administrative capacity to manage their large portfolio of distressed properties. Section 3711(h)(2) requires that delinquent debts be sold if the Secretary of the Treasury determines that such sales would be in the best interest of the United States. It is the intent of Congress that, to the greatest extent possible, prior to terminating collection action, agencies should sell delinquent debts in order to realize at least some amount of the delinquent receivable. Section 3711(h)(3) describes the conditions of sale for debts. It is the intent of Congress that agencies should be able to sell debts while retaining some portion of equity participation in the collection of the delinquent debt. This form of structured security (sometimes referred to as a joint venture between an agency and another person) allows agencies to obtain income as well as the possibly of future payments. Congress encourages agencies to employ the collection tool that maximizes repayments. Section 3711(h)(4) requires agencies to develop an inventory of loan assets. Congress intends to use this information to evaluate the results of collections and loan sales. The successful loan sales at HUD resulted in receipts far in excess of the proceeds anticipated under the Federal Credit Reform Act. Agencies should consider the results of these valuations and compare them against collections. To assure that agencies use the most economically effective means in collecting delinquent debt, agencies contemplating the sale of unsecured debt should prepare a cost-benefit analysis comparing the benefits of immediate sale to collection using other debt collection tools, including administrative offset, transfer to the Department of the Treasury and use of private collection agencies. Adjustments of Administrative Debt This section allows agencies to simplify the complicated series of fines, interest and penalties required under 31 U.S.C. 3717. Congress views the requirement to charge interest and penalties with great seriousness. The disappointing performance of nearly every agency, with the exception of the Department of Education, in assessing and collecting these amounts should be improved. Congress directs agencies to comply with the law, and for OMB to ensure that this requirement is met. The intent of this section is to allow agencies option to combine these fines and penalties into a single, easy assess charge. Congress is aware of the inadequate systems agencies face in assessing these amounts. Agencies that lack the technical accounting expertise to comply with 31 U.S.C. 3717 should privatize the management of their credit portfolio. the Department of Agriculture should rely on the expertise of private contractors to improve the dismal collection performance of its portfolio of farmers' home loans. Dissemination of Information Regarding Identity of Delinquent Debtors This section authorizes agencies to publicize the identity of delinquent debtors to help collect debts. Congress notes the success of the Public Health Service's program regarding dissemination of the identity of doctors delinquent in the repayment of medical school loans. The head of other agencies should seek to replicate this success, and make this tool more widely known among the debtor population. Congress recognizes that this is a powerful enforcement tool and urges judicious use. Federal civil monetary penalties Adjusting Federal Civil Monetary Penalties for Inflation Subsection (a) amends section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990 to require agencies to make an initial adjustment of such penalties within 180 days of the enactment of this bill, and also requires agencies to make additional adjustments at least once every four years. Subsection (b) limits the amount of the initial adjustment to ten percent of the amount of the penalty prior to such adjustment. Gain sharing Debt Collecting Improvement Account Subsection (a) of this section creates a new section 3720C in Title 31, United States Code. Section 3720C(a) establishes an account in the Treasury entitled the ``Debt Collection Improvement Account'' (``Account''). The Department of the Treasury shall maintain and manage the Account. Section 3720C(b) provides that agencies collecting delinquent claims may transfer into the Account five percent of the delinquent debt collected during any fiscal year beyond a baseline established for the prior fiscal year. The Office of Management and Budget shall determine the baseline from which increased collections are measured over the prior year, taking into account the recommendations made by the Secretary of the Treasury in consultation with credit agencies. Section 3720C(c) provides that the amount available for expenditure in any fiscal year will be available for certain purposes designed to improve debt collection, financial management or asset disposition. Section 3720C(c) also provides that the amount available to the agency will be in proportion to amounts transferred to the account. Section 3720C(d) modifies the treatment of amounts credited to the Account that are subject to the requirements of the Federal Credit Reform Act of 1990. That Act requires that collections for direct loans and loan guarantees made since 1991 be credited to a financing account and included in the cash flows used to calculate the subsidy cost of the credit program. This section provides that collections that are credited to the Account will not be included in the subsidy cost calculation in order to avoid counting them both in the cost calculation and on a cash basis. Section 3720C(e) authorizes the Secretary of the Treasury to issue regulations and procedures to implement this section. Tax refund offset authority Expanding Tax Refund Offset Authority Subsections (a) and (b) change the exclusion of the Tennessee Valley Authority (TVA) by authorizing the TVA to use tax refund offset. Expanding Authority To Collect Past-Due Support This section allows the Secretary of the Treasury and the Secretary of Health and Human Services to choose between using the tax refund offset authorities of either 31 U.S.C. 3720A or 42 U.S.C. 664 to collect past-due child support. This change in Section 3720A of title 31 is not intended in any way to hinder, restrict, or add any additional requirements to the collection of past-due support under 42 U.S.C. 664. Offset of Tax Refund Payments by Disbursing Officials This section allows the Secretary of the Treasury to implement the tax refund offset program through the disbursing official of the Department of the Treasury (i.e., the Financial Management Service). This will allow for more efficient operations, as the Financial Management Service also operates the administrative offset program. By merging these two offset programs, the Department of the Treasury will streamline and improve its operations. It is the intent of Congress that the Financial Management Service should perform both the tax refund offset and the administrative offset programs. This legislation makes changes in those two programs so that their administrative requirements are broadly similar, and can be performed by the same entity, the Financial Management Service. This change will allow the Internal Revenue Service to focus its efforts on other management problems identified by it and Congress. Congress intends that the Internal Revenue Service will transfer the operation of the tax refund offset program to the Financial Management Service. Disbursements Payments Subsection (a) mandates that all Federal payments to individuals who become eligible for that type of payment after 90 days after the date of enactment of this Act shall be made by electronic funds transfer. Further, individuals already receiving payments will begin to receive those payments electronically after 1999. This section will facilitate offset and improve audits associated with counterfeit, stolen, forged and fraudulent checks. Since this section will require participating beneficiaries to obtain a bank account, Congress expects the Secretary of the Treasury to work vigorously to accommodate the needs of the unbanked recipients through such means as: (1) the planned implementation of a national electronic benefits transfer system for Federal payments through the designation of depositaries and financial agents under the Secretary's existing authority. Under this program, recipients will receive all benefit payments under a single access card; (2) implement through the private sector consumer owned bank accounts where recipients access their funds by debit card or other means, rather than through traditional account features, such as checking. This product is known as Direct Deposit Too and is an extension of the Treasury's Direct Deposit Program; (3) intensive marketing of the Treasury's existing Direct Deposit Program for both individuals and businesses; and (4) other forms of electronic benefits transfer. The Financial Management Service should evaluate several recent pilots, including its Direct Deposit Too and various state pilots, to determine the best mechanism for benefit delivery. The Secretary of the Treasury is given broad discretion to waive the requirements of this section to avoid imposing a hardship on a beneficiary. Congress expects the Department of the Treasury to promulgate regulations addressing such hardship waivers and to consider various factors in defining hardship. Congress recognizes that adherence to these provisions may be difficult for a variety of beneficiaries. We are concerned that individuals who have geographical, physical, mental, educational, or language barriers or as a result of natural or environmental disasters will not be able to receive benefits. Recipients in this category includes small businesses as well as individuals. Waivers should be provided in order to minimize disruptions to any beneficiary. Additionally, [[Page H4091]] the Secretary of the Treasury may waive this section for recipients who reside in a country where delivery of an electronic payment is impractical. The Congress further directs the disbursing official to study the socioeconomic and demographic characteristics of those who currently do not have direct deposit and determine how best to increase usage among all groups. The Congress further directs the disbursing official to study the adequacy of consumer protections available to individuals who are required to obtain a bank account under this section. The exclusion of the application of this section to tax refunds is to allow time for development of the necessary infrastructure for making these electronic payments. However, the Secretary of the Treasury should, to the maximum extent possible, implement a system to disburse tax refunds electronically and conduct demonstrations of other electronic technologies to maximum outreach to recipients. Subsections (b) and (c) allow the Secretary of the Treasury to issue substitute checks to repay Federal recipients whose checks have been stolen, forged or fraudulently cashed. The Check Forgery Insurance Fund provision would authorize the Secretary of the Treasury to establish a flexible procedure for facilitating the timely payment of forged Government checks by providing a permanent and indefinite appropriation which would ensure readily available funds to provide innocent payees with replacement checks in a timely manner. It enables the Department of the Treasury to comply with two decisions of the Comptroller General Decision B-242666, dated August 31, 1993 and B-243536, dated September 7, 1993. These decisions concluded that the Check Forgery Insurance Fund Act (31 U.S.C. 3343) requires that the Department of the Treasury certify all checks issued to replace those checks paid over forged endorsements and charged to the Fund. The Congress recognizes that many payees rely on these payments for their basic subsistence and seeks assurance that claimants receive checks in a timely manner; the prospect of payees not receiving timely replacement payments is unacceptable to Congress. Congress notes the importance of the timely issuance of replacement checks, and that such replacement checks should not be contingent upon the Government's ability to recover the original forged check. Congress also notes that in the case of an innocent payee whose check has been forged, the Government's obligation to pay remains outstanding. This provisions would provide an equitable solution for payees and disbursing and program agencies, by resolving current inequities inherent in the current process of payment of checks bearing forged or unauthorized endorsements. Requirement To Include Taxpayer Identifying Number With Payment Voucher This section requires that Federal agencies include a taxpayer identifying number when a payment is made. This requirement will facilitate offset and increase collections. Congress directs the disbursing official of the Secretary of the Treasury and the Department of Defense to survey agency compliance with this section and include the results of this survey in the consolidated debt collection report to Congress required under Section 1692 of this Act. Miscellaneous Miscellaneous Amendments to Definitions Subsection (1) revises the definitions for ``administrative offset'' and ``claim'' under 31 U.S.C. 3701 (a)(1) and (b). These changes permit offsets of payments for the collection of debts administered by States such as debts which contain a Federal monetary component (e.g., AFDC overpayments due to fraud) and delinquent child support obligations. The definition of ``claim'' also includes amounts which the United States collects for the benefit of any person under statutory authority. In addition, the definition of debt has been amended to include deficiency payments. Federal authority to collect deficiencies has been upheld based on provisions of Federal law preempting State laws governing mortgage debt (in all but a few narrow circumstances). This authority has been upheld by numerous court decisions (including Connelly v. Derwinski, 961 F.2d 129, 131; United States v. Shimer, 367 U.S. 374, 387; and Burris v. First Financial Corp., 928 F.2d 797, 800- 801). The Congress is concerned that agencies have not established deficiencies as debt consistently. The Federal Housing Administration uniformly establishes as debt and collects deficiencies only in its Title I program. Congress is concerned that debtors under FHA's other loan programs are receiving different treatment. Deficiencies should be established in all cases. Congress is also concerned that agencies do not monitor the unpaid share of any non-Federal partner in a program involving a matching, or cost-sharing, payment by the non- Federal partner. According to the General Accounting Office, the non-payment of these types of matching payments has become more common. Congress is concerned about this trend, and wants to see those amounts collected. This section also adds specific definitions applicable to administrative offsets under 31 U.S.C. 3716 for creditor agencies and payment certifying agencies. Monitoring and Reporting Subsection (a) authorizes the Secretary of the Treasury to provide guidelines to monitor the performance of debt collection activities, in consultation with debt collecting agencies. Subsection (b) requires the Secretary to report to Congress on the progress of debt collection centers, defined under subsection (c) as those centers providing debt collection services for other agencies. Subsection (c) provides that the Secretary of the Treasury will submit reports concerning the status of loans and accounts receivable to Congress in accordance with the Debt Collection Act of 1982. Formerly, reporting was performed by the Director of the Office of Management and Budget. Subsection (d) authorizes the Secretary of the Treasury to consolidate all debt collection reports. Review of Standards and Policies for Compromise of Write-Down of Delinquent Debts This section requires the Office of Management and Budget to review agencies' standards and policies for compromising, writing-down, forgiving or discharging indebtedness and various reporting requirements. OMB should rely on the expertise and personnel of the Department of the Treasury in preparing this report, which should be consolidated with the annual consolidated debt collection report. However, OMB needs to be very involved in ensuring that each Federal agency complies with changes needed in their policies. Congress is seriously concerned about dissimilar standards for discharging indebtedness at different agencies. This needs careful monitoring. Congress is concerned that the credibility of the Federal Government is undermined when similarly-situated beneficiaries under one program receive more generous treatment than those under another program. In addition, Congress is very seriously concerned about the poor reporting of the discharge of indebtedness to the Internal Revenue Service on Form 1099. The Office of Management and Budget should ensure that agencies consistently report these amounts or allow the Secretary of the Treasury to report the data to the Internal Revenue Service. Justice debt management Expand Use of Private Attorneys This section gives the Attorney General permanent authority to contract with private counsel to collect delinquent non- tax civil debt when deemed appropriate.