Frequently Asked Questions About Debt Collection Laws
Where can I find information about federal debt collection laws?
We have written the Treatise on Federal Nontax Debt Collection Law. This treatise provides legal background on the collection of nontax debts owed to the United States.
Defining debt and delinquent debt
The definition of "debt" can depend on the circumstances. Generally, as used in the context of federal debt collection, the term "debt" or "claim" means any amount of funds or property that an appropriate official of the federal government has determined that a person, organization, or entity other than another federal agency owes to the United States.
The amount does not have to be litigated or adjudicated before being considered as a debt.
- Funds that someone owes for loans that the government made, insured, or guaranteed, such as direct or guaranteed loans to students, SBA loans, HUD loans. This can include amounts due after a foreclosure or after the sale of collateral.
- Expenditures of non-appropriated funds, such as the value of an object stolen from a military commissary.
- Overpayments, including payments disallowed in an audit by an Inspector General, such as salary or benefit overpayments, duplicate payments, or misused grant funds.
- Any amount that a law says the government may collect for the benefit of any person, such as an FTC consumer redress.
- The unpaid share of any non-federal partner, such as a state or local government, in a program that involved a federal payment and a matching or cost-sharing payment by the non-federal partner. For example, a state's share of a benefit matching program.
- Any fines or penalties that an agency assesses, such as civil monetary penalties or OSHA fines for mine safety violations.
- Other money or property that someone owes to the government, such as license fees or FOIA fees.
Yes. When an agency tries to satisfy someone's debt by selling a property on which it holds a mortgage, the agency must subtract the price it got from the total of the debt owed to the agency. The difference (deficiency) is a debt that the debtor still owes to the agency.
A debt is delinquent if it has not been paid by the payment date or by the end of any grace period contractually provided.
The date of delinquency
- for a loan or installment payment is the payment due date
- for an administrative debt is the date specified in the agency's initial written demand for payment
The date of delinquency is relevant to when interest and penalties generally begin to accrue, and when agencies will be required to refer debts to Fiscal Service’s delinquent debt collection programs.
Getting Taxpayer Identification Numbers (TINs)
Yes. Agencies must get the TIN from any individual or entity that is considered to be "doing business" with the government, where "doing business" is defined as doing something that might give rise to a receivable.
Examples of individuals or entities who would be doing business with an agency include:
- lenders and servicers under federal guaranteed or insured loan programs
- applicants for and recipients of federal licenses, permits, right-of-way grants, or benefit payments
- anyone owing fines, fees, royalties, or penalties to the agency
Yes. Agencies generally must include a TIN on all payment vouchers.
Reporting to credit bureaus and getting reports from credit bureaus
Yes. Agencies must report delinquent commercial and consumer nontax debt to credit bureaus.
Generally, yes. An agency may get a credit report or comparable credit information, such as a summary report, on any individual or entity that owes a delinquent debt, in order to assist the agency with collecting, compromising, or terminating collection action on a claim.
Adding interest, penalties, and costs
Yes. Generally, agencies must assess interest and penalties on delinquent debt that a state or local government owes.
Offsetting payments to delinquent debtors
Yes. Before sending a debt to the Treasury Offset Program, the agency must send the debtor a letter telling the debtor:
- how much the debt is
- what the debt is for
- that the agency intends to collect the debt by withholding money from federal payments
- that the debtor can inspect and copy the relevant records
- that the debtor can ask for a review of the debt within the agency
- that the debtor can set up a written payment agreement with the agency to pay off the debt in installments
Yes. When a payment is offset to satisfy a delinquent debt, the official in charge of the offset must send the debtor a letter telling the debtor:
- that a payment was intercepted (the payment was offset)
- the description of the payment that was offset
- the amount of the offset
- which agency asked for the offset
- a contact name and contact information at that agency for the debtor to ask about the debt
The offset is still legal even if the notice never reaches the debtor.
Yes. Any federal payment may be offset unless specifically exempt by law or by the Secretary of the Treasury.
Barring delinquent debtors from getting loans or credit
Yes. The agency generally must deny federal financial assistance to a debtor who is delinquent on a federal nontax debt, unless the head of the agency waives this requirement.
The head of the agency may delegate the authority to waive this requirement only to the agency's Chief Financial Officer or Deputy Chief Financial Officer.
The debtor can
- pay the delinquent debt in full, or
- enter into a payment plan to repay the debt in installments.
Collecting money for states
Yes. The Treasury Offset Program (TOP) can work with states (including the District of Columbia, American Samoa, Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Commonwealth of Puerto Rico) to collect overdue (delinquent) debt owed to them.
We can offset federal tax refunds to settle delinquent debts for child support, state income tax obligations, and unemployment compensation.
The regulation that allows Treasury to offset federal tax refunds for delinquent state income tax obligations and delinquent unemployment compensation debts is 31.CFR 285.
States may also participate in the State Reciprocal Program, where TOP collects delinquent debt owed to the states by offsetting federal nontax payments (other than benefit payments).
For more information, see the TOP page on State Programs.