Terminating & Suspending Collection

1. Terminating & Suspending Collection WHY DO AGENCIES TERMINATE OR SUSPEND COLLECTION ACTION? Federal law (31 U.S.C. 3711 and 31 CFR Parts 900-904): • requires that agencies try to collect debts owed to the Federal government (this is known as an agency’s affirmative duty to collect their debts); • authorizes agencies to suspend or terminate collection action; and • states that agencies act under their own regulations and standards promulgated in accordance with regulations issued by the Departments of Justice and the Treasury (also known as the Federal Claims Collection Standards (FCCS)). In summary, agencies have an affirmative duty to collect their delinquent debts. They may be relieved of this duty by terminating or suspending collection action under standards provided for in the FCCS and their own agency regulations. The decision to terminate or suspend collection action must be clearly made, and must be justifiable under established standards.

2. Terminating and Suspending Collection - Definitions WHAT DO TERMINATION AND SUSPENSION MEAN? • Termination of collection action means ceasing “active collection” on a debt. When an agency terminates collection on a debt, it does not intend to pursue “active collection” at a later time. • Suspension of collection action means temporarily ceasing “active collection” on a debt. • “Active collection” means the debt is being collected using all appropriate debt collection remedies (such as demand letters, credit bureau reporting, garnishment, litigation, foreclosure, and cross-servicing with the Financial Management Service. Note: When an agency terminates or suspends collection action, it may continue“passive collection” action if such action is not prohibited by law and is appropriate. Passive collection action includes maintaining a lien on collateral securing the debt without taking action to liquidate the collateral; or referring the debt to the Treasury Offset Program (TOP); or scheduling the debt for sale through an asset sales program.

3. Terminating & Suspending Collection WHEN SHOULD AN AGENCY TERMINATE OR SUSPEND COLLECTION ACTION? The general rule is that the agency should terminate or suspend collection action on a debt when it is either not economically worthwhile to continue collection action on the debt, or collection action is otherwise inappropriate. There is an exception to the general rule: when a significant enforcement policy is involved or recovery of a judgment is a prerequisite to imposition of administrative sanctions, it is inappropriate to terminate or suspend collection action. There are specific criteria in the Federal Claims Collection Standards to help agencies evaluate when to terminate or suspend collection action.

4. Terminating Collection Under the FCCS, agencies may terminate collection action when: • The agency is unable to collect any substantial amount through its own efforts or the efforts of others, including the consideration of the present and future financial condition of the debtor. • The agency is unable to locate the debtor. • The cost of collection is anticipated to exceed amount collected. • The debt is legally without merit. This means the debt was never owed in the first place and should not have been classified as a debt. • Enforcement of all appropriate debt collection tools (such as offset, administrative wage garnishment and litigation) is barred by statute(s) of limitations. • The debt cannot be substantiated, that is, there is insufficient witnesses, evidence or documentation to validate the debt and the debtor will not sign a repayment agreement. • The debt owed by the debtor has been discharged in bankruptcy.

5. Terminating Collection – DOJ Concurrence • Generally, DOJ concurrence is required to terminate active collection on debts with principal amounts greater than $100,000 unless there is an exemption to this requirement. • When an agency has a debt arising from fraud, false statements, or misrepresentation by the debtor, the agency must ask DOJ for authority to terminate or suspend collection action regardless of the amount. • Note: Treasury has been authorized by DOJ to approve termination of collection on debts of $500,000 or less that have been referred to FMS for cross-servicing. WHEN DOES AN AGENCY NEED THE CONCURRENCE OF THE DEPARTMENT OF JUSTICE (DOJ) TO TERMINATE COLLECTION ACTION?

6. Terminating & Suspending Collection • The agency has independent litigating authority. • The debt has been referred to DOJ for litigation. • The debt has been discharged in bankruptcy. • The statute of limitations for litigationhas run. • The agency has determined that the debt is legally without merit or cannot be substantiated. WHAT ARE THE EXECEPTIONS TO THE REQUIREMENT TO OBTAIN DOJ CONCURRENCE?

7. Terminating & Suspending Collection DOJ concurrence not required to write-off debts, because write-off is a concept different from termination of collection action and is done under different rules. DOJ Concurrence not required for write-off.

8. Terminating Collection – DOJ Concurrence • To request DOJ concurrence submit a completed Claims Collection Litigation Report (CCLR) to: Department of Justice Civil Division, Commercial Litigation Branch 1100 L Street NW, Room 10057 Washington, DC 20530 • The CCLR can be found at Appendix 7 of Chapter 7 of Managing Federal Receivables and on FMS’ website at www.fms.treas.gov/debt. HOW DOES AN AGENCY REQUEST CONCURRENCE FROM DOJ?

9. Suspension of Collection - Criteria WHEN IS SUSPENSION OF COLLECTION ACTION APPROPRIATE? An agency may suspend collection action on a debt if any of the following apply: • The agency cannot locate the debtor at the present time. • Though the debtor currently may not be able to pay anything or have any assets from which to collect the debt, the debtor’s financial condition is expected to improve. • The debtor has requested a waiver or administrative review of the debt. • The debtor has filed for bankruptcy. In most cases, the automatic stay in bankruptcy applies.

10. Suspension of Collection – DOJ Concurrence • DOJ concurrence is required to suspend collection on debts whose principal amounts exceed $100,000. • When an agency has a debt arising from fraud, false statements, or misrepresentation by the debtor, the agency must ask DOJ for authority to suspend collection action regardless of the amount. DOJ concurrence is not required if any of the following apply: • The agency has independent litigating authority. • A statute requires suspension of collection action. • The debtor has filed for bankruptcy. WHEN IS DOJ CONCURRENCE NEEDED TO SUSPEND COLLECTION ACTION ON A DEBT?

11. Terminating & Suspending Collection Attention Students! You have learned the rules for terminating and suspending collection action. CONGRATULATIONS - You are now “Terminators”. It is now time to learn more about write-off. PROCEED TO MY NEXT PART BY CLICKING ON THE ARROW!