Administrative Wage Garnishment

AGENCY:

Small Business Administration.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

SBA is issuing a proposed rule adopting administrative wage garnishment regulations to implement the Debt Collection Improvement Act of 1996. The rule would allow SBA to garnish the wages of a person indebted to the United States for any non-tax debt without first obtaining a judgment. The debtor generally would be entitled to a hearing before a Judge assigned to SBA's Office of Hearings and Appeals.

DATES:

Submit comments on or before August 28, 2000.

ADDRESSES:

Send all comments concerning this proposed rule to: Arnold S. Rosenthal, Assistant Administrator, Office of Portfolio Management, Small Business Administration, 409 Third Street SW., Washington, DC 20416.

Submit electronic comments and other data to: Walter.Intlekofer@sba.gov. See SUPPLEMENTARY INFORMATION for file formats and other information about electronic filing.

FOR FURTHER INFORMATION CONTACT:

Arnold S. Rosenthal, Assistant Administrator, Office of Portfolio Management, (202) 205-6481.

SUPPLEMENTARY INFORMATION:

Electronic Access and Filing

You may submit comments and data by sending electronic mail (E-mail) to: Walter.Intlekofer@sba.gov. Submit comments as Microsoft Word 97 or as ASCII files avoiding the use of special characters and any form of encryption. Identify all comments and data in electronic form with the title, “Administrative Wage Garnishment Regulations.” You may file electronic comments on this proposed rule online at many Federal Depository Libraries.

Public Review of Comments

Whether you comment on paper or electronically, your comments, including name, street address, or other contact information (such as e-mail address, FAX, or phone number), will be available for public review at this address during regular business hours (8 a.m. to 5 p.m.), Monday through Friday, except federal holidays. You may request confidentiality. If you want us to consider withholding your contact information from public review or from FOIA disclosure, you must state this prominently at the beginning of your comment. We will honor requests for confidentiality, to the extent the law allows, on a case-by-case basis. If you are an organization or business, or identify yourself as a representative or official of an organization or business, we will make your entire submission available for public inspection.

Background

SBA is issuing a proposed rule adopting administrative wage garnishment regulations implementing the Debt Collection Improvement Act (DCIA) of 1996. The Department of the Treasury garnishment regulations require agencies to publish regulations for administrative wage garnishment hearings.

Rulemaking History

Department of the Treasury (Treasury) published its proposed rules, with detailed analysis, at 62 FR 62458, Nov. 21, 1997 (Treasury Proposed Rule). After receiving written comments, Treasury published its final rule, discussing comments and changes in the final rules, at 63 FR 25136, May 6, 1998 (Treasury Final Rule). Treasury has since published a technical amendment at 64 FR 22906, April 28, 1999 (Treasury Technical Amendment). The rule, with the technical amendment, is now published in the Code of Federal Regulations as 31 CFR 285.11.

SBA issued a proposed rule amending its debt collection through offset regulations, 13 CFR part 140, to conform to the Debt Collection Procedures Act of 1996 and the DCIA, at 64 FR 3454, Jan 22, 1999 (Proposed Offset Rule). In anticipation of the administrative wage garnishment regulations, the Proposed Offset Rule sets forth general rules, applicable to offset collections and administrative wage garnishments, at subpart A of 13 CFR part 140 and rules pertaining only to offset at subpart B of 13 CFR part 140. The comment period for the Proposed Offset Rule ended February 22, 1999, and the SBA anticipates issuing a final rule (Final Offset Rule) shortly. This proposed rule takes into account SBA's regulations as the Final Offset Rule would amend them; therefore, this proposed rule includes citations that now do not exist as such but will be effected by the Proposed Offset Rule.

Same Organization as Treasury Final Rule

The core of this proposed rule, to be published in the Code of Federal Regulations as 13 CFR 140.11, is identical in subsection, paragraph, and subparagraph organization to 31 CFR 285.11. Thus, for example, section 285.11(f)(11) of the Treasury Final Rule corresponds to section 140.11(f)(11) of this proposed rule.

Conformity in Substance to Treasury Final Rule

Except as stated below, this proposed rule is substantially identical to the Treasury Final Rule.

Variation in Substance From Treasury Final Rule

This proposed rule provides for a hearing by a Judge assigned to the case by SBA's Assistant Administrator for Hearings and Appeals (AA/OHA), rather than a hearing official designated by the Administrator. Additionally, it makes minor editorial changes in accordance with Administration plain-language directives.

Basic Provisions

The rule would permit SBA to garnish the wages of a person indebted to the United States for any non-tax debt without first obtaining a judgment. SBA merely notifies the debtor it intends to garnish his/her wages. Subject to the exercise of appeal rights, SBA then may notify the debtor's employer (any state or local government or private employer, but not the federal government) to begin the garnishment. The OHA hearing, with a written decision by a Judge, will enhance the credibility and fairness of SBA's garnishment appeal procedure and will ensure due process.

Rules and Procedures

Except as stated below, this proposed rule would establish for the SBA the substantive and procedural requirements of the Treasury Final Rule.

Section Analysis

The following is a section-by-section analysis of how this proposed rule would affect SBA's regulations. This proposed rule would:

• Amend Section 134.101 (Definitions) to define “business day,” used in § 134.202(c)(ii);
• Amend Section 134.102(i) (Jurisdiction of OHA) to add collection of debts under DCIA to the jurisdiction of SBA's Office of Hearings and Appeals (OHA);
• Amend Section 134.202 (Commencement of cases) to specify the time limit for requesting a hearing on an administrative wage garnishment;
• Amend Section 134.222(a) (Availability of oral hearing) to add administrative wage garnishment to that group of cases in which a party might obtain an oral hearing;
• Amend Section 134.226(b) (Time limits for decision) to add collection of debts under DCIA to that group of cases in which OHA must render a decision within 60 days;
• Amend Section 134.227(a) (Final decisions) to add collection of debts under DCIA to that group of cases in which OHA's decision constitutes a final agency decision;
• Amend Section 140.1 (Coverage) to specify the coverage of subpart A of part 140;
• Amend Section 140.2 (Definitions) to add definitions pertaining to administrative wage garnishment;
• Add Section 140.3, a table showing features of part 140's debt collection methods;
• Add Section 140.10 (Coverage) to specify the coverage of subpart C of part 140; and
• Add Section 140.11 (Administrative wage garnishment) to implement the Treasury Final Rule, with the following modifications:

1. Definitions.

Section 285.11(c) of the Treasury Final Rule contains definitions. Section 140.11(c) contains no definitions, but incorporates by reference § 140.2, which defines terms applicable to debt collections through both offset and administrative wage garnishment. Except as stated below, the definitions pertaining to administrative wage garnishment are substantially identical to those in the Treasury Final Rule.

Business day. Section 285.11(c) of the Treasury Final Rule defines “business day” as “Monday through Friday,” then tells the reader to count the last day of the period unless it was a Federal legal holiday. The SBA believes all federal legal holidays, not merely those on the last day of a given period, are properly excluded from the term “business day.” Therefore, proposed § 140.2(c) would define “business day” as “Monday through Friday, excluding federal legal holidays.”

Certificate of service. Both the Treasury Final Rule, 31 CFR 285.11(c), and SBA's procedural rules, 13 CFR 134.204 (d), define “certificate of service.” In the Treasury Final Rule, “Certificate of service” refers only to documentation by the Agency, not by a party or by counsel, of which documents it mailed to the debtor and when it mailed them.

Under SBA's procedural rules, such a certificate of service is inadequate to document service of pleadings: A party serving pleadings must prepare a certificate of service conforming with 13 CFR 134.204(d).

Therefore, proposed § 140.11(d) applies only to a certificate signed by an SBA official and retained as evidence of mailing of a part 140 document, such as a notice of proposed garnishment or a garnishment order. When, for example, a debtor serves a request for hearing under proposed § 140.11(f)(2), the certificate of service must conform to § 134.204(d).

Debt or claim. The Treasury Final Rule defined “debt” or “claim” as “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.” 31 CFR 285.11(c). The SBA believes this definition raises more questions than it answers: For example, the meaning of “appropriate official,” which is defined neither in statute nor in case law. Because many SBA collections arise from loan defaults, proposed § 140.2(g) defines “debt,” in accordance with 31 U.S.C. § 3701(b): “Debt means money owed to the United States for any reason, including loans made or guaranteed by the United States, fees, leases, rents, royalties, services, sales of real or personal property, overpayments, fines, penalties, damages, interest, or forfeitures.”

Additionally, the Treasury Final Rule defines “delinquent” and “non-tax” under the definition for “debt or claim.” 31 CFR 285.11(c). Proposed §§ 140.2(n) and 140.2(m) would define these key terms separately.

Delinquent or past due. The Treasury Final Rule uses “delinquent,” while the offset regulations use “past due.” The garnishment statute, 31 U.S.C. § 3720D, refers to neither. Because “past due” is clearer than “delinquent,” the SBA adopted “past due.” However, the Treasury Final Rule's definition of “delinquent” for purposes of garnishment differs from that of “past due” for purposes of offset. Therefore, the SBA would adopt two definitions of “past due”: One, proposed § 140.2(n)(1), would apply to offset only; the other, proposed § 140.2(n)(2), would apply to garnishment only.

Disposable pay. “Disposable pay” is defined differently in 5 U.S.C. § 5514 and in the Treasury Final Rule. The garnishment statute, 31 U.S.C. § 3720D, defines “disposable pay” broadly, as does 5 U.S.C. § 5514; however, the Treasury Final Rule excludes “health insurance premiums.” 31 CFR 285.11(c). The analysis did not suggest a rationale. Treasury Final Rule, 63 FR 25136 at 25137; Treasury Proposed Rule, 62 FR 62458 at 62459.

The SBA is reluctant to define “disposable pay” more broadly than in the Treasury Final Rule. Additionally, one could argue that sound public policy favors encouraging debtors to maintain health insurance, which may reduce time lost from work and promote healthy families and businesses. Therefore, and because this definition varies from that used in the offset regulations, the SBA would adopt two definitions: One, proposed § 140.2(i)(1), would apply to offset only; the other, § 140.2(i)(2), would apply to garnishment only.

2. Hearing

Section 285.11(f)(1) allows agencies either to prescribe their own regulations or to adopt § 285.11 without change. Proposed § 140.11(f)(1) states that all procedures set forth in § 140.11, as well as the provisions of part 134, subparts A and B, consistent with § 140.11, will apply to any hearing on an administrative wage garnishment.

Additionally, SBA is adding two sentences to proposed § 140.11(f)(1). These sentences, now part of § 285.11(f)(9), state that a hearing need not be a formal judicial hearing, but that witnesses who testify in oral hearings must do so under oath or affirmation. Because these statements more directly relate to hearings rather than to the record, SBA is placing them in proposed 140.11(f)(1).

Section 285.11(f)(2) allows the debtor to request a hearing concerning the existence or amount of the debt or the terms of the repayment schedule unless the repayment schedule is based on a written agreement under paragraph (e)(2)(ii). Proposed § 140.11(f)(2) also contains this provision. In addition, it requires the debtor to specifically state in the request for hearing that the debtor deserves a hearing because of questions concerning the existence or amount of the debt or the terms of the repayment schedule. The debtor also must file the request for hearing with OHA, serving a copy on the office initiating the garnishment action. Subsequent references to the entity to which a debtor directs a request for hearing (specifically, (f)(4), (f)(5), and (f)(10)) will substitute “OHA” for the Treasury Final Rule's “agency.”

Section 285.11(f)(3)(i) states the agency will determine whether an oral hearing is required. To ensure a fair process and decision, proposed § 140.11(f)(3)(i) requires the OHA Judge appointed to the case, rather than SBA, to determine whether an oral hearing is justified and to conduct any hearing. Subsequent paragraphs (specifically, (f)(4), (f)(5), (f)(6), (f)(7), (f)(9), (f)(10), (f)(11), (f)(12), and (n)(1)) substitute “Judge” for the Treasury Final Rule's “hearing official.”

Similarly, section 285.11(f)(3)(ii) requires the agency to set the time and location of any oral hearing. OHA's Judges have authority to “take all appropriate action to ensure the efficient, prompt, and fair determination of a case.” 13 CFR 134.218(b). Therefore, proposed § 140.11(f)(3)(ii) places this determination in the hands of the OHA Judge assigned to the case.

If an oral hearing is not required, § 285.11(f)(3)(iii) requires a “paper hearing,” defined as a resolution based on the written record. Proposed § 140.11(f)(3)(iii) also requires a resolution based on the written record, but refers to it as a “written hearing.”

Additionally, section 285.11(f)(3)(iii) requires the agency to set the deadline for the submission of evidence. Proposed § 140.11(f)(7)(iii) states the Judge will notify the debtor of this deadline, and proposed § 140.11(f)(3)(iii) omits the requirement to set the deadline.

Section 285.11(f)(4) provides that an agency will conduct a hearing before issuing a withholding order if the agency receives the debtor's request for a hearing within 15 business days after the agency mails the notice described in § 285.11(e)(1) of this section. This deadline is inconsistent with proposed § 134.202(b), which states that a pre-garnishment hearing will be given if the debtor files a petition within 15 business days after SBA mails the notification letter to the debtor. Filing is effective, not only on receipt of a pleading by personal delivery, express mail, or commercial delivery service, but also on the postmark date of first-class mail or the transmission date of a facsimile. 13 CFR 134.204(e). Therefore, proposed § 140.11(f)(4) reads, “if you file your written request,” rather than, “if [your written request] is received by [SBA].”

Section 285.11(f)(5) provides that an agency need not delay issuing a withholding order unless the agency receives the debtor's request for a hearing within 15 business days after the agency mails the notice described in § 285.11(e)(1). Like that in § 285.11(f)(4), above, this deadline is inconsistent with proposed § 134.202(b). Therefore, proposed § 140.11(f)(5) reads, “if you file your written request,” rather than, “if [your written request] is received by [SBA].”

Section 185.11(f)(5) states the agency will determine whether a request for hearing was untimely for reasons beyond the debtor's control or whether other circumstances justify delaying or canceling the withholding order. Proposed 140.11(f)(5) authorizes the assigned Judge to make this decision.

Section 285.11(f)(6) authorizes the head of the agency to designate any qualified individual as a hearing official, including an Administrative Law Judge (ALJ). Proposed § 140.11(f)(6) states that a Judge assigned to OHA will conduct the hearing. The Assistant Administrator for Hearings and Appeals (AA/OHA) may assign any OHA case not subject to the Administrative Procedure Act to an ALJ or Administrative Judge or, if an attorney, may decide it personally, 13 CFR 134.218(a). Therefore, proposed § 140.11(f)(6) is substantially identical to § 285.11(f)(6), except that the AA/OHA, rather than the SBA Administrator, actually assigns the Judge to each case.

Paragraph (f)(8) describes the burden of proof on the respective parties to a hearing. Consistent with the Treasury Final Rule, proposed § 140.11(f)(8) requires the debtor to show, by a preponderance of the evidence, that no debt exists or that the amount of the debt is incorrect. Proposed 140.11(f)(8) also briefly defines “preponderance of the evidence” in plain English.

Section 285.11(f)(9), first sentence, requires the hearing official to maintain a summary record. The term “summary” is not defined; therefore, SBA is omitting it from proposed § 140.11(f)(9). OHA's regulations require a verbatim record for oral hearings, and any party can purchase a transcript. 13 CFR 134.222(e). Thus, any record the Judge keeps will not be verbatim, but will consist of the entire written record on appeal.

Additionally, § 285.11(f)(9), in its second and third sentences, states that the hearing need not be a formal judicial hearing, but that witnesses who testify in oral hearings must do so under oath or affirmation. These statements more directly relate to hearings rather than to the record. Therefore, SBA is placing those sentences in proposed § 140.11(f)(1).

Section 285.11(f)(10) provides that the hearing official must issue a written decision within 60 days after receipt of a hearing request. This deadline is inconsistent with proposed § 134.226(b), which provides that a decision pertaining to debt collection must be made within 60 days after a petition is filed. Filing is effective, not only on receipt of a pleading by personal delivery, express mail, or commercial delivery service, but also on the postmark date of first-class mail or the transmission date of a facsimile. 13 CFR 134.204(e). Therefore, proposed § 140.11(f)(10)) reads, “after you filed your request for a hearing,” rather than, “after receipt of [your written request].” Similarly, proposed § 285.11(f)(10)(ii) requires SBA to suspend previously issued withholding orders beginning on the 61st day after filing, rather than receipt, of the hearing request.

3. Wage Garnishment Order.

Section 285.11(g)(1) requires the agency to send a garnishment order within specified time limits unless it receives “information that the agency believes justifies a delay or cancellation of the withholding order.” This wording appears to render the Judge's decision irrelevant or, at best, advisory. Therefore, proposed § 140.11(g)(1) requires the SBA to send a garnishment order within specified time limits unless it receives “an adverse decision from the Judge or other justification to delay or cancel the withholding order.”

In the Treasury Final Rule, § 285.11(g)(2) provided in part that the withholding order sent to an employer must be on the garnishing agency's letterhead. The Treasury Technical Amendment deleted the words “on the agency's letterhead” from § 285.11(g)(2). This amendment “allows * * * agencies to use [Standard Form (SF) 329 (11-98),] prescribed by [Treasury] for the issuance of an administrative wage garnishment order[,] without preparing the form on agency letterhead.” Treasury Technical Amendment, 64 FR 22906, 22908 (1999). Because the form will clearly identify SBA as the garnishing agency and requiring SBA letterhead would interfere with use of SF 329, SBA is adopting this amendment.

Section 285.11(g)(3), second sentence, allows the agency to retain an electronic copy of the certificate of service. Because the SBA chooses not to exercise this option, the second sentence does not appear in proposed § 140.11(g)(3).

4. Amounts Withheld.

Section 285.11(i)(2)(i)(B) clarifies that the amount of garnishment is limited by the Consumer Credit Protection Act (CCPA). The CCPA, § 303(a)(2), codified at 15 U.S.C. 1673(a)(2) (maximum allowable garnishment), sets an additional limit on the amount of disposable pay that may be collected from a debtor's wages: The difference between 30 times the minimum hourly wage and the debtor's weekly disposable pay. This subparagraph did not appear in the Treasury Proposed Rule; Treasury added it to the final rule based upon the recommendations of two commenters. Treasury Final Rule, 63 FR 25136, 25138-39 (1998). However, the terms “hourly” and “weekly” do not appear in § 285.11(i)(2)(i)(B). Because both the comments on the final rule, 63 FR at 25139, and SF 329C (Wage Garnishment Worksheet), block 9, clearly indicate those terms are necessary to understand the limit set by CCPA, the SBA is inserting them in proposed § 285.11(i)(2)(i)(B).

Section 285.11(i)(3), introductory clause, purports to discuss “withholding orders with priority.” However, the subparagraphs of § 285.11(i)(3) describe how to determine whether another withholding order has priority. Therefore, proposed § 140.11(i)(3) replaces “withholding orders with priority” with “other withholding orders.”

Compliance With the Regulatory Flexibility Act (5 U.S.C. 601-12); the Paperwork Reduction Act (44 U.S.C. ch. 35); and Executive Orders 12866, 12988, and 13132

1. Regulatory Flexibility Act

The Administrator, in accordance with the Regulatory Flexibility Act (5 U.S.C. §§ 601-12), has reviewed this regulation and certifies that this rule, including the certification contained in proposed section 140.11(h), would not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-12.

This proposed rule applies only to individuals, as well as employers of such individuals, with outstanding debts to the United States. Though a substantial number of small entities will be subject to this proposed regulation and to its certification requirement, the requirements will not have a significant economic impact on these entities. Though a delinquent debtor's employer must certify certain information about the debtor, including the debtor's employment status and earnings, the employer's payroll records already contain this information. Therefore, an employer will not expend significant time or expense completing the certification form. Even if an employer received withholding orders on several employees during the year, the cost imposed on the employer to complete the certifications would not be significant. Employers need not vary normal pay cycles to comply with withholding orders issued under this proposed rule.

2. Paperwork Reduction Act of 1995

For purposes of the Paperwork Reduction Act (44 U.S.C. ch. 35), we certify this proposed rule would impose no new reporting or record-keeping requirements on employers. As noted at 1, above, though an employer of a delinquent debtor must certify certain information about the debtor, the employer's payroll records already contain this information; and, even if an employer received withholding orders on several employees, the burden of completing the certifications would not be significant.

3. Executive Order 12866

a. Significance of This Regulation

We have drafted and reviewed this regulation in accordance with Executive Order 12866, section 1(b), Principles of Regulation. This regulation falls within a category of regulatory actions that the Office of Management and Budget (OMB) does not constitute as “significant” within the meaning of section 3(f) of Executive Order 12866. Accordingly, OMB did not require review of this regulation.

b. Clarity of This Regulation

Executive Order 12866 and the President's memorandum of June 1, 1998, require us to write all rules in plain language. Other “Plain Language” directives include Writing User-Friendly Documents (visited March 22, 2000) < http://www.blm.gov/nhp/NPR/pe_toc.html >; and the Federal Register Document Drafting Handbook, October 1998 Revision (visited March 22, 2000) < http://www.nara.gov/fedreg/ddhhome.html#top >. Following these directives, we have reworded many provisions to help you understand them.

4. Executive Order 12988

For purposes of Executive Order 12988, we certify we drafted this rule, to the extent practicable, in accordance with the standards set forth in Section 3 of that Order.

5. Executive Order 13132

For purposes of Executive Order 13132, we determine this proposed rule does not have federalism implications to justify preparing a Federalism Assessment.

List of Subjects

13 CFR Part 134

• Administrative practice and procedure
• Claims
• Equal access to justice
• Lawyers
• Organization and functions (Government agencies)

13 CFR Part 140

• Administrative practice and procedure
• Claims
• Debts
• Hearing and appeal procedures
• Salaries
• Wages

Accordingly, under the authority contained in section 5(b)(6) of the Small Business Act (15 U.S.C. 634(b)(6)), SBA proposes to amend 13 CFR parts 134 and 140 as follows:

PART 134—RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF HEARINGS AND APPEALS

1. The authority citation for part 134 continues to read as follows:

Authority: 5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), and 637(a).

2. Amend § 134.101 by adding a new definition for “Business day” in alphabetical order to read as follows:

PART 140—DEBT COLLECTION

8. Revise part 140 to read as follows:

PART 140—DEBT COLLECTION

Authority: 31 U.S.C. 3711, Collection and compromise; 31 U.S.C. 3720A, Reduction of tax refund by amount of debt; 5 U.S.C. 5514, Installment deduction for indebtedness to the United States; 31 U.S.C. 3716, Administrative offset; 15 U.S.C. 634(b)(6), Small Business Act; 31 U.S.C. 3720, Collection of payments; 31 U.S.C. 3720D, Garnishment.

Subpart A—General Rules

Subpart B—Debt Collection Through Offset [Reserved]

Subpart C—Debt Collection Through Administrative Wage Garnishment