B-212729, OCTOBER 4, 1983, 63 COMP.GEN. 10

B-212729: Oct 4, 1983

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INTEREST - DEBTS OWED U.S. - DEBT COLLECTION ACT OF 1982 - SECTION 11 - ASSESSMENT PENDING WAIVER DETERMINATION THE ASSESSMENT OF INTEREST ON FEDERAL OVERPAYMENTS PURSUANT TO SECTION 11 OF THE DEBT COLLECTION ACT PRIOR TO COMPLETION OF A STATUTORY WAIVER PROCESS DEPENDS UPON WHETHER THE APPLICA0LE WAIVER PROVISION IS PERMISSIVE OR MANDATORY. IF THE WAIVER PROVISION IS PERMISSIVE. IF THE WAIVER PROVISION IS MANDATORY. INTEREST SHOULD NOT BE ASSESSED UNTIL THE WAIVER PROCESS IS COMPLETED. THE QUESTION PRESENTED IS WHETHER INTEREST MUST BE ASSESSED PRIOR TO THE COMPLETION OF A STATUTORILY MANDATED WAIVER PROCESS. WE HOLD THAT THE ASSESSMENT OF INTEREST PENDING RESOLUTION OF A REQUEST FOR WAIVER DEPENDS UPON WHETHER THE APPLICABLE WAIVER PROVISION IS PERMISSIVE OR MANDATORY.

B-212729, OCTOBER 4, 1983, 63 COMP.GEN. 10

INTEREST - DEBTS OWED U.S. - DEBT COLLECTION ACT OF 1982 - SECTION 11 - ASSESSMENT PENDING WAIVER DETERMINATION THE ASSESSMENT OF INTEREST ON FEDERAL OVERPAYMENTS PURSUANT TO SECTION 11 OF THE DEBT COLLECTION ACT PRIOR TO COMPLETION OF A STATUTORY WAIVER PROCESS DEPENDS UPON WHETHER THE APPLICA0LE WAIVER PROVISION IS PERMISSIVE OR MANDATORY. IF THE WAIVER PROVISION IS PERMISSIVE, INTEREST SHOULD BE ASSESSED FROM THE DATE OF THE AGENCY'S INITIAL NOTIFICATION OF THE OVERPAYMENT. IF THE WAIVER PROVISION IS MANDATORY, INTEREST SHOULD NOT BE ASSESSED UNTIL THE WAIVER PROCESS IS COMPLETED.

MATTER OF: DEBT COLLECTION - ASSESSMENT OF INTEREST PENDING WAIVER DETERMINATION, OCTOBER 4, 1983:

THE DIRECTOR OF THE OFFICE OF WORKERS' COMPENSATION PROGRAMS (OWCP), DEPARTMENT OF LABOR, HAS REQUESTED OUR OPINION CONCERNING ASSESSMENT OF INTEREST ON FEDERAL OVERPAYMENTS UNDER THE FEDERAL CLAIMS COLLECTION ACT, AS AMENDED BY THE DEBT COLLECTION ACT OF 1982. THE QUESTION PRESENTED IS WHETHER INTEREST MUST BE ASSESSED PRIOR TO THE COMPLETION OF A STATUTORILY MANDATED WAIVER PROCESS. WE HOLD THAT THE ASSESSMENT OF INTEREST PENDING RESOLUTION OF A REQUEST FOR WAIVER DEPENDS UPON WHETHER THE APPLICABLE WAIVER PROVISION IS PERMISSIVE OR MANDATORY. IF THE RECIPIENT OF AN OVERPAYMENT REQUESTS WAIVER UNDER A MANDATORY WAIVER STATUTE, INTEREST SHOULD NOT BE ASSESSED UNTIL COMPLETION OF THE WAIVER PROCESS.

THE FEDERAL CLAIMS COLLECTION ACT OF 1966, NOW CODIFIED AT 31 U.S.C. 3711, ESTABLISHED A GOVERNMENT-WIDE SYSTEM OF DEBT COLLECTION. THE ACT PROVIDES THE BASIC LEGAL FRAMEWORK FOR AGENCY COLLECTION OF DEBTS OWED TO THE UNITED STATES, WITH OVERSIGHT BY THE GENERAL ACCOUNTING OFFICE AND THE DEPARTMENT OF JUSTICE. THE REGULATIONS ISSUED JOINTLY BY THE COMPTROLLER GENERAL OF THE UNITED STATES AND THE ATTORNEY GENERAL OF THE UNITED STATES, THE FEDERAL CLAIMS COLLECTION STANDARDS (FCCS), ARE FOUND AT 4 C.F.R.PARTS 101-105.

THE DEBT COLLECTION ACT OF 1982 (PUB. L. NO. 97-365, 96 STAT. 1749) AMENDED THE FEDERAL CLAIMS COLLECTION ACT BY ESTABLISHING A NUMBER OF NEW PROCEDURES TO AUGMENT THE GOVERNMENT'S AUTHORITY TO COLLECT DEBTS WHILE ENSURING BASIC DUE PROCESS PROTECTIONS FOR DEBTORS. TO THIS END, SECTION 11 OF THE ACT, CODIFIED AT 31 U.S.C. 3717, AUTHORIZES FEDERAL AGENCIES TO ASSESS INTEREST ON OUTSTANDING DEBTS OWED TO THE UNITED STATES. /1/

THE GUIDELINES AND GENERAL POLICIES CONCERNING ASSESSMENT OF INTEREST ON DEBTS UNDER SECTION 11 ARE INCLUDED IN A PROPOSED REVISION TO THE FCCS. (THE PROPOSED REGULATIONS, ISSUED JOINTLY BY THE GENERAL ACCOUNTING OFFICE AND THE DEPARTMENT OF JUSTICE, WERE PUBLISHED FOR COMMENT ON MAY 24, 1983, 48 FED.REG. 23249, AND ARE SUBJECT TO CHANGE UPON BEING ISSUED AS FINAL REGULATIONS. REFERENCES TO THE FCCS WILL BE TO THESE PROPOSED REGULATIONS UNLESS OTHERWISE SPECIFIED.) THESE STANDARDS REQUIRE GENERALLY THAT INTEREST BE ASSESSED ON DEBTS UNDER SPECIFIED CONDITIONS, BUT ONLY AFTER THE DEBTOR HAS BEEN PROVIDED WRITTEN NOTICE EXPLAINING THE INTEREST CHARGE. 4 C.F.R. 102.13. INTEREST WILL GENERALLY ACCRUE FROM THE DATE OF THIS NOTICE. HOWEVER, SUCH INTEREST MAY BE WAIVED UNDER 31 U.S.C. 3717(H) AND SECTION 102.13(G) OF THE STANDARDS.

OWCP HAS ADVANCED A NUMBER OF ARGUMENTS TO SUPPORT THE PROPOSITION THAT INTEREST SHOULD NOT BE ASSESSED UNTIL A STATUTORILY MANDATED WAIVER PROCESS IS COMPLETE. WE FIND IT UNNECESSARY TO REVIEW THESE ARGUMENTS IN DETAIL, HOWEVER, BECAUSE I, OUR VIEW, THE RESULT FOLLOWS LOGICALLY AND REASONABLY FROM THE SUPREME COURT'S DECISION IN CALIFANO V. YAMASAKI, 442 U.S. 682 (1979). IN YAMASAKI, THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE SOUGHT TO RECOUP AN OVERPAYMENT UNDER THE SOCIAL SECURITY ACT BY WITHHOLDING THE FUTURE BENEFITS TO WHICH THE RECIPIENT WAS ENTITLED. PURSUANT TO A REQUEST FOR WAIVER OF THE OVERPAYMENT UNDER SECTION 204(B) OF THE SOCIAL SECURITY ACT, 42 U.S.C. 404(B), /2/ THE RECIPIENT DEMANDED AN OPPORTUNITY FOR HEARING BEFORE RECOUPMENT BEGAN.

THE COURT STATED THAT SECTION 204 "REQUIRES THAT THE SECRETARY MAKE A PRE -RECOUPMENT WAIVER DECISION, AND THAT THE DECISION, LIKE THAT CONCERNING THE FACT OF THE OVERPAYMENT, BE ACCURATE." 442 U.S.AT 693. THE COURT WENT ON TO NOTE THAT THE REQUIREMENT FOR A PRE-RECOUPMENT WAIVER DECISION WAS GENERALLY SATISFIED BY THE SECRETARY'S REGULATORY SCHEME WHEREBY "NO RECOUPMENT IS MADE UNTIL A PRELIMINARY WAIVER * * * DECISION HAS TAKEN PLACE, EITHER BY DEFAULT AFTER THE RECIPIENT HAS RECEIVED PROPER NOTICE, OR BY REVIEW OF A WRITTEN REQUEST." ID., AT 694. HOWEVER, THE COURT HELD THAT AN OPPORTUNITY FOR A PRE-RECOUPMENT ORAL HEARING IS REQUIRED WHEN A RECIPIENT REQUESTS WAIVER UNDER SECTION 204(B).

IN REACHING ITS CONCLUSION, THE YAMASAKI COURT NOTED THAT SECTION 204(B) OF THE SOCIAL SECURITY ACT IS A "MANDATORY" WAIVER STATUTE AND DISTINGUISHED IT FROM "PERMISSIVE" WAIVER PROVISIONS. /3/ THUS, UNDER A MANDATORY WAIVER STATUTE, THE "CREDITOR AGENCY" MUST NOTIFY THE RECIPIENT OF THE OVERPAYMENT OF HIS RIGHT TO A CONSIDERATION OF WAIVER. IF THE RECIPIENT THEN REQUESTS WAIVER, RECOUPMENT ACTION MAY NOT COMMENCE UNTIL COMPLETION OF THE WAIVER PROCESS. IN CONTRAST, IF THE WAIVER PROVISION IS ENTIRELY PERMISSIVE, RECOUPMENT MAY BEGIN AT ANY TIME, REGARDLESS OF WHEN THE WAIVER DECISION TAKES PLACE. /4/

IN OUR OPINION, THE CONCEPT OF THE YAMASAKI CASE SHOULD APPLY AS WELL TO THE ASSESSMENT OF INTEREST. WHILE INTEREST SERVES TO COMPENSATE A CREDITOR FOR LOSS OF THE USE OF MONEY, IN THE SPECIFIC CONTEXT OF THE DEBT COLLECTION ACT IT SERVES A PERHAPS MORE IMPORTANT PURPOSE-- TO ENCOURAGE THE PROMPT PAYMENT OF DEBTS OWED TO THE UNITED STATES. THE AUTHORITY TO CHARGE INTEREST IS ESSENTIALLY ANOTHER WEAPON IN THE GOVERNMENT'S DEBT COLLECTION ARSENAL. THE MESSAGE OF YAMASAKI, IN EFFECT, IS THAT WHERE A MANDATORY WAIVER STATUTE APPLIES, THERE IS NO DEBT UPON WHICH COLLECTION ACTION MAY BE PURSUED-- STATED DIFFERENTLY, THE OVERPAYMENT DOES NOT "RIPEN" INTO A DEBT-- UNTIL THE WAIVER PROCESS HAS RUN ITS COURSE. THIS BEING THE CASE, CHARGING INTEREST DURING THE WAIVER PROCESS COULD PENALIZE THE RECIPIENT WHO IS WITHOUT FAULT BUT WHO STILL DOES NOT MEET THE WAIVER STANDARDS FOR PURSUING HIS STATUTORY RIGHT TO SEEK WAIVER.

WHERE A MANDATORY WAIVER STATUTE APPLIES, THE AGENCY SHOULD STILL INCLUDE THE INTEREST REQUIREMENT AS PART OF THE INITIAL NOTIFICATION TO THE RECIPIENT OF THE OVERPAYMENT. SEE PROPOSED 4 C.F.R. 102.2(B) AND 102.13(A), 48 FED.REG. 23251 AND 23253. IF, UPON PROPER NOTIFICATION, THE RECIPIENT DECLINES TO SEEK WAIVER, INTEREST SHOULD BE ASSESSED IN ACCORDANCE WITH 31 U.S.C. 3717 AND THE PROPOSED 4 C.F.R. 102.13. IF, HOWEVER, THE RECIPIENT REQUESTS WAIVER, INTEREST SHOULD NOT BEGIN TO ACCRUE UNTIL COMPLETION OF THE WAIVER PROCESS, OR EARLIER IF THE RECIPIENT ACKNOWLEDGES THE DEBT.

WHERE A PERMISSIVE WAIVER STATUTE APPLIES, INTEREST SHOULD BE ASSESSED FROM THE DATE OF THE INITIAL NOTIFICATION AS PROVIDED IN 31 U.S.C. 3717(B) AND (D). HOWEVER, WE HAVE HELD THAT AN AGENCY MAY SUSPEND COLLECTION ACTION ON A DEBT PENDING CONSIDERATION OF WAIVER UNDER A PERMISSIVE WAIVER STATUTE UNDER CERTAIN CIRCUMSTANCES. B-185466, AUGUST 19, 1976, INCORPORATED INTO THE FCCS AS PROPOSED 4 C.F.R. 104.2(C), 48 FED.REG. 23256. THE AGENCY COULD APPLY THE SAME CRITERIA TO SUSPEND THE COLLECTION OF INTEREST. IF WAIVER IS ULTIMATELY GRANTED, THE QUESTION OF INTEREST THEN BECOMES MOOT. IF WAIVER OF THE UNDERLYING DEBT IS NOT GRANTED, THE AGENCY STILL HAS AUTHORITY TO SEPARATELY CONSIDER WAIVING THE INTEREST. 31 U.S.C. 3717(H) PERMITS AN AGENCY TO "PRESCRIBE REGULATIONS IDENTIFYING CIRCUMSTANCES APPROPRIATE TO WAIVING COLLECTION OF INTEREST" AS LONG AS THEY ARE CONSISTENT WITH THE FCCS. SEE ALSO THE PROPOSED 4 C.F.R. 102.13(G), 48 FED.REG. 23253-54. THE AGENCY COULD USE THIS AUTHORITY TO CONSIDER SUCH ADDITIONAL FACTORS AS THE LENGTH OF TIME IT HAS TAKEN TO MAKE THE WAIVER DETERMINATION ON THE UNDERLYING DEBT. /5/

AGAINST THIS BACKGROUND, WE TURN NOW TO THE TWO SPECIFIC PROGRAMS CITED BY OWCP. FIRST IS THE BLACK LUNG BENEFITS PROGRAM. THE WAIVER AUTHORITY FOR THIS PROGRAM IS FOUND IN 30 U.S.C. 923(B), APPLICABLE TO THE OWCP PROGRAM BY VIRTUE OF 30 U.S.C. 940. IT PROVIDES IN PERTINENT PART THAT "THE PROVISIONS OF SECTION 204 * * * OF THE SOCIAL SECURITY ACT * * * SHALL BE APPLICABLE UNDER THIS PART WITH RESPECT TO A MINER, WIDOW, CHILD, PARENT, BROTHER, SISTER, OR DEPENDENT, AS IF BENEFITS UNDER THIS PART WERE BENEFITS UNDER TITLE II OF SUCH ACT * * * ." SECTION 204 OF THE SOCIAL SECURITY ACT, 42 U.S.C. 404, IS THE SAME PROVISION THE SUPREME COURT CONSIDERED IN YAMASAKI. THE WAIVER AUTHORITY FOR THE BLACK LUNG BENEFITS PROGRAM IS, THEREFORE, CLEARLY A MANDATORY PROVISION.

THE SECOND PROGRAM IS THE FEDERAL EMPLOYEES' COMPENSATION PROGRAM. THE WAIVER AUTHORITY FOR THIS PROGRAM IS 5 U.S.C. 8129(B):

ADJUSTMENT OR RECOVERY BY THE UNITED STATES MAY NOT BE MADE WHEN INCORRECT PAYMENT HAS BEEN MADE TO AN INDIVIDUAL WHO IS WITHOUT FAULT AND WHEN ADJUSTMENT OR RECOVERY WOULD DEFEAT THE PURPOSE OF THIS SUBCHAPTER OR WOULD BE AGAINST EQUITY AND GOOD CONSCIENCE. WHILE THE STATUTORY LANGUAGE IS NOT IDENTICAL TO 42 U.S.C. 404(B), THIS ALSO IS A MANDATORY WAIVER PROVISION. RESORT TO THE ORIGINAL STATUTORY LANGUAGE REMOVES ANY DOUBT. THE ORIGINAL ENACTMENT PROVIDED "THERE SHALL BE NO ADJUSTMENT OR RECOVERY" (63 STAT. 864), AND THIS LANGUAGE WAS CARRIED IN THE U.S.C. UNTIL THE 1966 RECODIFICATION OF TITLE 5 MODIFIED IT TO THE PRESENT 5 U.S.C. 8129(B). SEE 5 U.S.C. 788(B) (1964 ED.).

IN SUM, WE CONCLUDE THAT IF THE RECIPIENT OF AN OVERPAYMENT OR ERRONEOUS PAYMENT REQUESTS WAIVER UNDER A MANDATORY WAIVER PROVISION SUCH AS 30 U.S.C. 923(B) OR 5 U.S.C. 8129(B), INTEREST SHOULD NOT BE ASSESSED UNTIL COMPLETION OF THE WAIVER PROCESS. IF THE WAIVER PROVISION IS PERMISSIVE, INTEREST SHOULD BE ASSESSED FROM THE DATE OF THE AGENCY'S WRITTEN NOTIFICATION IN ACCORDANCE WITH 31 U.S.C. 3717(B), UNLESS THE COLLECTION OF INTEREST IS ITSELF WAIVED UNDER THE AUTHORITY OF 31 U.S.C. 3717(H) AND THE FCCS.

/1/ SECTION 8(E) OF THE DEBT COLLECTION ACT, CODIFIED AT 31 U.S.C. 3701(D), EXEMPTS CLAIMS ARISING UNDER OR AMOUNTS PAYABLE UNDER THE INTERNAL REVENUE CODE OF 1954, THE SOCIAL SECURITY ACT, OR THE TARIFF LAWS OF THE UNITED STATES. OUR DECISION IS AIMED AT THOSE PROGRAMS AND AGENCIES WHICH ARE SUBJECT TO SECTION 11. NEVERTHELESS, IT MAY PROVIDE GUIDANCE EVEN TO PROGRAMS AND AGENCIES WHICH ARE EXEMPT FROM THAT PROVISION. SEE 62 COMP.GEN. 599 (1983).

/2/ 42 U.S.C. 404(B) PROVIDES: "IN ANY CASE IN WHICH MORE THAN THE CORRECT AMOUNT OF PAYMENT HAS BEEN MADE, THERE SHALL BE NO ADJUSTMENT OF PAYMENTS TO, OR RECOVERY BY THE UNITED STATES FROM, ANY PERSON WHO IS WITHOUT FAULT IF SUCH ADJUSTMENT OR RECOVERY WOULD DEFEAT THE PURPOSE OF THIS SUBCHAPTER OR WOULD BE AGAINST EQUITY AND GOOD CONSCIENCE.

/3/ THE COURT CITED SEVERAL EXAMPLES OF EACH TYPE. 442 U.S.AT 693, FOOTNOTE 9. A MANDATORY WAIVER STATUTE "AT LEAST IMPOSES * * * A DUTY TO DECIDE." ID.

/4/ TO SAY THAT RECOUPMENT MAY BEGIN AT ANY TIME IS NOT TO SAY THAT IT MUST. IN CONNECTION WITH 5 U.S.C. 5584, 10 U.S.C. 2774, AND 32 U.S.C. 716 (ALL PERMISSIVE WAIVER STATUTES), WE HAVE HELD THAT, WHILE AUTOMATIC SUSPENSION OF COLLECTION ACTION IN ALL CASES UPON RECEIPT OF WAIVER APPLICATIONS WOULD NOT BE PROPER, SUSPENSION IN INDIVIDUAL CASES IN APPROPRIATE CIRCUMSTANCES PENDING OUTCOME OF THE WAIVER DETERMINATION IS PERMISSIBLE. B-185466, AUGUST 19, 1976.

/5/ IN A SEPARATE MEMORANDUM, THE OWCP DIRECTOR CALLED OUR ATTENTION TO THE INEQUITIES THAT MAY RESULT IF INTEREST IS CHARGED ON A LARGE DEBT WHICH THE DEBTOR IS ABLE TO REPAY ONLY IN SMALL INSTALLMENTS. IF THE INTEREST RATE IS HIGH ENOUGH AND THE INSTALLMENT SMALL ENOUGH IN RELATION TO THE SIZE OF THE DEBT, IT IS NOT INCONCEIVABLE THAT THE DEBT COULD NEVER BE REPAID, RESULTING IN CREATION OF A "PERPETUAL DEBTOR." HOW OR WHETHER TO TREAT THIS PRECISE SITUATION IN THE FCCS HAS YET TO BE DETERMINED. ANY EVENT, 31 U.S.C. 3717(H) PROVIDES ADEQUATE AUTHORITY FOR AGENCIES TO DEAL WITH THE PROBLEM.