B-222845, Dec 9, 1987, Office of General Counsel

B-222845: Dec 9, 1987

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Edda Emmanuelli Perez
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Late payment penalties are to be assessed on all portions of the debt which are more than 90 days past due (including past due assessments of interest and administrative costs). The letter was originally referred to our Claims Group. We were provided with materials from the file of particular debt as a reference point.). Penalty charges on delinquent debts after appropriate notice is given to the debtor. 3l U.S.C. The assessment of interest and the related charges prescribed by the DCA is a complex subject. The notice requirements of the DCA do not require agencies to suspend interest assessments (on delinquent debts) which began accruing prior to enactment of the DCA in accordance with the common assessed on all portions of the debt which are more than 90 days past due (including past due assessments of interest and administrative costs).

B-222845, Dec 9, 1987, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Claims by Government - Past Due Accounts - Debt Collection - Penalties - Interest DIGEST: 1. Regarding the assessment of interest on delinquent debts (owed to the United States) under Section 11 of the Debt Collection Act of 1982 (DCA), Pub. L. No. 97-365, 96 Stat. 1749, 1755-56, codified in 31 U.S.C. Sec. 3717 (1982), GAO advised the Federal Emergency Management Agency that, as a general rule, where interest actually began to accrue prior to the DCA pursuant to the common law and the Federal Claims Collection Standards (FCCS), 4 C.F.R. ch. II, the DCA does not require the interest to be suspended. GAO also advised that, under both the DCA and the common law, interest on delinquent debts should generally be computed on a daily basis, with the interest rate remaining fixed for the life of the debt. 2. Regarding the assessment of late payment penalties on delinquent debts (owed to the United States) under Section 11 of the Debt Collection Act of 1982 (DCA), Pub. L. No. 97-365, 96 Stat. 1749, 1755 56, codified in 31 U.S.C. Sec. 3717 (1982), GAO advised the Federal Emergency Management Agency that, as a general rule, late payment penalties are to be assessed on all portions of the debt which are more than 90 days past due (including past due assessments of interest and administrative costs), and accrue from the date that the debt becomes "delinquent." However, where the past due interest began accruing under the common law prior to the DCA, agencies must send a post-Act notice to the debtor before penalties may accrue on that interest.

Mr. Perry:

This responds to a letter from your predecessor, Mr. George Jett, regarding the assessment of interest on debts owed the United States. The letter was originally referred to our Claims Group, but has now been referred to this Office for reply. Please accept our apologies for the delay.

The letter sought our opinion on seven questions concerning the assessment of interest on debts which became delinquent prior to the enactment on October 25, l982, of section ll of the Debt Collection Act of 1982 (DCA), Pub. L. No. 97-365, 96 Stat. l749, 1755-56, codified in 31 U.S.C. Sec. 3717 (l982). (In order to place the questions in a more practical context, we were provided with materials from the file of particular debt as a reference point.)

As you know, section 11 of the DCA generally requires agencies to assess interest, administrative costs, and penalty charges on delinquent debts after appropriate notice is given to the debtor. 3l U.S.C. Sec. 3717. These questions arose from FEMA's attempts to correctly apply the provisions of section l1 to debts which arose and became delinquent prior to its enactment, but still remain to be collected. The assessment of interest and the related charges prescribed by the DCA is a complex subject, and your agency's questions necessarily require a fairly complicated and technical response.

While an enclosure to this letter discusses the seven questions in greater detail, our answers may be summarized as follows:

l. The notice requirements of the DCA do not require agencies to suspend interest assessments (on delinquent debts) which began accruing prior to enactment of the DCA in accordance with the common assessed on all portions of the debt which are more than 90 days past due (including past due assessments of interest and administrative costs), and accrue from the date that the debt becomes "delinquent." However, where the past due interest began accruing under the common law prior to the DCA, agencies must send a post-Act notice to the debtor before penalties may accrue on that interest.

We hope that this letter satisfactorily answers your agency's questions. However, should you or your staff wish to discuss this matter further, please feel free to contact Mr. Neill Martin-Rolsky of my staff at 275- 5544.