Clear Network Recovery | Debt Collection Legal Authorities

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Debt Collection Legal Authorities
Clear Network Recovery
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FY 2012 Key Service Statistics
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Debt Management Services (DMS)

• MissionWe exist to
  identify, prevent, collect and resolve debt
• owed to government agencies.
• VisionWe will
  transform government financial management as the
  provider of choice for shared services related to
  improper payments, receivables management, and
  delinquent debt collection.

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The Role of DMS

• Assist federal and state agencies in the
  collection of delinquent child support
  obligations, supplemental nutrition assistance
  program (SNAP) debts, income tax debts,
  unemployment insurance compensation debts, and
  other federal and state debts.
• Provides access to the Do Not Pay program for the
  purpose of preventing, identifying and recovering
  federally-funded improper payments.

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Debt Collection Legal Authorities

• The Federal Governments administrative debt
  collection activities are governed by a number of
  Federal laws, including
• Federal Claims Collection Act of 1966, Debt
  Collection Act of 1982, Debt Collection
  Improvement Act of 1996 and other laws, codified
  primarily in 5 U.S.C. 5514 and 31 U.S.C. 3701 et
  seq
• Internal Revenue Code, Title 26 of the United
  States Code
• Bankruptcy Code, Title 11 of the United States
  Code
• Privacy Act of 1974, 5 U.S.C. 552a
• Other statutes that apply to specific agencies,
  debt types or payment types
• Treasury regulations, OMB policies,
  agency-specific regulations

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Debt Collection Legal Authorities

• Among other things, debt collection laws govern
• Type of due process required for various debt
  collection remedies
• Example 60 days notice required before a tax
  refund may be offset 30 days notice required for
  most other debt collection actions
• The amounts allowed to be collected through each
  mechanisms
• Example TOP can offset 100 of a tax refund
  payment, but no more than 15 of a Federal salary
  payment veterans benefit payments are exempt
  from offset
• When debts may not be referred to Treasury for
  TOP
• Example Debts that are subject to a stay under
  the Bankruptcy Code are not eligible for referral

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Debt Collection Programs

• DMS collects delinquent debts for federal and
  state agencies (non-tax and tax) primarily
  through two programs the Treasury Offset Program
  (TOP) and the Cross-Servicing Program.
• DMS has collected a total of 7.02 billion as of
  September 2013 (an increase of 13.69 as
  compared to the same period in FY 2012)
• Treasury Offset Program - 6.86 billion as of
  September FY 2013
• Cross-Servicing Program - 169.9 million as of
  September FY 2013
• Cumulative collections over 60 billion since
  inception (1997)

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TOP State Success Stories
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The State of Mississippi 7.4 Million in
Unemployment Fraud Recouped in Seven Days
WLBT Mississippi News Now

• WLBT, the Jackson, Mississippi, NBC affiliate
  aired a report in February 2012 concerning the
  increased collection of unemployment debts from
  those individuals collecting unemployment
  benefits fraudulently.
• WLBT reported that the Mississippi Department of
  Employment Security had collected 7.4 million in
  its first week participating in TOP. This means
  that Mississippi was able to recoup 12 of their
  UIC debts in just the first seven days of using
  the program.

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The State of New York Recovers 51M in
Fraudulently Collected Unemployment Insurance
via TOPwww.governor.ny.gov

• Once again, New York is at the forefront of
  efforts to protect taxpayer dollars through
  preventing and collecting fraudulently-obtained
  government payments. Every dollar we recover
  through this program becomes available to
  eligible unemployed New Yorkers who are most in
  need of this vital economic safety net. We will
  continue to do everything we can to collect
  fraudulently-obtained benefits from people who
  dont deserve them, and who are in fact stealing
  from their fellow New Yorkers.

Andrew Cuomo, Governor State of New York
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The State of Maryland

• State Income Tax Program
• Maryland is leading the way in collecting back
  taxes, said Comptroller Franchot. Given the
  fiscal challenges we face, its critical we use
  all available resources to get any money owed to
  the state.
• State Reciprocal Program
• The offset program we conduct with the federal
  government is one of the most successful in the
  nation, said Comptroller Franchot.It keeps
  growing because were able to quickly certify more
  accounts to intercept.

Peter Franchot, Comptroller State of Maryland
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The State of New Jersey

• Christie Administration Saves NJ Employers from
  211 Million in Tax Hikes Unemployment Trust
  Fund Becomes Solvent
• State of New Jersey, Office of the Governor,
  October 24, 2013
• Governor Chris Christie announced that New Jersey
  employers will be saving 211 million because his
  Administrations anti-fraud reforms and fiscal
  management practices will bring New Jerseys
  Unemployment Insurance Trust Fund into solvency
  next week and spare businesses drastic tax
  increases.
• One of the reforms highlighted that the
  Administration acted on to protect and improve
  the Trust Fund was the Federal Treasury Offset
  Program (TOP) which
• Recovered 1 million since the program was
  implemented in June 2013
• With the Department of Labor, has offset
  unemployment insurance compensation that was
  illegally collected by individuals by seizing
  their federal income tax refund payments
• Is expected to net the fund more than 10 million
  over the next year.

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TOP Annual Report to the States
www.fms.treas.gov/debtTOP_annual_report_to_States_
fy12.pdf
We are proud of the work we do in collecting
delinquent child support, in partnership with the
U.S. Department of Health and Human Services,
Office of Child Support Enforcement, and
participating states. These funds 2.2 billion
in FY 2012 are repaid to states or provided to
meet the needs of Americas families and
children. David A. Lebryk,
Commissioner Bureau of the
Fiscal Service
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Treasury Offset Program (TOP)
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Treasury Offset Program (TOP)

• TOP is a centralized offset program administered
  by the U.S. Department of the Treasury, Bureau of
  the Fiscal Service, to collect delinquent debts
  owed to federal agencies and states.
• TOP requires creditor agencies to provide debtors
  with due process, including proper notices and
  dispute opportunities, as well as the chance to
  repay debts over time.
• TOP sends notices to debtors when payments are
  offset. For recurring payments, TOP sends
  warning notices.

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TOP State Programs

• State Income Tax Program (SIT) - TOP offsets
  federal tax refund payments to payees who owe
  delinquent state income tax obligations.
• State Reciprocal Program (SRP) - TOP offsets
  federal vendor and other non-tax payments to
  payees who owe delinquent debts to state
  agencies. In return, states offset payments to
  payees who owe delinquent debts to federal
  agencies.
• Unemployment Insurance Compensation (UIC) Debts -
  In partnership with the U.S. Department of Labor,
  TOP offsets federal tax refund payments to payees
  who owe delinquent unemployment insurance
  compensation debts due to fraud or a persons
  failure to report earnings.
• Child Support Program - States submit delinquent
  child support obligations to the Office of Child
  Support Enforcement (OCSE), which in turn submits
  the debts to TOP for collection through the
  offset of federal tax refund and other eligible
  payments.
• Supplemental Nutritional Assistance Program - The
  Department of Agriculture-Food and Nutrition
  Service (FNS), in collaboration with state
  offices administering the Food Stamp Program,
  submit food stamp recipient debts to Treasury for
  offset of tax refund, federal vendor, salary,
  federal retirement, Social Security, Railroad
  Retirement, and state payments.

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Treasury Offset Program State Programs
TOP Database
KEY SRP - State Reciprocal Program UIC -
Unemployment Insurance Compensation
Child Support Debt
Unemployment Insurance Compensation Debt
Child Support
Child Support
SRP
UIC
Federal Tax Refund Payments
Federal Non-Tax Payments (Vendor, Travel, Misc.)
State Income Tax Debt
SRP
State Income
Other State Debt
SRP
State Programs
State Payments (Vendor, State Tax Refunds, Other)
Federal Non-Tax Debt
Federal Programs
SRP
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TOP State Delinquent Debt CollectionsFY 2008 -
2013 (in millions)
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Top 10 State Income Tax FY 2013
State Name Offset Count Net Collection Amount
New York 109,450 78,399,646
California 62,957 62,630,671
Georgia 86,605 59,036,609
Maryland 62,709 55,952,945
Illinois 80,040 29,856,628
Ohio 31,157 25,051,894
Louisiana 41,368 23,478,935
New Jersey 40,095 23,108,897
Missouri 38,792 22,005,051
Alabama 72,416 20,421,065
Total 40 States and DC 941,828 602,891,886
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Top 10 UIC FY 2013
State Name Offset Count Net Collection Amount
Illinois 22,631 37,644,933
New York 27,460 28,027,989
Arizona 30,793 21,465,606
Missouri 16,335 20,219,263
Florida 24,833 19,640,827
Arkansas 22,852 19,293,275
Pennsylvania 8,813 16,926,715
Tennessee 18,497 16,142,684
Minnesota 7,018 15,315,890
Wisconsin 17,825 13,335,308
Total 35 States and DC 325,632 326,211,590
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State Reciprocal ProgramFY 2013 Collection Totals
State Name Offset Count Net Collection Amount
District of Columbia 4,876 9,776,616
Maryland 4,190 8,884,482
Kentucky 4,173 8,560,700
New York 2,992 4,215,694
New Jersey 2,725 2,852,626
Minnesota 1,317 2,029,548
Wisconsin 860 1,043,479
West Virginia 584 529,840
Total All States 27,717 37,892,985
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Why Join SRP? What are the Benefits?

• Ability to collect millions of dollars in unpaid
  debt annually
• Access to federal non-tax payment offsets for the
  UIC and state tax programs
• Recovery of valuable funds for federally
  sponsored programs
• Opportunity to maximize your states debt
  collection potential

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States Participating in Income Tax, SRP, UIC
in FY 2013
State Name Offset Count Net Collection Amount
Maryland 78,073 77,394,401
Kentucky 27,508 27,172,083
New York 139,902 110,643,329
New Jersey 43,555 27,002,632
Minnesota 18,198 23,948,965
Wisconsin 27,389 23,832,004
West Virginia 17,067 12,209,690
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State Identified Challenges
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• Centralization
• While centralizing a states debt portfolio and
  payment streams is ideal, it is not a requirement
  for participation in the program. TOP works with
  states to find a way to make the program work for
  their agency.
• Legislation
• Fiscal Service is committed to assisting states
  with the process of obtaining legislation. In
  doing so, we provide
• Sample legislation and support from the Fiscal
  Service legal team
• a Legislative Forum for State Attorney
  Generals/staff
• Funding Technology
• States face challenges in funding new technology
  to connect with TOP in the current economic
  climate.
• TOP is exploring options for Fiscal Service to
  support states.

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TOP Solutions for States
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The TOP Partial Match Process

• Partial match occurs when the social security
  number (SSN) or employer identification number
  (EIN) of a TOP debtor matches the SSN or EIN of a
  payee, but the debtors name does not match the
  payees name.
• States can obtain a list of these matches by
  requesting a Debtor Locator Report (DLR) from
  TOP.
• If your state can verify that the individual or
  entity receiving the payment is the same
  individual or entity who owed the debt, your
  state may add the newly identified name variation
  to TOP as an alias for future payment offset.

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TOP Legislation/Regulation Checklist for States

• Essential Items While states must abide by all
  the terms of the reciprocal agreement, the
  following are most often affected by state
  legislation
• Authority to offset state tax refunds - If the
  state issues any tax refunds, they must be
  subject to offset to collect federal debts.
• Authority to offset other state payments -
  Legislative authority should be broad enough to
  include all state payments specified in the
  reciprocal agreement.
• Authority for appropriate state official to
  submit state debts to TOP - TOP generally only
  accepts one or two points of connection with a
  state so the authorized official(s) should be
  the officials that are capable of submitting the
  debt.
• Authority for Fiscal Service to deduct a fee
  from offset collections - Federal law requires
  that Fiscal Service charge a fee to cover its
  costs of running the TOP program. Fiscal Service
  withholds a portion of each collection it makes
  from a federal payment for a state as its fee.
  States are free to add that fee amount to the
  debt balance, if state law authorizes it.
• No authority to charge Fiscal Service a fee -
  Federal law does not permit Fiscal Service to pay
  a fee to the states when the state offsets a
  payment to collect a federal debt.
• Due process - State law cannot require Fiscal
  Service or federal agencies to provide
• different due process from that set
  forth in the agreement and in 31 CFR 285.6.

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Whats New with TOP?
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TOPs New Web ClientComing December 2013!

• DMS is developing a new system to replace the
  current 15-year old system that will improve
  TOP efficiencies and increase TOP collections by
  enabling
• Increases in payment streams that can be offset
• Increases in debt volume that can be collected by
  offset
• Improve matching logic
• For TOP users this change will appear seamless,
  as the new TOP Web Client does not require any
  system changes of users.

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Benefits of TOPs New Web Client

• The new web client version will include the
  following benefits for users
• Newly Enhanced User Screens
• Ability to view debt/debtor information in one
  place to include Offset Activity, Non Offset
  Activity, Agency Refund and Reversal Activity
• Access to information on the File Receipt,
  Processing Status and Processing Statistics for
  Creditor Agencies
• Ability to view captured information for bypassed
  payments fully matched to a debt
• Capability to set bypass and override at the
  payment agency level
• Sign up online for TOPs new Web
  Client training at
• www.fms.treas.gov/debt/training.
  html.

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Expanding SRP Program

• TOP is seeking to identify new debt and payment
  streams from states currently in the SRP and
  those planning to join. Specifically, to
  identify
• potential debt streams that may require statutory
  or regulatory changes
• potential payment streams that may require
  statutory or regulatory change

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Working with States to Help Them Understand
State Debts in TOP and How They Affect Federal
Payments

• State Debts in TOP Process
• TOP will offset a payment when the Taxpayer
  Identification Number (TIN) of a state agency
  receiving a payment is the same as the TIN of the
  state agency owing the debt.
• TOP sends a letter notifying the payee state
  agency of the offset, if available. If not, TOP
  will use the debtor agency address.
• TOP Report Designed for States
• Treasury Offset Division (TOD) can provide your
  state with a report to help identify debts owed
  by state agencies, and assist you with the
  resolution and payment of these debts.
• A written authorization from your states
  Comptroller is required for TOD to release this
  information at the beginning of each month.

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Working with States to Help Them Understand
State Debts in TOP andHow They Affect Federal
Payments (2)

• New Online information Provided for States
• How to resolve debts owed to the federal
  government
• Frequently Asked Questions
• A link to State Comptrollers on NASACTs website
  
• Visit www.fms.treas.gov/debt/TOP_state_debts.
  html
• Working together with AGA, States and Federal
  Agencies to develop new pilots and solutions.

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Increasing Communication and Soliciting Feedback
with States

• TOP wants to hear directly from states about
  their challenges, experiences, best practices,
  and program recommendations for SRP. These are
  some of the new ways we are communicating with
  states
• Annual Report to the States
• Offsets Matter TOPs bi-monthly news for
  states
• Quarterly Meetings with Participating States
• Industry Conferences and Meetings
• Individual State Executive Meetings
• Enhanced Customer Relationship Engagement
• (Pre and Post Implementation)
• View Offsets Matter online at
• www.fms.treas.gov/debt/offsetsmatter.ht
  ml

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DMS/TOP Initiatives
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The Partnership Fund for Program Integrity,
Innovation, and Recovery of Federal/State Funds
via the TOP Pilot

• Various laws authorize Treasury to collect debts
  on behalf of States.
• Limited authority to offset certain types of
  payments to collect debts owed to States, namely
  Federal income tax refunds and benefit payments.
• In January 2011, state representatives were
  invited to join the team to develop potential
  pilot programs including how to utilize the
  Treasury Offset Program to aid in collection.
• In June 2011, OMBs Partnership Fund provided
  funding for the pilot to gather data for these
  programs from participating states.
• Purpose To simulate and test the concept of
  collecting debts arising out of Federally funded,
  state managed program debts through the TOP by
  intercepting Federal tax refunds and other
  Federal payments to delinquent debtors prior to
  disbursement.

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The Partnership Fund for Program Integrity,
Innovation, and Recovery of Federal/State Funds
via the TOP Pilot

• Seven states were selected to participate in the
  simulation
• Arkansas, Illinois, Kansas, North Carolina,
  Texas, Washington, and Wisconsin
• Programs included
• Temporary Assistance for Needy Families
• Child Care
• Medicaid
• Foster Care
• Aid to Families with Dependent Children
• One month of payment data (February 2011) from
  three federal sources
• Federal income tax refunds (IRS)
• Retirement payments (OPM 25)
• Social security payments (SSA 15)

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The Partnership Fund for Program Integrity,
Innovation, and Recovery of Federal/State Funds
via the TOP Pilot

• No actual offsets were processed during the
  simulation
• Contractor evaluated and validated the pilot
  methodology
• Reviewed TOP processes
• Extrapolated pilot results to develop nationwide,
  10-year estimates for state-submitted debt
  collection
• Contractor Report includes
• Summary of results by state, program and payment
  type
• Estimated costs
• Projected offsets
• Projected recovery rates
• Projected potential savings in ranges with low,
  medium and high results over 1, 5 and 10 year
  periods
• Interagency report is being developed to
  accompany the contractor report (expected release
  date November 2013)

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TOP State Programs Contact

• David Burgess
• Email stateoffsets_at_fms.treas.gov
• Phone [phone]
• Website www.fms.treas.gov/debt/TOP_state_prog.htm
  l

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Do Not Pay Program
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Do Not Pay Objectives

• Tactical
• Identify potentially improper payments by
  comparing agency payments to lists of ineligible
  recipients
• Provide agencies with
• analytical insights about payments to potentially
  ineligible recipients to help them identify
  systemic sources of improper payment and/or
  potential fraud
• information about patterns of improper payments
  to help them identify systemic sources of
  improper payment and/or potential fraud
• analytical insights about the sources of future
  improper payments

• Strategic
• Provide agencies with centrally-provided,
  IPERIA-mandated agency-driven information that
  helps them avoid and reduce and recover improper
  payments

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Do Not Pay Solution
Do Not Pay can be incorporated into all parts of
the payments stream. It can be aligned with
existing business processes and an agencys
mission.
User submits data for entities receiving payments
or being monitored receives matching results.
User submits data for entities under
consideration receives matching results.
Data Analytics Services staff analyze the data
and trends and provide reports to support agency
investigation and recovery efforts.
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• Email donotpay_at_stls.frb.org
• Website www.donotpay.treas.gov
• Phone [phone]

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Thank You