Debt Collection Improvement Act of 1996

The Debt Collection Improvement Act of 1996 seeks to maximize the collection of billions of dollars of nontax delinquent debt owed to the federal government. The act requires agencies to refer eligible debts delinquent more than 180 days to the Department of the Treasury for payment offset and to Treasury or a Treasury-designated debt collection center for cross-servicing. The Treasury Offset Program, includes the offset of benefit payments, vendor payments, and tax refunds. Cross-servicing involves locating debtors, issuing demand letters, and referring debts to private collection agencies. The Rural Housing Service (RHS) has initiatives to ensure the timely referral of all delinquent debt. However, the agency's failure to make the act a priority has left key provisions of the legislation unimplemented and severely reduced collection opportunities. The agency had referred no direct single-family housing (SFH) loans to the Financial Management Service for cross-servicing. Three major factors delayed implementation. First, RHS's loan-servicing system had not incorporated key features necessary to implement the act's referral provisions. Second, RHS did not refer any debts for cross-servicing while pursuing an exemption from Treasury. Third, amounts reported as delinquent and eligible for consideration for referral were materially understated. RHS had not kept the documentation needed to independently verify the accuracy and validity of the exclusion amounts in its certified fiscal year 2000 year-end report. Accordingly, GAO was unable to determine whether RHS had appropriately excluded $182 million of delinquent loans from referral for offset and for cross servicing as of September 2000.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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