Debt collection improvement act
The Need of Such an Act
The Debt Collection Improvement Act (DCIA) was implemented by the Congress in the year 1996. It was noticed that there was steady augment in the amount of wrong non-tax debt that was owned by the United States. It was a matter of concern as no appropriate action was being taken to extract this delinquent tax. This law brought about the centralization of the collection of tax by the government and appointed the Treasury with new responsibilities related to the same. There is a Financial Management Service (FMS). They have the responsibility of implementation of the Provisions of debt collection of the DCIA by the Treasury.
Why FMS?
Before the DCIA was passed, FMS/Treasury only assisted the Office of Management and Budget (OMB) so that they could provide guidance to the federal agencies on the ways they could collect the debts that were owned by the government. The FMS also assisted agencies in the collection of delinquent debts with salary offset and by using a contract by the government that was available to the agencies so that they could refer the delinquent debts to PCAs or Private Collection Agencies. Owing to this the FMS accumulated a lot of information related to practices and procedures of debt collection. It also had the recognition of the agency that disbursed more than 85% of the federal payments. Naturally FMS was the best choice to conduct the operations of centralized debt collection for federal government.
The Mechanism
The FMS used, in fact still uses, a few ways or tools to extract the delinquent non-tax. One of them is the Treasury Offset Program or TOP. It compares the Tax-Payer Identification Number (TIN) and names of the debtors and the same of the recipients of federal payments. If the data matches, the federal payment is reduced so as to satisfy the debt that is overdue. The federal agencies are required to provide the FMS with the non-tax debts that are delinquent so that they can be collected by setting off non-tax payments. Non tax payments are inclusive of vendor, federal salary, federal retirement, and benefits of Social Security.
The second method used by FMS as a tool for collecting tax is Âcross servicing. It is a collection of tools that encourage the debtors to pay back to the federal government. For this the Federal Agencies provide the Treasury or FMS with the information of the delinquent non- tax debtors from whom they have not been able to collect the debts. This includes a variety of debts like unpaid loans, duplicate payments or over payments made to benefit payment receipts or federal salary, grant funds that have been misused and fees, fines and penalties as assessed by the federal agencies. A demand letter is sent to the debtors on treasury letterhead by the FMS. It also makes arrangements of repayment of the debts by the debtors to the agencies. This program of cross servicing of the FMS has contracts with the PCAs who provide services to the FMS for collection of delinquent debts.
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