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About Debt Collection Improvement Act: FMS Debt Collection and The Debt Collection Improvement Act of 1996
In response to a steady increase in the amount of delinquent non-tax debt owed to the United States, and concern that appropriate actions were not being taken to collect this delinquent debt, Congress passed the Debt Collection Improvement Act of 1996 (DCIA). This law centralized the government wide collection of delinquent debt and gave Treasury significant new responsibilities in this area. The Financial Management Service (FMS) is responsible for Treasury's implementation of the debt collection provisions of the DCIA.
TOP has been expanded to incorporate other offset processes, particularly: (1) the tax refund offset program, formerly operated by the Internal Revenue Service, was merged into TOP in January 1999; (2) levies served by the IRS for the collection of delinquent tax debt in accordance with the Taxpayer Relief Act of 1997; and (3) collection of state income tax debts by offset of federal income tax refunds as mandated by the 1998 Internal Revenue Service Restructuring and Reform Act. Different statutory requirements have made implementation of the entire TOP program very complex.
The other primary debt collection tool operated by FMS is "cross-servicing" which uses a variety of collection tools to encourage debtors to repay the federal government. Federal agencies are required to refer eligible delinquent (over 180 days) non-tax debts to Treasury for debt collection action, if they have not been successful at collecting those debts. The types of debts referred to FMS include unpaid loans, overpayments or duplicate payments made to federal salary or benefit payment recipients, misused grant funds, and fines, penalties or fees assessed by federal agencies. FMS sends demand letters to debtors on Treasury letterhead, and enters into repayment arrangements with debtors. FMS' cross-servicing program administers a contract with PCAs who provide delinquent debt collection services and FMS refers debts to these PCAs.