Federal Debt Collection Procedures

When you owe money to the federal government — an unpaid student loan, a tax overpayment the IRS wants back, a delinquent SBA loan, or an overpayment of Social Security benefits — the government has collection powers that private creditors simply don't have. Federal debt collection is governed by the Federal Debt Collection Procedures Act (FDCPA, 28 U.S.C. §§ 3001–3308) (not to be confused with the Fair Debt Collection Practices Act, a separate consumer protection law) and the Debt Collection Improvement Act (31 U.S.C. §§ 3701–3720E), which centralized government-wide collections at the Treasury Department. The government's most powerful tool is the Treasury Offset Program (TOP): Treasury can intercept federal payments — your tax refund, Social Security check, federal salary, or federal contractor payment — and apply them to your delinquent federal debt without going to court, collecting roughly $7+ billion per year this way. Beyond offset, agencies can pursue administrative wage garnishment (up to 15% of disposable pay without a court order), refer debts to the DOJ for judicial collection, and report delinquent debts to credit bureaus. Debts more than 120 days delinquent must be referred to Treasury for cross-servicing and TOP offset. Understanding these rules matters if you've received any federal payment — overpayments are aggressively recovered, and the government's collection toolkit is far broader than a private creditor's.

Current Law (2026)

Legal Authority

• 28 U.S.C. § 3001-3003 — Federal Debt Collection Procedures Act (exclusive civil procedures for the United States to recover debts; defines "debt" as any amount owed to the U.S.; applicable in federal court)
• 28 U.S.C. § 3101-3105 — Pre-judgment remedies (attachment, receivership, garnishment; United States may seek pre-judgment remedies to secure payment of a debt pending litigation)
• 28 U.S.C. § 3201-3206 — Post-judgment remedies (judgment liens, writs of execution, garnishment of property; priority of United States as creditor)
• 31 U.S.C. § 3711 — Collection and compromise (federal agencies must aggressively collect debts; authority to compromise debts; referral for litigation; write-off of uncollectible debts)
• 31 U.S.C. § 3716 — Administrative offset (federal agencies may offset federal payments to collect delinquent debts; includes tax refund offset, Social Security offset, federal salary offset)
• 31 U.S.C. § 3718 — Cross-servicing (delinquent debts over 120 days must be referred to Treasury's Bureau of the Fiscal Service for centralized collection)
• 31 U.S.C. § 3720D — Administrative wage garnishment (federal agencies may garnish up to 15% of a debtor's disposable pay without a court order; hearing rights; hardship provisions)

How It Works

When you owe money to the federal government — whether from a defaulted student loan, an overpayment of benefits, a delinquent SBA loan, or an unpaid fine — the government has powerful collection tools that exceed what private creditors can do. Federal debt collection operates through both administrative mechanisms and judicial remedies.

Before going to court, federal agencies have substantial administrative collection powers. The most significant is the Treasury Offset Program (TOP): when a federal debt becomes delinquent, the creditor agency refers it to Treasury, which intercepts other federal payments owed to the debtor — income tax refunds (the most common offset), Social Security benefits (up to 15% for most debts), federal salary, retirement benefits, and other federal payments. TOP collects over $7 billion annually and is the government's most effective collection tool. Agencies may also impose administrative wage garnishment — garnishing up to 15% of disposable pay from a debtor's non-federal employer without obtaining a court judgment first, exceeding the protections debtors have against private creditors under the Consumer Credit Protection Act. Under the Debt Collection Improvement Act, federal agencies must refer delinquent debts to Treasury's Bureau of the Fiscal Service within 120 days of delinquency; Treasury then uses private collection agencies, the offset program, and other tools to collect on behalf of the originating agency, ensuring delinquent federal debts don't fall through the cracks.

The Federal Debt Collection Procedures Act (28 U.S.C.) provides the exclusive procedures for the United States to collect debts through federal court litigation. The government has priority over most other creditors — dating to the earliest days of the republic — can obtain pre-judgment remedies (attachment, garnishment, receivership) to prevent debtors from dissipating assets before judgment, and can enforce judgment liens against real property for 20 years (renewable). Despite these powerful tools, debtors have due process rights: before offset or garnishment, the agency must provide written notice and an opportunity for review, allowing debtors to challenge the existence or amount of the debt, request a payment plan, or claim financial hardship. Social Security benefits have special protections — the first $750/month (indexed) is protected from offset, and offset is limited to 15%.

How It Affects You

State Variations

Implementing Regulations

• 31 CFR Part 285 — Debt collection authorities (§ 285.11 — administrative wage garnishment)

• 31 CFR Part 5 — Treasury debt collection regulations (§§ 5.3, 5.13 — adoption of Federal Claims Collection Standards, administrative wage garnishment procedures)

• 31 CFR Part 212 — Garnishment of accounts containing federal benefit payments (§ 212.4 — initial action upon receipt of garnishment order)

• 28 CFR Part 11 — DOJ debt collection (§§ 11.2, 11.21 — private counsel program, administrative wage garnishment)

• 29 CFR Part 20 — Department of Labor Federal Claims Collection: DOL's agency-specific implementation of the Federal Claims Collection Standards (31 U.S.C. § 3711), covering debts arising from DOL programs (OSHA penalties, unemployment insurance overpayments, workers' compensation overpayments, grant overpayments, and other DOL program debts). Six subparts cover the full collection toolkit:

  • Subpart A — Disclosure to Credit Reporting Agencies: DOL must report delinquent debts over $100 to credit bureaus after 60 days of delinquency; advance notice and opportunity to dispute required before reporting; continues until debt is paid, compromised, or deemed uncollectible
  • Subpart B — Administrative Offset (§§ 20.11–20.29): DOL may recover debts by withholding any payment the federal government owes to the debtor — including tax refunds (through Treasury Offset Program), federal contract payments, federal benefit payments, and payments from other agencies; debtors receive written notice of the proposed offset and 30 days to dispute; offset may proceed without court order
  • Subpart C — Interest, Penalties and Administrative Costs: interest accrues on delinquent debts at the Treasury Fiscal Service rate (updated annually); an administrative penalty of 6% per year applies after 90 days of delinquency; administrative costs (collection costs, referral fees) are added to the debt; interest and penalties continue until full payment
  • Subpart D — Salary Offset (§§ 20.43–20.59): for current federal employees who owe debts to DOL (or whose DOL debts are being cross-serviced), DOL may direct the employee's employing agency to withhold up to 15% of disposable pay per pay period; employees have the right to advance notice, to inspect the debt record, to make a written response, and to a hearing before an impartial official; voluntary repayment agreements are offered before involuntary deduction
  • Subpart E — Federal Income Tax Refund Offset (§§ 20.60–20.70): debts delinquent over 90 days and over $25 are referred to the IRS for offset against federal income tax refunds through the Treasury Offset Program; debtors receive advance notice including the opportunity to enter a repayment agreement to avoid offset
  • Subpart F — Administrative Wage Garnishment (§§ 20.71–20.85): for non-federal employees who owe delinquent DOL debts, DOL may issue a wage garnishment order directly to the debtor's private employer — without a court judgment; garnishment is limited to 15% of disposable pay; employer must honor the garnishment order or face liability; the debtor gets advance notice and a hearing right

• 5 CFR Part 179 — Claims Collection Standards (OPM) (30 sections across 3 subparts — OPM's implementation of the Federal Claims Collection Standards for debts owed to OPM, covering three distinct collection tools: general collection, salary offset, and administrative offset; implements 31 U.S.C. §§ 3701, 3711, 3716, 3720 and 5 U.S.C. § 5514):

  • General collection (Subpart A, § 179.101): OPM's Chief Financial Officer and delegates are authorized to collect, compromise, terminate, or refer to DOJ all claims for money and property arising from OPM programs; the delegation chain flows from the Director through the CFO to designated staff
  • Salary offset (Subpart B, §§ 179.201–179.218): OPM may deduct debts from a federal employee's paycheck under 5 U.S.C. § 5514; before any deduction starts, the creditor agency (or OPM as creditor) must send the employee written notice at least 30 calendar days in advance (§ 179.206); the notice must state the debt amount, the collection schedule, and the employee's rights; employees may request a hearing to contest the debt's existence, amount, or repayment schedule (§ 179.207); as an alternative, the employee may propose a voluntary repayment agreement — paying by installments rather than paycheck deduction (§ 179.209); a special review is available at any time if the employee's financial circumstances change materially (§ 179.210); OPM issues certifications to the paying agency confirming the debt and directing deductions (§ 179.208); interest, penalties, and administrative costs are assessed under 31 U.S.C. § 3717 (§ 179.214); involuntary payments do not waive the employee's right to dispute the debt later (§ 179.217); OPM will also serve as hearing official for other agencies when an OPM employee owes a debt to another agency (§ 179.216)
  • Administrative offset (Subpart C, §§ 179.301–179.305): OPM may recover debts by withholding amounts the federal government owes the debtor — contract payments, travel reimbursements, grants, and other government payments; certified mail notice is required before any offset; debtors have 30 days to dispute the debt's existence or amount after receiving notice (§ 179.305); OPM may coordinate with Treasury's offset program to reach tax refunds and other federal payments; OPM retirement, life insurance, and health insurance debts are handled separately by the Associate Director for Retirement and Insurance, not under Part 179 (§ 179.204)

• 7 CFR Part 3 — USDA Debt Management (57 sections across 9 subparts — USDA's agency-specific implementation of the Federal Claims Collection Standards; applies to all debts arising from USDA programs including farm loans, crop insurance overpayments, rural development loans, and commodity program payments):

  • Subpart B — Collection and Compromise (13 sections): USDA must aggressively pursue every debt and send a written demand letter within 30 days; demand letters must state the basis for the debt, payment deadline, and USDA's intent to report to credit reporting agencies after 60 days of delinquency (§ 3.12); agencies must not issue new loans or guarantees to anyone delinquent on a non-tax federal debt — USDA CFO may grant exceptions; collateral may be liquidated including non-judicial foreclosure; installment plans allowed when the debtor cannot pay in full — USDA requires a financial statement and will charge interest, penalties, and administrative costs (§ 3.17)
  • Subpart D — Administrative Offset (8 sections): USDA may recover debts by withholding payments the agency owes to the debtor — including contract payments, grants, and program benefits; offsets must comply with 31 CFR Part 901 and require advance notice and an opportunity to review the debt record
  • Subpart E — Administrative Wage Garnishment (4 sections): USDA may issue wage garnishment orders to non-federal employers to recover delinquent debts; garnishment is limited to 15% of disposable pay; debtors receive a 30-day notice and hearing right before garnishment begins
  • Subpart G — Federal Salary Offset (18 sections): for debts owed by current federal employees, USDA uses involuntary payroll deduction; deductions are limited to 15% of disposable pay per pay period unless the employee agrees to a higher rate; employees receive advance notice, the right to inspect agency records, and the right to a hearing before an impartial official; installment repayment plans are preferred when the debtor cooperates

Pending Legislation

• SJRES 125 — Disapproves CFPB withdrawal of Regulation F rules governing third-party debt collection practices. Status: Introduced.
• SJRES 126 — Blocks CFPB withdrawal of rules restricting collection on time-barred debts. Status: Introduced.
• S 2454 — Fair Debt Collection Practices for Servicemembers Act. Extends additional debt collection protections to military servicemembers. Status: Introduced.

Recent Developments

• The COVID-19 pandemic led to temporary suspension of many federal debt collection activities (student loan payments, tax refund offsets for student loans, and Treasury offsets were paused)
• Student loan debt collection has been particularly controversial, with ongoing debates about forgiveness, income-driven repayment, and collection practices
• Treasury has modernized the offset program to improve matching accuracy and debtor notification
• GAO has reported significant amounts of improper payments across federal agencies that generate collection actions