792 FARM SERVICE AGENCY DEPARTMENTAL DECISIONS In re: JOANNE FRANTA. FS Docket No. 96-0001 Decision and Order filed August 21, 1996. Salary offset - 15% deduction of disposable pay. Chief Judge Victor Palmer approved a 15% salary offset imposed by the FSA on the respondent, a federal employee, to collect an overdue loan owed to the United States government Nancy L. New, Marc A. Smith and Craig Iverson, for Complainant. Jack Crickenberger and Penny Walker, for Respondent. Decision and Order issued by Victor W. Palmer, Chief Administrative Law Judge. Pursuant to 7 C.F.R.§ 1951.111,the Farm Service Agency (FSA), formerly Farmers Home Administration, on May 2, 1996, sent its employee, Joanne Franta, "Salary Offset" letters. The letters advised Ms. Franta that FSA had reviewed its records and determined that she owed the U.S. Government $17,765.94on an overdue loan, which it intended to collect by offsetting 15% of her net salary until the debt and all accumulated interest and other costs were paid in full in accordance with Department Regulation 2520-1, Interest on Delinquent Debt, and 4 C.F.R. 102.13. The letters further advised Ms. Franta: "As a Federal employee, you have the following rights: 1. The right to inspect and copy the records relating to the delinquency or other debt. Charges will be assessed for copying; 2. The right to enter into a written agreement for a repayment schedule different from that proposed so long as your terms of repayment are agreeable to FSA; 3. The right to a hearing conducted by a USDA Administrative Law Judge or a hearing official from outside USDA. The hearing will consider the existence of the delinquency or other debt, the amount of the delinquency or other debt, and/or percentage of disposable pay to 55 Agric. Dec. 792 be deducted each pay period. The timely filing of a petition or a hearing will stop collection proceedings; 4. The right to a final decision on a hearing at the earliest practical date, but not later than 60 calendar days after you file your hearing petition; 5. The right to request a waiver of salary overpayment. You may also question the amount or the validity of a salary overpayment or general delinquency or other debt by submitting a claim to the Comptroller General in accordance with General Accounting Office procedures; 6. The right to have any moneys paid on or deducted for the delinquency or other debt which are later waived or found not owed to the United States to be promptly refunded to you unless there are applicable contractual or statutory provisions to the contrary." Ms. Franta responded by letter, dated May 16, 1996, stating that she found the letters to be confusing. Her confusion was caused by another letter advising her that an administrative offset would also be made against sums accumulated in her pension fund to pay this debt. On May 30, 1996, Nancy L. New, Director Program Division, FSA, wrote to Ms. Franta and explained the distinction between a salary offset and an administrative offset. On June 12, 1996, Ms. Franta filed a petition for a hearing; because of her initial confusion her letter filed after the 30 day time limitation was accepted by the certifying official of FSA who wrote her to that effect on June 20, 1996. On June 24, 1996, the underlying documents which constitute the administrative record was sent to me by the certifying official of FSA who appointed Nancy L. New, Director Program Division to make arrangements for a hearing in accordance with my directions. I determined that it was appropriate to conduct a hearing by telephone conference call as authorized by the governing regulations (7 C.F.R. § 1951.111(g)(6).) On July 2, 1996, at 2:00 P.M. EDT, a telephonic hearing was initiated. Participating were Nancy L. New, Marc A. Smith and Craig Iverson for FSA, and Ms. Franta together with her attorneys Jack Crickenberger and Penny Walker. The offices of the FSA representatives are at 441 South Salina Street, Suite 356, Syracuse, New York. Mr. Crickenberger and Ms. Walker are officed at 3921 Old Lee Highway, Suite 71A, Fairfax, Virginia 22030. We reviewed the history and nature of the loan which the Farmers Home Administration had made to Ms. Franta and her then husband, David, whom she subsequently divorced and is now deceased. The arguments advanced on Ms. Franta's behalf, were all equitable in nature and a settlement proposal was advanced for consideration by FSA. I decided to adjourn the hearing to allow the proposal to be explored and to reconvene the hearing later in the month. Subsequently, I was advised that the parties required more time to explore settlement possibilities and the reconvening of the hearing was delayed. On August 19, 1996, the hearing by telephone conference was reconvened at 2:00 P.M. EDT. FSA was represented by Ms. New and Ms. Franta participated together with her attorneys Mr. Crickenberger and Ms. Walker. I was advised that FSA had rejected the settlement proposal and that the amount now available in Ms. Franta's pension fund was adequate to pay in-full the debt and all accumulated interest. It again appeared that every argument asserted on Ms. Franta's behalf was equitable in nature and there were no legal arguments available against the imposition of the salary offset. I explained to the parties that the powers conferred by the governing regulation 7 C.F.R. § 1951.111(g), do not include equity powers. I am limited by the regulation to considering the written submissions and documents provided by the debtor and FSA unless a statute authorizes or requires consideration to also be given to a waiver of the debt. No statutory authority of this type was shown applicable. Inasmuch as Ms. Franta's attorneys requested the delay of the proceeding so that her settlement proposal could be considered by FSA, the sixty day period for issuing a written decision was accordingly lengthened as authorized by 7 C.F.R. § 1951.111(g)(7). Upon consideration of the written submissions and documents provided by Ms. Franta and FSA as well as the arguments made at the hearing by telephone conference, the following findings, conclusions and analysis is made supporting the salary offset to collect the debt owed by Ms. Franta. FINDINGS 1. In 1985, David and Joanne Franta borrowed $13,000.00 from the Farmers Home Administration to start a small strawberry business. The annual interest rate was 10 1/4% and the loan was to be paid in 7 years through 8 installments due on the 1st of January of each year. The promissory note they signed contained a promise by each borrower to "jointly and severally" pay the loan's principal and interest. 55 Agric. Dec. 792 2. Loan payments were not made as agreed and, in 1989, the Farmers Home Administration rescheduled the loan to better enable the Frantas to pay. The annual interest rate was reduced to 9 1/2% and the Frantas were given six years to pay the then balance of $12,475.32. 3. In 1990, the Frantas separated with David Franta retaining possession of the farm equipment. 4. In 1994, the Frantas submitted a partial compromise offer under Farmers Home Administration Instruction 1956-B, which was rejected as incomplete. They were notified of the rejection by telephone on November 8, and November 16, 1994. 5. The Frantas divorced in 1994, and subsequent to his remarriage, David Franta died on December 7, 1994. 6. Joanne Franta had become a federal employee prior to the 1994 partial compromise offer she and David Franta submitted. 7. Upon their divorce, David Franta resided in New York where the farm equipment purchased with the loan money was located. Joanne Franta moved to Virginia where she is currently employed by the federal government. 8. On March 12, 1996, the entire indebtedness due on the promissory notes was accelerated for failure to make payments as scheduled and written notice to that effect was sent to Joanne Franta. 9. In that Joanne Franta is a federal employee, salary offset was initiated on May 2, 1996, and an administrative offset respecting her pension fund was initiated on May 3, 1996. 10. By letter dated May 16, 1996, Joanne Franta responded to the letters she received. Inasmuch as her response indicated she did not understand the differences between the two offset actions, Nancy L. New, Director Program Division, by letter dated May 30, 1996, undertook to explain the differences and Ms. Franta's right to a review by an Administrative Law Judge of the salary offset action, and a review by the USDA National Appeals Division of the administrative offset. 11. Joanne Franta has petitioned for review of both actions and the administrative offset review is currently pending. 12. As of April 30, 1996, Joanne Franta owed $11,261.25 on the debt's principal and $6,504.69in interest. Interest continues to accrue at the rate of $2.93 per day. CONCLUSIONS Joanne Franta and her then husband, David Franta borrowed $13,000.00on July 19, 1985, which they "jointly and severally" promised to fully pay with interest of 10 1/4% by July 19, 1992. Instead the note's installment payments were rescheduled in 1989 to better enable them to pay the debt at a reduced rate of interest. Currently, $11,261.25of the principal debt is still owed, plus interest to date of $6,835.78,whereby, $18,097.30is owed as of August 21, 1996. The various settlement proposals Ms. Franta submitted to FSA were considered and rejected. I have been advised that the amount of money that is currently set aside to pay her pension is sufficient to fully pay this debt and for that reason there is no incentive for FSA to accept a smaller amount or reduced installment payments. The administrative offset review is likely to be decided in approximately sixty days. The regulations allow up to 15% of a federal employee's disposable pay to be deducted and sent directly to the creditor agency. FSA has requested that $381.00 p O per pay period be deducted in repayment of the debt. Ms. Franta admits that this deduction would not exceed 15% of her disposable pay. Accordingly, starting with her October 24, 1996, pay check, $381.00 shall be deducted each pay period until such time as the entire debt which Ms. Franta owes to the Farm Service Agency has been paid or satisfied in full. Moreover, interest shall continue to accumulate on the debt until it is paid or satisfied in full. [This Decision and Order became final August 21, 1996.--Editor] Chief Judge Victor Palmer approved the imposition of a salary offset on the respondent, but reduced the amount of the deduction. Respondent is a federal employee with an outstanding and overdue loan from the United States government. The FSA imposed a 15% offset, or a deduction of $112 from each paycheck, which Chief Judge Palmer reduced to $100. Mike Robinson, Dean Altenhofen, Amy Roeder, and Jack Salava, for Complainant. |