Docket No. AWG 23-583

FINAL DECISION

This matter arises under our administrative wage garnishment procedures. In certain cases, the Postal Service may send a nontax debt to the United States Department of the Treasury (“Treasury”) for collection. These debts may involve any indebtedness to the United States, but primarily involve former employees who owe money to the Postal Service, usually for an overpayment of salary or other similar payroll-related issues. The procedures by which the Postal Service may transfer this debt are set forth in 31 C.F.R. § 285.11. Also, the Postal Service has a separate agreement with Treasury that governs these debts. See CY2024 Agreement to Certify Federal Nontax Debts for the Centralized Receivables Service, the Cross-Servicing Program, and the Treasury Offset Program (“Treasury Certification Agreement”). 
If a debtor requests a hearing after receipt of a Notice of Intent to Initiate Administrative Wage Garnishment from Treasury, the matter is referred to the Judicial Officer for resolution. Our review of these debts is largely limited to two issues. The first issue requires us to review whether the debt is valid. The second issue is whether the Postal Service complied with due process provisions under the regulations, and its obligations under the Treasury Certification Agreement. The Postal Service carries the burden of proof on both issues. If successful, the Postal Service may, with the assistance of Treasury under its Treasury Certification Agreement, collect both the debt and any related Treasury fees by administrative wage garnishment. 

BACKGROUND AND FINDINGS OF FACT

Petitioner Bryan Davies separated from the Postal Service on May 13, 2022, following Mr. Davies’ unsuccessful challenge of the circumstances of his separation.¹ Resp. Exh. 20. The Postal Service then initiated collection activity against Mr. Davies by sending him invoices for debts based on Federal Employees Health Benefit (FEHB) program premiums and overdrawn annual and sick leave. Because Mr. Davies did not respond to the invoices, the Postal Service eventually transferred the debts to Treasury for collection.² Treasury Certification Agreement; 31 C.F.R. § 285.11. Treasury initiated collection, including referral of the debts to a collection agency. When Mr. Davies received notice from the collection agency, he paid the balance sought by the collection agency. The notice from the collection agency only included the FEHB debts, not the debt for overdrawn annual and sick leave. At that time, Mr. Davies was under the impression that he had paid the entire balance of his debts to the Postal Service, plus associated Treasury fees.
However, he received another administrative wage garnishment notice from Treasury on or about June 1, 2023, seeking a balance due of $3,804.05. This notice sought to collect the $2,926.19 debt for overdrawn annual and sick leave (Invoice No. 703329316), plus collection fees. Mr. Davies filed a timely appeal, and the matter was referred to the Judicial Officer on November 22, 2023. After several telephone conferences, a hearing was held on April 16, 2024.
When Mr. Davies paid the collection agency, he made two payments: one for $2,356.24 and a second for $4,676.79. Treasury applied the first payment in a timely manner to Mr. Davies’ balance but misplaced the second payment. Following Postal Service inquiries during this case, Treasury discovered the missing payment and applied the payment to remaining balances. Tr. 64; Resp. Exh. 18. However, Treasury did not apply the payment to the FEHB debts (the oldest ones) first. Both payments made by Mr. Davies to the collection agency were applied by Treasury as follows:
Invoice No. 703125525 paid in full in the amount of $879.27 (balance of $26.48 previously paid by payroll deductions in 2021).
Invoice No. 703145517 paid in full in the amount of $905.75.
Invoice No. 703169571 paid in full in the amount of $925.21.
Invoice No. 703191555 paid in the amount of $859.83 leaving a balance due of $94.57.
Invoice No. 703329316 paid in the amount of $1,812.49 leaving a balance due of $1,113.70.
Invoice No. 703210781 unpaid balance due $954.40
Invoice No. 703227173 unpaid balance due $763.52
Tr. 61; Resp. Exhs. 17, 19.
The Treasury fees charged for these debt amounts totaled $1,106.73.³ Id.
Yet, as discussed, there remains a balance due.⁴ The reason for this balance due was because the $2,926.19 debt associated with the overdrawn annual and sick leave (Invoice No. 703329316) was not included in the collection agency’s original demand for payment. Thus when Mr. Davies made a good faith payment of what he assumed was his entire debt, the debt was not satisfied in full. His confusion was justified given Treasury’s actions, later exacerbated by its misplacing his payment, but I find no error in their debt calculations.
However, I also found that further muddying the application of the payments made by Mr. Davies was Treasury’s inexplicable choice to apply the payments in part to the overdrawn annual and sick leave balance rather than the remaining FEHB premium balances that were included in the collection agency demand. This misapplication of funds was the final straw. Given what I considered Treasury’s less than professional handling of this debt collection, I ordered the Postal Service to recall the remaining debt balance from Treasury as Mr. Davies had paid that agency enough for their blunders. Order and Memorandum of Telephone Conference dated March 7, 2024.
With the remaining debt recalled to the Postal Service, we proceeded to hearing. There was no dispute as to the FEHB premium debt collected by Treasury. The invoices cited above were valid. Accordingly, we covered the remaining annual and sick leave debt in detail. Mr. Davies was overdrawn in annual leave by the 46 hours claimed when separated. Tr. 21–22. However, it was overdrawn sick leave that required more testimony. In general, an employee cannot overdraw their sick leave, as sick leave requested in excess of a sick leave balance will result in either use of annual leave or leave without pay. Tr. 22–23. However, an employee may request advanced sick leave under certain circumstances, which Mr. Davies did prior to his separation and the Postal Service approved. Id. A review of the payroll journals revealed that Mr. Davies was overdrawn in sick leave by the 108 hours claimed when he separated. Resp. Exh. 15.
The calculation of the debt amount required the Accounting Service Center (ASC) to apply a retroactive increase that was implemented under a union agreement. Tr. 28. As a result, the payroll journals were a bit confusing. The Postal Service, through testimony and review of the relevant payroll journals, explained how ASC calculated the debt amount. Tr. 29–30; 33–42. That testimonial evidence and explanations regarding the payroll journals established by a preponderance of the evidence that the amount set forth in Invoice No. 703329316 was accurate, and I so find.
The balance due of $2,926.19 is a valid debt.
Accordingly, the Postal Service is entitled to judgment in its favor.
Mr. Davies testified that because of his current financial situation, repayment of the debt in full is not possible. I credit Mr. Davies’ testimony that he cannot afford more than $100 per month without sustaining financial hardship. Tr. 98. Accordingly, he shall repay the debt at that amount.

ORDER

The Petition is DENIED.
The Postal Service may collect the debt of $2,926.19 in accordance with the following payment plan.
Mr. Davies shall pay the Postal Service $100 per month, on or about the first day of each month, until the debt is satisfied.⁵ Mr. Davies may pay this debt off early if he so wishes without penalty. As long as Mr. Davies remains current in his payments, the Postal Service may not transfer the debt to Treasury for collection, nor seek to collect the debt by other means.
If Mr. Davies fails to make timely payments in accordance with this Order, the Postal Service may collect the debt by any means available under federal law and collection regulations, including transfer of the remaining debt to Treasury.