Sec. 1.1940  Assessment.

    (a) Except as provided in paragraph (h) of this section, or 
Sec. 1.1941, the Commission shall assess interest, penalties and 
administrative costs on debts owed to the United States pursuant to 31 
U.S.C. 3717. Before assessing these charges, the Commission will mail or 
hand-deliver a written notice to the debtor explaining the agency's 
requirements concerning these charges.
    (b) Interest shall accrue from the date on which notice of the debt 
and the interest requirements is first mailed or hand-delivered to the 
debtor, using the most current address that is available to the agency. 
If the Commission should use an ``advance billing'' procedure--that is, 
if it mails a bill before a debt is actually owed--it can include the 
required interest notification in the advance billing, but interest may 
not start to accrue before the debt is actually owed.
    (c) The rate of interest assessed shall be the rate of the current 
value of funds to the United States Treasury (i.e., the Treasury Tax and 
loan account rate), as prescribed and published by the Secretary of the 
Treasury in the Federal Register and the Treasury Financial Manual 
Bulletins annually or quarterly, in accordance with 31 U.S.C. 3717. The 
Commission may assess a higher rate of interest if it reasonably 
determines that a higher rate is necessary to protect the interests of 
the United States. The rate of interest, as initially assessed, shall 
remain fixed for the duration of the indebtedness except that where a 
debtor has defaulted on a repayment agreement and seeks to enter into a 
new agreement, the Commission may set a new interest rate which reflects 
the current value of funds to the Treasury at the time the new agreement 
is executed. Interest will not be assessed on accrued interest, 
penalties, or administrative costs required by this section. However, if 
the debtor defaults on a previous repayment agreement, charges which 
accrued but were not collected under the defaulted agreement shall be 
added to the principal to be paid under a new repayment schedule.
    (d) The Commission shall assess against a debtor charges to cover 
administrative costs incurred as a result of a delinquent debt--that is, 
the additional costs incured in processing and handling the debt because 
it became delinquent. Calculation of administrative costs shall be based 
upon actual costs incurred or upon costs analyses establishing an 
average of actual additional costs incurred by the agency in processing 
and handling claims against other debtors in similar stages of 
delinquency. Administrative costs may include costs incurred in 
obtaining a credit report or in using a private debt collector, to the 
extent they are attributable to the delinquency.
    (e) The Commission shall assess a penalty charge, not to exceed 6 
percent a year, on any portion of a debt that is delinquent for more 
than 90 days. This charge need not be calculated until the 91st day of 
delinquency, but shall accrue from the date that the debt became 
delinquent.
    (f) When a debt is paid in partial or installment payments, amounts 
received by the agency shall be applied first to outstanding penalty and 
administrative cost charges, second to accrued interest, and third to 
the outstanding principal.
    (g) The Commission will waive the collection of interest on the debt 
or any portion of the debt which is paid within 30 days after the date 
on which interest began to accrue. It may extend this 30-day period, on 
a case-by-case basis, if it reasonably determines that such action is 
appropriate. Also, the Commission may waive, in whole or in

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part, the collection of interest, penalties, and/or administrative costs 
assessed under this section under the criteria specified in part 103 of 
the Federal Claims Collection Standards (4 CFR part 103) relating to the 
compromise of claims (without regard to the amount of the debt), or if 
it determines that collection of these charges would be against equity 
and good conscience, or not in the best interest of the United States. 
Waiver under the first sentence of this paragraph (g) is mandatory. 
Under the second and third sentences, it may be exercised under 
appropriate circumstances. Examples of appropriate circumstances 
include:
    (1) Waiver of interest pending the agency's disposition of a request 
for reconsideration, administrative review, or waiver of the underlying 
debt under a permissive statute, and
    (2) Waiver of interest where the Commission has accepted an 
installment plan under Sec. 1.1914, and there is no indication of fault 
or lack of good faith on the part of the debtor.
    (h) Where a mandatory waiver or review statute applies, interest and 
related charges may not be assessed for those periods during which 
collection action must be suspended under Sec. 104.2(c)(1) of the 
Federal Claims Collection Standards (4 CFR part 104).