Statements & Memorandum on Federal Credit Management, April 23, 1981

Statement on Federal Credit Management

April 23, 1981

The burden of delinquent debts owed to the Federal Government continues to grow every year and is contributing to our problems of inflation. More that $25 billion of the $175 billion in debts owed the Federal Government is either delinquent on in default. The interest on the delinquent debt alone, at a 15-percent rate, is almost $10.3 million per day. This abnormally high delinquency rate is another example of the abuse and mismanagement in the Federal Government. Allowing uncollected debt to grow increases the cost of government and adds to the inflation that hurts every one of us.

We must make it clear that debts owed to the Federal Government must be repaid. These debts are due from all segments of our society: college graduates whose tuition was paid for by Government loans; homeowners who have defaulted on loans from the Veterans Administration, Farmers Home Administration, and Federal Housing Administration; businesses who have used Government funds to finance export sales; farmers who have used Government loans to finance farm operations; and individuals and businesses who have not settled their tax accounts with the Internal Revenue Service.

It is not right that responsible, honest citizens should suffer because of those who do not honor their obligations or pay their taxes.

We must immediately pursue the current overdue debt to reduce that $25 billion burden. We must institute better Federal credit management to prevent debt delinquencies and defaults and use more aggressive debt collection practices to recover the delinquencies that do occur.

I am directing the heads of Federal agencies and departments to institute more effective debt collection practices and better credit management. I am asking them to designate an official in each agency or department who will have direct responsibility for debt collection. Additionally, I am calling for a detailed review of the current overdue debt and asking for a plan to collect those debts. Each agency and department must also provide a plan for improved credit management and debt collection in the future.

A progress report on the results of the detailed review of backlogged debt, along with the credit management plans, will be due by September 30, 1981. As a further step in establishing better discipline in this area, an annual report on debt collection will be due every September when the Federal budgets are being reviewed.

Administrative action alone is not enough to solve this massive problem. Accordingly, this administration will support legislation to facilitate debt collection and allow the Federal agencies and departments to practice better credit management.

We will not allow mismanagement and abuses in the Federal Government to contribute to the burden already being carried by the American people.

Memorandum on Federal Credit Management

April 23, 1981

Memorandum for the Heads of Executive Departments and Agencies

Subject: Strengthening Federal Credit Management

The burden of delinquent debts owed to the Federal Government continues to grow every year and is contributing to our serious problem of inflation. We must again establish the principle that debts to the Federal Government must be paid. Recent studies by the Executive Branch Debt Collection Project and the General Accounting Office reveal that more than $25 billion of the $175 billion in debts owed the Federal Government are either delinquent or in default.

We must institute better credit management to prevent debt delinquencies and defaults and use more aggressive debt collection procedures to recover the delinquencies that do occur. We must take firm action now to reduce that portion of the $25 billion debt backlog that is collectible.

As first steps, I am directing you to designate an official with responsibility and authority for debt collection and submit the name of this official to the Office of Management and Budget by May 15, 1981. Additionally, each department and agency is to complete a review of their agencies debt situation and prepare a detailed plan and schedule for resolving identified problems. This is due by June 15, 1981 to the Office of Management and Budget.

To slow the expansion of delinquent debt, each agency and department will provide a plan for improved credit management and more efficient debt collection. A progress report on the results of your reviews and the development of credit management plans will be due by September 30, 1981 to the Office of Management and Budget. Hereafter, an annual report on debt collection will be submitted in September.

I am instructing the Director of the Office of Management and Budget to issue procedures and guidelines to assist you in carrying out this directive.

Administrative actions are not sufficient to resolve this critical problem. Accordingly, this Administration will support legislation to facilitate better credit management and more effective debt collection.

We cannot afford to allow debt to grow and add to the burden of inflation. Immediate action is required now to restore sound credit management to the Federal Government.

Ronald Reagan