CHAPTER 20. DISPUTE PROCEDURES FOR BENEFIT DEBTS (VBA & VHA)

20.01 BACKGROUND

Title 38 U.S.C. 5314 and recent decisions by the U.S. Court of Veterans Appeals (COVA) gives claimants the right to dispute the existence and/or amount of a VA benefit or home loan program debt. When a person against whom an overpayment has been created, timely exercises his/her right to dispute, either separately or in conjunction with the right to request a waiver of the debt, the person is entitled to a determination of the correctness of the debt before deductions to recover the overpayment can be made from future benefit payments.

20.02 FIRST COLLECTION LETTERS

The first collection letters generated by CARS or prepared by Fiscal activities will include an explanation of the right to dispute the existence or amount of the debt and request waiver at the same time.

20.03 FIELD STATION/FACILITY ACTION ON DISPUTES

a. When a debtor disputes a debt and requests waiver at the same time, a verification audit/analysis of the debt should be immediately prepared and sent to the debtor and a copy placed in the claims folder/loan docket. A copy should also be attached to the waiver request sent to the Committee on Waivers and Compromises (COWC). Appendix I has examples of recommended letters to be sent to persons disputing a debt. If the audit indicates that a debt does not exist, the receivable will be canceled and the claimant advised.

(1) VBA Fiscal activities will verify the existence and amount of benefit debts that are under station jurisdiction, except for loan guaranty debts. The Loan Guaranty Division is responsible for verifying the existence and amount of loan guaranty debts. Fiscal activities will also prepare audits on debts that are maintained in CARS when requested by the DMC.

(2) The Medical Administration Service (MAS) will verify medical care charges billed by preparing a written audit. Note: Debts arising from medical services furnished solely on an emergency or humanitarian basis, per diem charges, or Category C debts cannot be considered for waiver.

(3) The Debt Management Center (DMC) will verify the existence and amount of benefit debts maintained in CARS, except for loan guaranty debts. The Loan Guaranty Division of jurisdiction is responsible for verifying the existence and amount of loan guaranty debts. If the DMC does not have sufficient data to prepare an audit, the appropriate regional office Fiscal activity will be asked to do so.

b. Offset of benefits will not commence if the debtor disputes the debt within 30 days from the date of the first demand for repayment. However, once an audit request that validates the debt has been mailed to the debtor, offset of benefits will not be delayed or deferred unless the debtor has also requested a waiver, in which case offset of benefits will be deferred until the COWC has reached a decision on the waiver request, and that decision denies waiver.

c. Offset of benefits will not be delayed or deferred if correspondence disputing a debt is not received within 30 days from the date of the first demand for repayment, but the debtor will immediately be furnished an audit of the account.

NOTE: An exception to above paragraphs b. and c. would be when a Chapter 32 participant requests a refund of his/her contributions and the TARGET master record reflects existence of a Chapter 32 overpayment. Offset from contributions to apply to the Chapter 32 overpayment will not be delayed even though correspondence disputing the debt and/or requesting waiver of the debt is received within 30 days from the date of the first demand for repayment. The debtor will be furnished an audit of the account. If the audit does not verify existence of a debt or if waiver of the debt is granted, the amount offset will be promptly refunded. (Ref. 38 CFR 1.912a).

20.04 NOTICE OF DISAGREEMENT (NOD)

a. If the debtor still disputes the debt after an audit/analysis of account is provided, the dispute will be considered a Notice of Disagreement (NOD). COVA has stated that the validity and amount of a debt is an issue within the Court's jurisdiction and must be addressed and resolved by VA whenever it is raised by the debtor. COVA has also prohibited waiver consideration until the dispute concerning the existence and amount of the debt is resolved. Thus, waiver consideration must remain suspended until the dispute is resolved whenever the debtor continues the dispute after receipt of an audit/analysis.

b. On debts maintained in CARS, the DMC will forward the NOD to the regional office Fiscal activity who will log and forward it on to the Adjudication/Loan Guaranty Division for review and preparation of the statement of case, if necessary. Adjudication/Loan Guaranty will return the statement of case to the Fiscal activity for forwarding to the DMC or the debtor, as appropriate. A copy of the statement of case will be filed in the debtor's claims folder. VHA Fiscal activities will forward NODs to MAS for preparation of the statement of case.

20.05 REFERRALS FOR ENFORCED COLLECTION

Debts in dispute are not to be referred to the DC or DOJ for enforced collection until the dispute and any appeal is settled. Any case which is disputed timely but after a referral has been made, should be recalled or the DC or U.S. Attorney is to be requested to provide guidance on how the dispute should be handled.