Citation Nr: 0811218 Decision Date: 04/04/08 Archive Date: 04/14/08 DOCKET NO. 05-38 936A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Muskogee, Oklahoma THE ISSUE Entitlement to a waiver of recovery of an overpayment of educational assistance benefits in the calculated amount of $677.70. ATTORNEY FOR THE BOARD Ann-Monique Clark, Associate Counsel INTRODUCTION The veteran had active service from December 1996 until December 2000. This matter comes before the Board of Veterans' Appeals (BVA or Board) from a decision of the Committee on Waivers and Compromises of the Department of Veterans Affairs (VA), Regional Office (RO) in Muskogee, Oklahoma. FINDINGS OF FACT 1. The veteran was awarded benefits for education assistance at a full-time rate for enrollment for the period of January 10, 2005 to March 31, 2005. 2. The veteran's educational institution reported a reduction from 14 to 11 semester hours, effective March 29, 2005. 3. The charged indebtedness in the amount of $677.70 was validly created. 4. The veteran is liable for the overpayment debt. 5. The overpayment was not the result of fraud, misrepresentation or bad faith on part of the veteran. 6. The record does not reflect that repayment of the debt would deprive the veteran of the basic necessities of life, or otherwise defeat the purpose of the VA education program. CONCLUSION OF LAW 1. The debt created by overpayment of educational assistance benefits in the amount of $677.70 is valid. 38 U.S.C.A. §§ 3002, 3011 (West 2002); 38 C.F.R. §§ 21.7020, 21.7070, 21.7144 (2007). 2. The overpayment of VA education benefits in the amount of $677.70 was not the result of fraud, misrepresentation or bad faith on part of the veteran; and it would not be against the principles of equity and good conscience to recover the amount of the overpayment. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.963, 1.965 (2007). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The veteran is claiming entitlement to waiver of overpayment of education benefits. In the present case, the veteran has not contested the validity of the debt, and as such, this is not an issue for consideration in the present appeal. Rather, the sole question in this adjudication is whether the veteran should be granted a waiver of overpayment as to such debt. Recovery of overpayment of any benefits made under laws administered by VA shall be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver. 38 U.S.C.A. § 5302(c) (West 2002); 38 C.F.R. § 1.963(a). "Bad faith" is defined in VA regulations as "unfair or deceptive dealing by one who seeks to gain thereby at another's expense. Thus, a debtor's conduct in connection with a debt arising from participation in a VA benefits/services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government." 38 C.F.R. § 1.965(b). The phrase "bad faith" is also defined in the Veterans Benefits Administration (VBA) CIRCULAR 20-90-5, dated February 12, 1990, as a willful intention on the part of the claimant to seek an unfair advantage or to neglect or refuse to fulfill some duty or contractual obligation." However, a recent decision of the Court has invalidated the use of the above-cited phrase as an appropriate basis for a bad faith determination. See Richards v. Brown, 9 Vet. App. 255 (1996). In Richards, the Court found that the operative language in 38 C.F.R. § 1.965(b)(2) limits bad faith to cases in which there is an intent to seek an unfair advantage. Thus, the Court held that the use of the phrase neglect or refuse to fulfill some duty or contractual obligation found in the circular was inconsistent with the regulation and cannot be an appropriate basis for a bad faith determination. In the present case, the Board does not find any fraud, misrepresentation, or bad faith on the part of the veteran. Indeed, the veteran's failure to report all class changes and promptly return funds not due to her are not found to constitute an intent to seek an unfair advantage, as would be required for a finding of bad faith. As explained by the veteran in a statement dated in April 2005, she dropped the class in question because she was "not doing satisfactorily in the class and in return it would bring my grade point average down." The Board will resolve doubt in the veteran's favor and find that there was no bad faith in the present case. See 38 U.S.C.A. § 5107(b); Gilbert v. Derwinski, 1 Vet. App. 49, 54-56 (1990). There is also no showing of overt fraud or misrepresentation. In cases such as this, where there is no indication of fraud, misrepresentation, or bad faith in the record, the indebtedness shall be waived if the recovery of the overpayment would be against equity and good conscience. 38 U.S.C.A. § 5301(a); 38 C.F.R. §§ 1.962, 1.965 (2005). Consideration of equity and good conscience is intended to reach a result that is not unduly favorable or adverse to either the claimant or the Government. It is intended to achieve a result that is fair. 38 C.F.R. § 1.965(a) (2005). Six non-exclusive elements are set forth in the regulations that must be addressed to determine whether the facts and circumstances in a particular case dictate that collection of an overpayment would be against equity and good conscience. The following six elements, which are not intended to be all inclusive consist of: (1) the fault of the debtor; (2) balancing of faults between the debtor and VA; (3) undue hardship of collection on the debtor; (4) a defeat of the purpose of an existing benefit to the veteran; (5) the unjust enrichment of the veteran; and (6) whether the veteran changed positions to his/her detriment in reliance upon a granted VA benefit. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.965(a). Each of the six elements must be addressed. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). Again, the first two "equity and good conscience" elements for consideration under 38 C.F.R. § 1.965(a) are the fault of the debtor, and balancing the fault of the debtor and VA. Prior to the May 2005 VA letter informing her that her education benefits would be reduced, the veteran had received notification from VA informing her that a reduction in course work would result in a reduction of benefits. These letters were issued to the veteran in March 2001, September 2001, and May 2002. Because the veteran was repeatedly informed that a reduction in course work may result in a reduction of the education benefit, the failure to return the amount of the overpayment lies solely with the veteran. Indeed, no fault on the part of VA has been identified here. In sum, the veteran was at fault for not timely notifying VA of her reduction in course load. No corresponding fault on the part of VA has been persuasively demonstrated. Thus, considerations of fault fail to support the veteran's request for a waiver of overpayment. Regarding the element of undue financial hardship, the Board has considered whether collection of the indebtedness would deprive the debtor or her family of the basic necessities. In this regard, a Financial Status Report dated in June 2005 shows that the veteran has more expenditures than income. However, the excess expenses appear to consist of consumer debt, rather than basic necessities. Given the veteran's age and income potential, collection of the debt would not deprive the veteran of the basic necessities. The Board emphasizes that after taking care of basic necessities such as shelter and food, the veteran is expected to accord a debt to VA the same regard given to any other debt. It has not been shown that repayment of the Government debt in monthly installments would deprive the veteran or her family the basic necessities of life in this case. The fourth element to be addressed is whether recovery of the overpayment would defeat the purpose for which the benefits were intended. Such has not been demonstrated here. The purpose of the award of education benefits was to pay for educational related expenses associated with course work. Once the veteran reduced her course work, such payments were supposed to be reduced at that time. Thus, recovery of the overpayment would not be self-defeating but would rather affirm the intended purpose of the education award as understood by all parties involved. The fifth element to be considered is "unjust enrichment," which means that failure to make restitution would result in unfair gain. It stands to reason, that, since repayment of the debt would not result in undue hardship, a waiver of the indebtedness here would result in unfair gain. The veteran received monies to which she was not entitled, and in fairness such monies should be remitted where the financial resources are available to do so, as here. The sixth element to be considered is whether reliance on VA benefits resulted in the veteran relinquishing a valuable right or incurring a legal obligation. The veteran claimed in a May 2005 letter that paying back the extra funds was unfair. However, she has not claimed that she relinquished any right or incurred any legal obligation or that she relied upon VA to her detriment, nor do the facts show such. Thus, this sixth element does not support the veteran's request for a waiver of overpayment. The record does not demonstrate any additional factors which should be considered in adjudicating the veteran's claim for a waiver of the indebtedness, and she has identified no other such factors. In conclusion, the veteran's debt owed to VA is valid. As the evidence does not show fraud, misrepresentation, or bad faith, she is not precluded from a waiver of overpayment of such indebtedness. However, with the balancing of fault between the VA and debtor, the evidence does not demonstrate that repayment in this case would run counter to principles of equity and good conscience. As such, the Board finds that no waiver is appropriate. As the preponderance of the evidence is against the claim, the benefit of the doubt rule is not applicable. See 38 U.S.C.A. § 5107(b); Gilbert v. Derwinski, 1 Vet. App. 49, 54-56 (1990). Finally, the Veterans Claims Assistance Act of 2000 (VCAA) describes VA's duty to notify and assist claimants in substantiating a claim for VA benefits. 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5107, 5126 (West 2002 & Supp. 2005); 38 C.F.R. §§ 3.102, 3.156(a), 3.159 and 3.326(a) (2005). In the present case, the only claim on appeal is that of entitlement to a waiver of overpayment of education. In this regard, the United States Court of Appeals for Veterans Claims held that the VCAA, with its expanded duties, is not applicable to cases involving the waiver of recovery of overpayment claims, pointing out that the statute at issue in such cases was not found in Title 38, United States Code, Chapter 51 (i.e. the laws changed by VCAA). Cf. Barger v. Principi, 16 Vet. App. 132 (2002). Therefore, the VCAA (and, it follows, its implementing regulations) is not for application in this matter. In any event, the Board points out that the RO, in the July 2005 decision on waiver indebtedness, in an accompanying letter and in a subsequent statement of the case issued in November 2005 has explained to the veteran the bases for denial of the claim, and afforded her the opportunity to present information and evidence in support of the claim. The Board finds that these actions satisfy any duties to notify and assist owed to the veteran. ORDER Waiver of recovery of an overpayment of educational assistance benefits in the calculated amount of $677.70 is denied. ____________________________________________ ERIC S. LEBOFF Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs