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This video touches upon certain topics concerning the Cross-Servicing of an SBA debt to the Treasury Department’s Bureau of Fiscal Service.
The transcript of the video follows below for further consumption and review.
“Cross-Servicing FAQ: How did my SBA debt get transferred from the SBA to the Treasury Department’s Bureau of Fiscal Service and why do I owe almost 28-30% more?
The President signed the Debt Collection Improvement Act of 1996 into law on April 26, 1996. It became effective immediately.
The DCIA (as amended by the DATA) requires agencies to transfer a debt or claim that has been delinquent 120 days or more to Treasury for collection, with the following exemptions:
The debt is in litigation, meaning that the debt has been referred to the Department of Justice, a complaint has been filed, or a notice of default has been issued.
The debt will be disposed of in an asset sales program within 1 year after becoming eligible for sale, or later than 1 year if consistent with an OMB/Treasury approved asset sales program. The debt is at a private collection agency for a period of time established by Treasury.
The debt has been referred to a Federal debt collection center designated by Treasury.
The debt will be collected by internal offset within 3 years of delinquency.
The Collection Process
The Bureau of Fiscal Service (BFS) has established standard processes for accepting and collecting debts. These processes are consistent with government-wide and Treasury requirements.
The standard collection process is as follows:
Demand Letter. BFS will send out a standard demand letter, on Treasury letterhead within 5 days after acceptance of an account. The demand letter gives the debtor 10 days to respond.
Phone Calls. BFS will begin making phone calls 10 days after the date of the demand letter, depending upon the amount of the debt.
Credit Bureau Reporting. This begins 60 days after a consumer debt is referred and 30 days after a commercial account. The reason for the delay is to ensure that a consumer debtor has the full 60 days from when the demand letter was mailed to make payment.
Offset. Twenty days after the date of the demand letter, the debt will be routed into the Treasury Offset Program. It may stay in the Treasury Offset Program until the time for collection by Offset expires (generally 10 years), or for a period of time specified by the creditor agency.
Collection Agencies. Thirty days (or fifteen days if no phone number for the debtor has been provided) after the date of the demand letter, the debt will be referred to a private collection agency (PCA). A debt may be referred to two PCAs, each PCA will service the debt for a period of 270 days. Treasury has a government-wide contract in place and all referrals will be made to the Treasury contractors. The PCAs will be paid on their collections only. The PCAs are evaluated, and based on their performance may receive monetary bonus’ or additional accounts.
Department of Justice. BFS may recommend, and upon agency concurrence refer debts to the Department of Justice (DOJ). BFS will prepare the Claims Collection Litigation Report (CCLR) and monitor case progress while at DOJ.
Until a debt is referred to a private collection agency, BFS is actively pursuing collection, including purchasing credit reports, skip tracing, and negotiating compromise or repayment plans. Compromise and repayment plans will be negotiated within the parameters set by the agency in the Agency Profile Form (APF).
Once a debt is returned from a PCA, and all collection efforts are completed, BFS may:
Recommend referral to the Department of Justice,
Recommend that the debt be written off;
Prepare IRS Form 1099-C on behalf of the creditor agency if so instructed in the agency profile;
Leave the debt in TOP for passive collection.
A federal creditor agency may recall a debt or adjust a debt amount at any time. However, the agency will owe the BFS fee on collections received on recalled debts after the Treasury demand letter has been sent. An agency should send recalls, with a reason for the recall, as well as adjustments, to the Debt Resolution Branch or process them on-line via FedDebt.
Fees are deducted from collections, with the agency receiving collections less fees. An agency may elect, in the Agency Profile Form to have BFS not add its fee; however, this does not affect whether BFS receives its fee, only whether BFS adds its fee to the amount of the referred debt. At the time a debt is referred, BFS adds a fee to the debt based on its age. Any debt that is delinquent by 2 years or more will be assessed a fee equal 30% of the total payment received. Debts less than 2-years delinquent will continue to be assessed a 28% fee of the total payment received. The Treasury Offset Program assesses a fee of $17 for each offset that is collected against payments issued by Federal government agencies. The Department of Justice will assess a fee equal to 3% of the collection amount on payments received after an account has been referred to DOJ for collection. BFS will assess an additional fee equal to 28% or 30% of the payment received, depending upon the age of the debt.
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We analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.”