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Eligible Loans and Debts in the Complete COVID Collections Act

Explore the Complete COVID Collections Act's impact on pandemic-era loan collections, focusing on small businesses, transparency, and economic recovery efforts.

Have you ever considered how the Complete COVID Collections Act is shaping the landscape of loan and debt repayment for small businesses affected by the pandemic? This question is at the forefront of many business owners' and legal professionals’ minds as they navigate the complexities of post-pandemic financial obligations. The Complete COVID Collections Act serves as a keystone in ensuring that collections on specific loans continue unabated, thereby influencing both the macroeconomic stability and individual business recovery. As we delve into this legislation, it is crucial to dissect its provisions, the roles of different government agencies, and the legislative intent behind its enactment.

Eligible Loans and Debts in the Complete COVID Collections Act
The Provisions of the Complete COVID Collections Act

The Provisions of the Complete COVID Collections Act

The Complete COVID Collections Act offers a structured approach to managing loan collections related to pandemic relief efforts, with specific emphasis on small businesses.

Loan Collection During COVID-19

The Act explicitly prohibits the suspension of collections on specific loans guaranteed under particular provisions of the Small Business Act. This is especially pertinent for loans disbursed during the COVID-19 pandemic. The rationale behind this is to ensure continued economic stability and the return of funds into the federal system, which were initially provided as a relief measure to businesses attempting to survive the unprecedented economic challenges posed by the pandemic.

Referral of Claims

For loans under $100,000, the Act necessitates that the Small Business Administration (SBA) refers these claims to the Department of the Treasury for collection action. This provision is intended to streamline the debt recovery process and ensures that even smaller loans, which cumulatively represent a significant financial outlay, are systematically addressed. The aim is to aid in the efficient collection of debts without overwhelming small businesses with unsustainable repayment demands.

Monthly Updates

A dynamic component of the Act is the monthly briefings that the SBA Administrator must provide to Congress. These updates are critical in maintaining transparency and accountability, ensuring that Congress is continually informed of the progress in loan collections and related activities. This element of oversight is vital in adapting legislative measures to evolving financial realities.

Fraud Enforcement

The Act establishes a 10-year limitation for initiating criminal or civil actions related to fraudulent activities concerning loans or grants allocated under COVID-19 relief programs. This long-term horizon for legal recourse indicates a robust approach to deterring and addressing fraud, thereby protecting the integrity of public funds allocated for pandemic relief.

Data Transparency

Transparency is further enhanced by requiring the Pandemic Response Accountability Committee to maintain real-time data on funds recovered by the Federal government. This provision facilitates better public access to data, enabling independent assessments of recovery efforts and ensuring that governmental actions remain open to scrutiny.

Key Definitions in the Act

Understanding the terminology used within the Act is crucial for comprehending its application and implications.

Covered Loan

The term "Covered Loan" includes any loans guaranteed under specific sections of the Small Business Act and those concerning COVID-19 economic injury. Such loans were initiated to help businesses weather the economic downturn caused by the pandemic and are now a focus area for collection efforts under the Act.

Covered Programs

Covered Programs refer to the various loan and grant initiatives established under COVID-19 relief legislation, including high-profile initiatives like the Paycheck Protection Program and grants to support shuttered venues and restaurants. The precise coverage means that the Act specifically targets programs designed to aid sectors hit hardest by the pandemic, aligning repayment efforts with the initial scope of these programs.

Oversight and Reporting

Effective oversight and transparent reporting mechanisms are pivotal to the implementation of the Complete COVID Collections Act.

Inspections and Reports

The Act enables improved coordination between the SBA and the Inspector General, focusing on accurate reporting and oversight of COVID-19 relief programs. This collaboration ensures that discrepancies or inefficiencies in the reporting process are quickly identified and remedied to uphold the integrity of loan collection operations.

Monthly Reports from Attorney General

The Attorney General is required to report monthly to Congress on prosecutorial actions pertaining to the covered programs. These reports include metrics on enforcement actions, providing Congress with a regular overview of legal efforts to resolve fraudulent or non-compliant loan activities, ensuring that justice and preventive measures are aligned with the Act’s goals.

Legislative Intent

At the core of the Complete COVID Collections Act lies a clear legislative intent to maintain financial accountability.

Supporting Small Business Stability

The primary goal is to ensure that loans issued during the pandemic to support small businesses are effectively collected. By doing so, the Act contributes to a stable COVID-19 recovery framework, recognizing the intertwined nature of small businesses' health and broader economic recovery.

Enhancing Financial Accountability

The focus on maintaining strict collection protocols reflects a commitment to safeguarding public resources. The anticipation is that, by instigating diligent recovery measures, public funds disbursed rapidly during the pandemic are returned in a manner that secures future governmental financial interventions.

Fostering Transparency and Trust

Through comprehensive data transparency and systematic reporting, the Act fosters an environment of trust and accountability. Stakeholders, ranging from policymakers to the general public, can gain confidence that the funds intended to support pandemic recovery are being managed with due diligence and responsibility.

Conclusion: Navigating the Complete COVID Collections Act

Understanding the intricacies of the Complete COVID Collections Act is an essential task for those navigating the post-pandemic financial landscape. Whether you are a small business owner facing loan collections or a legal professional assisting in these matters, the Act provides a framework bound by transparency, accountability, and diligent resource management. Each provision, from loan collection stipulations to the enforcement of fraud penalties, is designed to strengthen the economic resurgence of businesses nationwide, ensuring that pandemic relief serves its intended purpose without compromising future fiscal resilience.

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA.  Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice.  Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt.  After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.

The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.

Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.

$337,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

$337,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

Clients personally guaranteed an SBA 504 loan balance of $337,000.  The Third Party Lender had obtained a Judgment against the clients.  We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.

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