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Purpose and Goals of the Complete COVID Collections Act

Discover how the Complete COVID Collections Act ensures financial accountability post-pandemic by enforcing loan collections, fraud prevention, and data transparency.

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Have you ever wondered how legislative measures are designed to protect the financial framework during unprecedented times, particularly the ones impacted by a global pandemic like COVID-19? In examining the "Complete COVID Collections Act," we aim to uncover its purpose and how its numerous provisions serve the overarching goal of maintaining financial accountability in the wake of COVID-19 repercussions.

Purpose of the Complete COVID Collections Act

The Complete COVID Collections Act was established to address specific challenges related to the collection of debts accrued as a result of federal loans provided to small businesses during the COVID-19 pandemic. The backdrop of this legislative action is rooted in the need to support both the economic recovery and the financial system by ensuring that the government's credit facilities are administered effectively and that there is a mechanism for accountability.

Importance of Debt Collection During COVID-19

At the height of the pandemic, an array of relief programs was rolled out to sustain small businesses affected by unforeseen economic shutdowns. However, these initial measures of relief posed new challenges once the immediate crisis subsided, primarily concerning how these debts would be collected. The Act mandates that loan collections are persistently pursued, ensuring that the intrinsic financial mechanisms remain intact despite the leniencies allowed during the pandemic.

Provisions of the Act

The fundamental objective of the Complete COVID Collections Act is encapsulated in several essential provisions. Each provision is designed to address critical areas of debt collection and regulation enforcement, thereby ensuring a streamlined process of accountability.

Importance of Debt Collection During COVID-19
Importance of Debt Collection During COVID-19

Loan Collection and Suspension

One of the cornerstone aspects of this Act is its prohibition against the suspension of loan collections on guaranteed loans under specific provisions of the Small Business Act. By preventing the indefinite suspension of these collections, the Act maintains a balance between offering relief and ensuring fiscal responsibility. This measure reassures stakeholders that pandemic-related financial disruptions do not engender long-term insolvency.

Referral of Claims

The Act mandates that claims regarding loans valued at under $100,000 be routed through the Small Business Administration (SBA) to the Department of the Treasury for efficient collection action. This strategic referral is designed to ensure that smaller-sized yet numerous claims do not overwhelm the system and are addressed with apt attention and resources.

Monthly Updates to Congress

To bolster transparency and keep legislative bodies informed, the Act requires the SBA Administrator to deliver monthly briefings to Congress. These updates are crucial in monitoring the progress of loan collections and ensuring that Congress remains fully apprised of related financial activities. This ongoing dialogue fosters accountability and enables swift legislative response if required.

Fraud Enforcement Provisions

Fraudulence presents a significant threat to any relief program, in that it undermines the integrity and effectiveness of the financial aid being distributed. The Complete COVID Collections Act addresses this issue head-on through specific fraud enforcement measures.

Establishment of a 10-Year Limit

The Act stipulates a 10-year window for the filing of both criminal and civil actions concerning fraud associated with any loan or grant provided under COVID-19 relief programs. This extended statute of limitations offers authorities an ample timeframe to investigate and prosecute instances of fraud, ensuring that fraudulent activities do not evade legal recourse due to time constraints.

Data Transparency

Transparency is pivotal in maintaining trust in any government-imposed financial support system. As such, the Act emphasizes the necessity for data transparency, particularly involving the Pandemic Response Accountability Committee.

Maintaining Real-Time Data

The requirement for real-time data maintenance by the Pandemic Response Accountability Committee is crucial. By having up-to-date information regarding funds recovered by the Federal government, stakeholders can reliably assess the efficacy of the collection efforts and trust in the accountability of these programs. This ongoing data transparency provides a platform for reassessing strategies and optimizing recovery operations if necessary.

Key Definitions

Understanding the Act’s implications requires specific terminology to be accurately defined. This section clarifies pivotal terms relevant to the Act.

Covered Loan

The term "Covered Loan" refers to loans guaranteed under specified sections of the Small Business Act, with additional inclusion of loans related to COVID-19 economic disruptions. The specificity of this definition ensures a targeted focus on the types of loans this Act aims to monitor and from which funds are to be recovered.

Covered Programs

"Covered Programs" include various loan and grant initiatives instituted under COVID-19 relief legislation. Among these initiatives are the Paycheck Protection Program (PPP) and grants awarded to shuttered venues and restaurants. Designating these programs helps clarify the breadth of the Act and assures businesses receiving such funds that oversight exists to mediate accountability.

Oversight and Reporting

Comprehensive oversight mechanisms are essential for validating the effectiveness and integrity of relief efforts. The Act places significant emphasis on strengthening oversight operations.

Inspections and Reports

To ensure accuracy and proper oversight of COVID-19 relief programs, the Act permits enhanced coordination between the SBA and the Inspector General. Through concerted inspections and detailed reports, the integrity of financial assistance programs is preserved, allowing for necessary adjustments to be implemented if inefficiencies or improprieties are identified.

Monthly Reports from the Attorney General

Complementing the efforts of the SBA and the Inspector General, the Attorney General holds responsibility for delivering monthly reports to Congress. These reports focus on activities related to prosecutions under covered programs, providing key metrics on enforcement actions. This additional oversight channel helps ensure that legal measures are actively enforced, and that any misuse of funds is prosecuted timely.

Legislative Intent

The genesis of the Act lies firmly within its legislative intent, outlining its role in safeguarding financial structures during economic re-establishments following the pandemic.

Ensuring Financial Accountability

The legislative intent behind the Complete COVID Collections Act is clear in its aim to uphold financial accountability. By enforcing the collection of loans extended to support small businesses, the Act directly contributes to stabilizing the COVID-19 recovery framework. This stability is crucial for resuming economic equilibrium and fostering trust across stakeholders by demonstrating a commitment to securing the public funds leveraged during the pandemic.

Supporting Economic Stability

Supporting economic stability remains a foundational aspiration of the Act. By ensuring efficient collection procedures and maintaining transparent operations, the Act aims to consolidate the government’s efforts in reinstating a stable economic environment. Recognizing its long-term vantage point, the Act's provisions afford the Federal government the tools needed to bring about sustainable economic recovery and resilience in future crises.

Conclusion

The Complete COVID Collections Act stands as a crucial legislative measure warranting the fiduciary responsibilities extended during the COVID-19 pandemic, covering everything from collection mechanisms to fraud enforcement and data transparency. In navigating such extraordinary times, the purpose and goals of this Act are critical to maintaining an accountable, transparent financial framework that supports ongoing economic recovery and stability. Understanding these complexities and their broader implications equips stakeholders with a clearer perspective on the indispensability of such measures amid global financial disruptions.

$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.

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.

We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.

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$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $750,000.  She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance.  The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance.  However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.

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