Learn how a Cross-Servicing Dispute can help businesses challenge the transfer of their debt to the Treasury, potentially eliminating hefty collection fees and returning the debt to a more favorable agency.
Book a Consultation CallCross-Servicing is a government-wide program managed by the Treasury's Bureau of Fiscal Service (BFS), designed to collect delinquent non-tax debts on behalf of federal agencies. This program fulfills the requirements set out in the Debt Collection Improvement Act of 1996 (DCIA). Under the DCIA, any eligible debt that remains delinquent for more than 180 days must be referred to BFS for cross-servicing.
However, when debts are transferred to the Treasury, personal guarantors often face severe consequences, including steep collection fees. If you have a defaulted SBA loan or another federal debt that has been transferred to Treasury, disputing this transfer could save you from the significant financial burden imposed by the Treasury. This process, known as a Cross-Servicing Dispute, may be your best avenue to reduce fees and work with more favorable terms.
As part of the Cross-Servicing program, the Treasury’s BFS is responsible for taking appropriate actions to collect, compromise, or suspend debt collection, or in some cases, terminate collection efforts. While agencies are encouraged to use available tools to collect debts before the 180-day mark, once the debt is referred, it becomes more difficult to negotiate or compromise, especially since Treasury adds a significant collection fee, ranging from 28% to 30% of the debt amount.
Moreover, the Digital Accountability and Transparency Act (DATA Act) shortened the window for federal agencies to notify the Treasury of past-due debts from 180 days to 120 days, accelerating the process.
A Cross-Servicing Dispute provides an opportunity to challenge the transfer of your debt to the Treasury. In most cases, the Treasury is reluctant to compromise on debts, making it essential to return the debt to the originating agency, such as the SBA. Successfully disputing the debt transfer can provide two key benefits:
To initiate a Cross-Servicing Dispute, you must present evidence, facts, and legal arguments that demonstrate the debt should not have been transferred to the Treasury in the first place. Common grounds for dispute include:
To transfer a federal agency debt (such as a defaulted SBA loan) to the Treasury, the originating agency (e.g., SBA) must certify in writing that the debt is valid and legally enforceable. They must also confirm that all legal prerequisites to collection have been met. If these certifications were incorrect or improperly completed, they can serve as a basis for your dispute.
The first step in disputing your debt is to obtain a copy of the Annual Debt Certification Agreement between the federal agency and the Treasury. This document outlines the conditions for debt transfer and often contains provisions that can be challenged. A successful dispute typically requires an in-depth investigation into whether the debt was legally valid, whether proper procedures were followed, and whether any errors occurred during the transfer process.
If you're considering filing a Cross-Servicing Dispute, it is highly recommended that you seek legal assistance. The process involves gathering evidence, analyzing legal documents, and presenting formal arguments to federal agencies. Attempting to handle this on your own can result in missed opportunities to present the strongest case.
Disputing a debt transferred to Treasury requires expertise in federal debt collection laws and administrative procedures. At Protect Law Group, our attorneys have years of experience in SBA loan workouts, debt resolution, and Cross-Servicing Disputes. We will help:
We understand what evidence to look for, how to build a strong case, and how to navigate the complex bureaucratic system to maximize your chances of success.
If your debt has been transferred to the Treasury's Bureau of Fiscal Service, don't wait until the situation worsens. A Cross-Servicing Dispute could help you avoid excessive collection fees and return your debt to a more manageable agency. Contact Protect Law Group today to schedule a consultation with one of our experienced attorneys.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
.jpg)
