The Debt Collection Improvement Act
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
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.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
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.
Clients personally guaranteed SBA 7(a) loan balance of over $300,000. Clients also pledged their homes as additional collateral. SBA OIC accepted $87,000 with the full lien release against the home.
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