For Your Business: Should You Consider Small Loans from the SBA?
The SBA can help advance such entrepreneurs small loans to give their firms a chance at thriving again. But you will have to sign a personal guarantee.
The transcript of the video follows below for further review.
If you have an SBA loan default that has been referred to the Department of Treasury for collection, you may have been contacted by a private collection agency (PCA): Pioneer Credit Recovery, CBE Group, Performant or Conserve. A recent case addressed a collection letter sent by Pioneer to an alleged debtor. Pioneer brought a motion to dismiss the case.
The complaint alleged that on April 1, 2016, Pioneer sent a letter ("the Letter") to the plaintiff, Biber and others, which was captioned in bold, capitalized letters, "Administrative Wage Garnishment Proceedings Notice." It further said:
"This may be your last opportunity to make satisfactory payment arrangements on your student loan(s)";
"If these arrangements are not made, we will begin or continue the process of verifying your employment for Administrative Wage Garnishment";
"The United States Congress has enacted a law . . . that allows guarantors . . . to offset the wages of student loan defaulters without filing a lawsuit";
"[A] guaranty agency . . . may garnish the disposable pay of an individual to collect the amount owed by the individual, if he or she is not currently making required repayment . . . [T]he amount deducted for any pay period may not exceed 15 percent of disposable pay";
"This [statutory] provision [*3] overrides all applicable state law, and allows for the garnishment of student loan defaulter's wages";
"Before an administrative order is issued, defaulters are given notice and an opportunity for a hearing as part of this federal wage offset program";
"After the completion of this administrative offset process, your employer may be ordered to deduct 15% of your disposable income before you are paid. If your employer does not comply with this order, a lawsuit may be filed against your employer";
"Because the use of this federal wage offset law could reduce your take-home pay substantially, we are providing you with the chance to establish a satisfactory payment arrangement so you can voluntarily satisfy your obligation on more reasonable terms. We are hoping we can reach a satisfactory agreement before we proceed with further action.”
The Court ruled that Biber's claim that Pioneer "falsely represent[ed] that [defendant] was going to perform an Administrative Wage Garnishment" stated a claim upon which relief may be granted. The Court applied the "least sophisticated consumer" lens, the Letter plausibly comprised a materially false, deceptive, or misleading representation that could "reasonably be read to have to or more meanings, one of which is inaccurate." The Court further noted that Biber alleged sufficient facts to move his claim--that the Letter misrepresented that wage garnishment proceedings were imminent--from possible to plausible. Moreover, the complaint plausibly alleged that misrepresentation could have "affect[ed] [the] consumer's ability to make intelligent decisions with respect to the alleged debt."
If you have been contacted by a PCA like Pioneer Credit Recovery, regarding a SBA loan default, contact Protect Law Group today online or at 888-756-9969 for a FREE initial consultation.
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.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
Our firm successfully resolved an SBA COVID-19 Economic Injury Disaster Loan (EIDL) default in the amount of $150,000 on behalf of Illinois-based client. After the business permanently closed due to the economic impacts of the pandemic, the owners faced potential personal liability if the business collateral was not liquidated properly under the SBA Security Agreement.
We guided the client through the SBA’s Business Closure Review process, prepared a comprehensive financial submission, and negotiated directly with the SBA to release the collateral securing the loan. The borrower satisfied their collateral obligations with a payment of $2,075, resolving the SBA’s security interest.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
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