Dealing with an SBA OIC case can be hard on anyone. This is why you should allow one of our lawyers to settle SBA debt on your behalf. Talk to us about your SBA loan default situation.
Book a Consultation CallThe Small Business Administration's Office of Inspector General have issued several reports criticizing SBA oversight of banks and lenders and calling for tighter controls on their activities. These reports come as the OIG is aggressively working with the Department of Justice and US Attorney’s Office to pursue civil and criminal cases against lenders, their employees, and their brokers. In the past, SBA OIG referrals have resulted in 96 indictments, 71 convictions, and $25 million in recoveries and fines
In its most recent report, the OIG identified deficiencies "so egregious" that it called for a full denial of the SBA loan guarantee on six loans originated by six different lenders. The "material lender noncompliance" alleged by the OIG included inadequate evidence of equity injection, inadequate evidence of IRS tax verifications, inadequate appraisals, and failure to disclose environmentally contaminated property – all of which occurred during the loan origination process. Because of these errors, the OIG called on the SBA to seek recovery of the full guarantee amount plus interest, despite the fact that the SBA conducted two comprehensive reviews of these loans before charging off their outstanding balances. The SBA is seeking responses from the cited lenders, but has noted that three of the repurchases occurred over six years ago, meaning that the statute of limitations may bar SBA recovery.
The OIG report follows two other audits criticizing SBA oversight of five other lenders:
In other audits, the OIG has claimed that the SBA failed to address performance and compliance issues or protect government funds once deficiencies were identified, and called on the SBA to develop guidelines under which it will suspend or revoke a lender's status in the Preferred Lender Program. The OIG also argued that the SBA has made tens of millions of dollars in erroneous payments to lenders that did not provide the information necessary to prove that they had originated and serviced loans in compliance with SBA regulations
Legal Developments: Potential Adverse Consequences for Failure to Identify and Correct Risks Common to SBA Lending
In this climate of enhanced oversight, there is a wide variety of administrative, civil and criminal tools available to the government for pursuing claims against lenders, their employees and their brokers for allegedly improper lending practices:
These legal risks are particularly profound for lenders participating in the SBA's Preferred Lenders Program, under which the SBA delegates loan decisions regarding eligibility to the lender. The vast majority of credit determinations are left to PLP lenders, and the SBA conducts only a cursory review of a limited set of documents before approving the loan guarantee. After its payment of a guarantee on a defaulted loan, the SBA then conducts a full-fledged review of the lender's loan documents to determine whether deficiencies in underwriting, closing, or servicing contributed to the failure of loan.
What Can SBA Borrowers and Personal Guarantors Do?
If you have been deemed responsible for an SBA debt – either as a direct Borrower, Obligor and/or Personal Guarantor, you need to hire qualified counsel and practitioners who can review your case, including your original loan documents, payments, performance, etc. to find out if any regulatory deficiencies or fraud may exist.
Some of these potential issues are frequently discovered in post-SBA guarantee payment forensic audits by the Government. However, the main problem for SBA debtors is that several years have already passed before the Government could even consider conducting an audit of the loan portfolios where SBA guarantees were paid out to the lenders and banks that transacted the original loan. In the meantime, debtors who have been held liable on the SBA debt (either because of the original personal guarantee signed during the origination of the SBA loan) have been forced to pay the Government back – when, if they would have been more proactive in resolving this liability – could have avoided the situation by pointing out the regulatory mishaps and fraud by the respective lenders and bank – and petition the Government to seek recovery of the SBA Guaranty monies that had been paid out to the culpable parties.
We can help by conducting a comprehensive SBA loan audit to determine if any regulatory deficiencies, fraud or other SOP violations may have occurred. Once the investigation and audit has been performed and we are able to find regulatory mishaps, we would then petition the SBA or the DOT (whichever federal agency has the debt) to terminate any and all collection action against you based on the findings.
The goal, if possible, would be to resolve the SBA loan default by showing that the SBA debt against you should not be "legally enforceable" and that the Government should seek recovery from the offending lender or bank that originated the loan and fraudulently convinced the Government to honor or purchase the SBA Guaranty or Debenture.
Needless to say, this is a viable option in defending against SBA debts, Treasury Dept. collection action or DOJ collateral liquidation and/or litigation.
If you are struggling with circumstances that involve SBA loan default or Treasury collection, you deserve professional help! Our attorneys know how to win SBA & DOT cases. If you contact us, we will help you settle SBA debt once and for all.
After you schedule an appointment, you confer with a dedicated SBA Workout Attorney & DOT Practitioner who can help you through your administrative legal battle. After your claim is resolved, you never again have to worry about your SBA loan default problem haunting you. Our team of lawyers has assisted many clients through the years. Now it is your turn!You truly cansettle SBA debt for good!
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.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
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.
The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.