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.
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.
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.
Our firm successfully resolved an SBA COVID-19 Economic Injury Disaster Loan (EIDL) in the original amount of $150,000 for a Florida-based borrower. The loan, issued on June 4, 2020, was secured by business assets and potential personal liability through the SBA's Security Agreement.
Following the permanent closure of the business, we guided the client through the SBA’s Business Closure Review process and prepared a comprehensive collateral analysis. We negotiated directly with the SBA, obtaining a full release of the business collateral for $2,910 — satisfying the borrower’s obligations under the Security Agreement and eliminating any further enforcement risk against the pledged assets.
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