Understanding Cross-Servicing and Treasury Disputes: Navigating SBA Treasury Challenges

If you're a small business owner or guarantor facing a cross-servicing dispute with the SBA and the Treasury, you're not alone. The process can be complex, but with the right guidance, you can navigate these waters effectively. This article will explore what cross-servicing entails, how disputes with the Treasury arise, and the steps you can take to protect your interests.

What is Cross-Servicing?

Cross-servicing refers to the process by which the U.S. Treasury Department takes over the collection of delinquent debts from federal agencies, including the Small Business Administration (SBA). This occurs when a borrower defaults on their SBA loan and the debt is not resolved within the initial collection efforts of the SBA.

  • Why it Matters: Once a debt is transferred to the Treasury for cross-servicing, additional collection tools become available, such as wage garnishment and tax refund offset. Understanding this process is crucial to safeguarding your assets.

How Treasury Cross-Servicing Works

Once your debt is transferred to the Treasury, the cross-servicing process begins. Here's a breakdown of what you can expect:

  1. Debt Referral: If you're unable to resolve your SBA debt, it's referred to the Treasury for collection. This typically happens after the SBA has exhausted its collection efforts over a period of 180 days.
  2. Debt Collection Tools: The Treasury can employ various tools to collect the debt, including:
    • Administrative wage garnishment
    • Federal tax refund offset
    • Administrative offset (withholding payments from other federal sources)
  3. Collection Fees: It's important to note that once your debt is with the Treasury, collection fees of up to 32% can be added to your balance. This makes resolving the debt promptly even more critical.

Common Disputes in Treasury Cross-Servicing

Cross-servicing disputes can arise due to various reasons. Understanding these can help you prepare and strategize effectively.

Dispute Over Debt Validity

You may dispute the validity of the debt itself. This can occur if you believe there has been an error in the amount owed or if the debt has been resolved but not accurately reflected in the records.

  • Action Step: Gather all relevant documentation, such as payment receipts or correspondence with the SBA, to support your claim.

Dispute Over Collection Methods

You might find the Treasury's collection methods to be overly aggressive or incorrect, such as an unwarranted wage garnishment or tax refund offset.

  • Action Step: Request a hearing or review of the collection actions taken. It's your right to dispute these methods if they're not in compliance with the Federal Claims Collection Standards.

Dispute Over Personal Guarantees

In some cases, disputes arise over personal guarantees. If you're a guarantor, you may argue against the enforcement of a personal guarantee due to procedural errors or other factors.

  • Action Step: Review the terms of your guarantee and consult with a legal expert to assess the enforceability under your specific circumstances.

Navigating the SBA Treasury Dispute Process

Dealing with a cross-servicing dispute requires a strategic approach. Here are steps you can take to effectively manage the situation:

Step 1: Review and Understand Your Notice

Upon receiving a notice from the Treasury, read it carefully. This notice will outline the amount owed, the collection actions being taken, and your rights to dispute or appeal.

  • Key Point: Time is critical. You often have a limited period, such as the 60-day window, to respond or dispute the claims.

Step 2: Gather Documentation

Compile all relevant documents related to your SBA loan, including:

  • Loan agreements
  • Payment records
  • Correspondence with the SBA
  • Any previous dispute resolutions

These documents will be crucial in substantiating your claims during a dispute.

Step 3: Explore Your Options

You have several options when dealing with a Treasury dispute:

  • Negotiate a Settlement: You may be able to negotiate a reduced balance or a payment plan.
  • Request a Review: You can request a review of the debt or the collection actions taken.
  • Seek Legal Guidance: Consult with an attorney who specializes in SBA debt to explore your legal options.

Step 4: Communicate with the Treasury

Engage proactively with the Treasury's Financial Management Service (FMS) to discuss your case. Clear and timely communication can prevent further escalation and facilitate a resolution.

Step 5: Protect Your Assets

While resolving the dispute, take steps to safeguard your personal and business assets. This might involve restructuring your finances or seeking legal protection against unwarranted collection actions.

Legal Framework: Relevant Laws and Regulations

Understanding the legal framework governing SBA and Treasury collections can bolster your position in a dispute.

  • Debt Collection Improvement Act: This act outlines the procedures for federal debt collection, including Treasury's role in cross-servicing.
  • Federal Claims Collection Standards: These standards dictate the methods federal agencies must follow in collecting debts, ensuring fair and lawful practices.

Conclusion: Taking Action

Facing a cross-servicing dispute with the Treasury can be daunting, but you have options. By understanding the process, gathering documentation, and exploring your available alternatives, you can take strategic steps to resolve your SBA debt.

Next Steps:

  • Schedule a Consultation to discuss your situation and explore your options.
  • Call 888-756-9969 to speak with an expert who can provide guidance and representation.

Remember, while the challenge is significant, it's not insurmountable. With proactive measures and the right support, you can navigate your SBA Treasury dispute effectively.

‍This article is provided for informational purposes only and does not constitute legal advice. Consult a qualified SBA-Attorney for advice regarding your individual situation.