When an EIDL loan enters Treasury Cross-Servicing, collection activity may continue through federal administrative processes such as tax refund offsets and Administrative Wage Garnishment. This guide explains what changes once a debt is referred for federal collection.
The COVID-19 Economic Injury Disaster Loan program provided emergency funding to businesses during the pandemic. As increasing numbers of delinquent loans move into Treasury Cross-Servicing, more borrowers are encountering federal administrative collection procedures for the first time.
When EIDL payments become delinquent, collection activity generally begins with notices and borrower outreach attempts. If the debt remains unresolved, the account may eventually be referred to the U.S. Department of the Treasury’s Bureau of the Fiscal Service for Cross-Servicing.
Unlike many private debts, federal non-tax debts may be collected through administrative processes authorized under federal law. Depending on the circumstances, collection activity may include Treasury Offset Program collections, Administrative Wage Garnishment, and the addition of collection fees once a debt enters Cross-Servicing.
“Once a delinquent account is referred for Cross-Servicing, collection activity transitions from SBA servicing into federal administrative collection procedures,” explains SBA & Federal Debt Advisory Services. “At that stage, borrowers may begin receiving notices connected to Treasury collection processes and administrative enforcement tools.”
Once a delinquent EIDL loan is referred for Cross-Servicing, collection activity may continue through federal administrative collection procedures managed by the Bureau of the Fiscal Service.
Some EIDL loans included personal guarantees, particularly larger loans issued during the pandemic. Borrowers reviewing Treasury notices may wish to carefully review their original loan documents and guarantee agreements to better understand how the loan was structured.
Depending on the circumstances, federal administrative collection activity may include Treasury Offset Program collections, Administrative Wage Garnishment, collection fees, and other authorized federal collection procedures.
Because loan structures and guarantee requirements may vary, borrowers often benefit from understanding exactly which notices they are receiving and which federal collection processes may apply to their situation.
Certain delinquent federal non-tax debts may be collected through Administrative Wage Garnishment. Depending on the circumstances, up to 15% of disposable pay may be withheld without first obtaining a court judgment.
Administrative Wage Garnishment generally begins after required notices and opportunities to request a hearing have been provided under federal administrative procedures.
Under the Treasury Offset Program, eligible federal payments, including federal tax refunds, may be applied toward delinquent federal debts referred for collection.
Certain federal benefit payments, including portions of Social Security benefits, may also be subject to offset limitations established under federal law. Supplemental Security Income (SSI) is generally exempt from Treasury Offset Program collection.
Once a debt enters Treasury Cross-Servicing, collection fees are generally added to the outstanding balance. These fees are currently 26% to 28%, depending on account status and collection circumstances.
Once delinquent EIDL loans are referred to the Bureau of the Fiscal Service for Cross-Servicing, collection activity may continue through federal administrative collection procedures. At that stage, Treasury systems and contracted private collection agencies may participate in collection activity on behalf of the federal government.
Borrowers may receive notices related to Administrative Wage Garnishment, Treasury Offset Program collections, payment arrangements, or requests connected to federal collection processing.
According to SBA & Federal Debt Advisory Services, understanding how Cross-Servicing works may help borrowers better interpret notices, timelines, and administrative collection procedures once a debt enters federal collection.
