SBA Referred Your EIDL Loan to Treasury: What It Means

The Referral Process

Under the Debt Collection Improvement Act, federal agencies are generally required to refer delinquent debts to the Bureau of the Fiscal Service for collection through the Treasury Offset Program. For EIDL loans, this means the SBA transfers collection authority to Treasury when a loan has been delinquent for a specified period. Once referred, Treasury can intercept federal payments including tax refunds, federal salary payments, and certain federal benefits.

The 60-Day Notice Requirement

Before referring a debt to TOP, the SBA must comply with the notice requirements of 31 CFR 285.2. This includes providing the borrower with written notice at least 60 days before the referral. The notice must inform the borrower of the amount of the debt, the right to inspect and copy agency records, the right to request a review of the debt, and the opportunity to enter into a repayment agreement. Failure to provide this notice is a procedural defect that can support a challenge to the referral.

Common Referral Defects

In practice, many EIDL referrals contain procedural defects. The SBA may have failed to send the required 60-day notice entirely, sent it to the wrong address, failed to include required information in the notice, or failed to provide the borrower with an opportunity to enter into a repayment arrangement as required by the Federal Claims Collection Standards. Each of these defects can form the basis of a challenge.

What to Do After a Referral

If your EIDL loan has been referred to Treasury, the first step is to obtain your full servicing file through a FOIA request to the SBA. This file will show whether the required notices were sent, when they were sent, and what they contained. With this information, an attorney can evaluate whether the referral was procedurally valid and develop the appropriate challenge strategy.