Often the company I work for receives calls from potential clients who hold SBA-backed debt and are being sent collection notices from the US Treasury. This means they have either been unable or unwilling to resolve their debt issue with either the direct lender, or the Birmingham office of the SBA. Birmingham handles the loan for 60 days while Treasury is preparing to take over collections. The Debt Collection Improvement Act of 1996 (DCIA) centralized the government wide collection of delinquent debt and gave the Treasury significant new responsibilities in this area. The Financial Management Service (FMS) is responsible for Treasury's implementation of the debt collection provisions of the DCIA. This means if you are dealing with a federally backed loan and have not paid it, you will eventually be hearing from the Treasury. Guarantors who end up receiving communication from the Treasury are often misled, either by the limited research they have personally handled, or by ineffective professional representation. Many times these guarantors ignore the collection attempts of their lender. In many cases the guarantor is simply too afraid to deal with the situation and will attempt to avoid communication, hoping to dismiss the situation. They equate the lender with a bully who will target someone else if it fails to get a response from the intended victim. No matter the path a guarantor has taken to get to the point they are being collected on by the Treasury, they need to know what can and will happen. The collection practices of the Treasury are more powerful than what is used at the lender level. There are two major differences I will discuss. The "Treasury Offset Program" (TOP), and the ability of the Treasury to ignore many state protections. Initially established under the DCIA, the TOP compares the names and taxpayer identifying numbers (TINs) of debtors and guarantors with the names and TINs of recipients of federal payments. If there is a match, the federal payment is reduced, or "offset," to satisfy the overdue debt. The DCIA requires federal agencies to refer delinquent non-tax debts to FMS for purposes of collection by offset of non-tax payments. Non-tax payments include, but are not limited to: vendor, federal retirement, federal salary, and Social Security benefits. Many people attempt to rely on protections at the state level to protect them from enforced collections. Protections such as state IRA and wage garnishment exemptions are not applicable when dealing with the Treasury. The statute that describes what type of debt is subject to administrative wage garnishment, and how can SBA administratively garnish your pay is 13cfr140.00. Cornell University also published an article on their Legal Information Institute (LII) in, translating the legal jargon into a more readable form for the general public. You can find it here: Cornell (LII). Number (2) states, "This section applies despite any State law." The ability to ignore state protections is not limited to TOP and wage garnishment practices, but they are excellent examples of what to be careful of. I hope this helps guarantors realize they need to communicate and handle a defaulted loan unemotionally. Use the information provided by this website and experts who focus specifically on these types of situations. Dealing directly with these problems with a business solution will always yield better results than listening to a general councilor’s guesswork, or running away, and realizing far too late you made the wrong decision. Adam Gleason Strategy Specialist Second Wind Consultants