Ending Active Collections on Delinquent COVID-19 Economic Injury Disaster Loans
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The Small Business Administration's (SBA) Office of Inspector General (OIG) is issuing this management advisory to bring attention to concerns regarding SBA’s decision to end active collections on delinquent COVID-19 Economic Injury Disaster Loans (EIDL) with an outstanding balance of $100,000 or less.
First, SBA’s decision to cease collections risks violating the Debt Collection Improvement Act of 1996, which prohibits ending collections on fraudulent, false, or misrepresented claims, because SBA OIG and other oversight agencies are continuing to work on identifying COVID-19 EIDL fraud that may not have been identified by the agency. It is also unclear whether SBA plans to end active collections on loans for borrowers who received multiple COVID-19 EIDLs of $100,000 or less that, when combined, exceed $100,000.
Second, SBA based its decision to end active collections on a cost-benefit analysis that used a dissimilar loan program and a private-sector loan servicing model to estimate proceeds from collections and collection costs. The cost-benefit analysis did not include periodic comparisons of costs incurred and amounts collected as federal regulations require.
Finally, SBA does not appear to have fully evaluated its consultant’s recommendation to sell a portion of the COVID-19 EIDL portfolio to maximize the return to taxpayers.
SBA management agreed with recommendations 3, contingently agreed to recommendation 2 based on the outcome of recommendation 1, partially agreed with recommendations 1 and 4, and disagreed with recommendation 5.
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- Effective: | File size: 752KB | Download .pdf for / September 29, 2023