House Small Business Committee Wants SBA to Collect COVID Loans Less than $100k
Says Chair Roger Williams, “The COVID-19 pandemic broke the SBA. The agency failed to detect upwards of $200 billion in potential fraud in their lending programs and now has decided to end active collections on loans of $100,000 or less.
“The SBA should be treating these taxpayer-funded loans the same way as any business owner would who is owed a large debt.
“The SBA should continue pursuing loans of all sizes rather than taking the path of least resistance. This Committee will continue its investigation into this concerning decision and will work to hold the SBA accountable.”
The Committee’s investigation began after the SBA’s Office of Inspector General published a report noting the SBA’s decision not to pursue PPP loans $100,000 or less was not justified. During our hearing with the SBA Inspector General on July 13, 2023, the IG reiterated that he did not agree with this decision and the SBA had not provided a suitable justification for ceasing collection on these loans. The OIG’s most recent report, released on September 29, 2023, examined the SBA’s decision to end active collection on COVID EIDLs $100,000 or less.
Unlike the PPP, these loans were never meant to be forgiven, and represent a portfolio valued at $70.9 billion. The OIG reached the same conclusion regarding COVID EIDL as they did with the PPP: the SBA has failed to adequately justify either decision.
“Federal Claims Collection Standards require agencies to pursue all appropriate means of collection and determine based on these efforts that the debt is uncollectable before terminating collection of a claim. This Committee maintains its position that the SBA’s reliance on outcomes of the SBA Express Loan Program collection in its justification not to pursue these loans is improper and does not satisfy the aforementioned standard. The OIG agrees, stating in its report that the relatively small sample of the SBA Express loans used to draw this conclusion, in addition to the fact that the eligibility requirements significantly differ from those of COVID EIDLs, makes the basis of the SBA’s estimate of recoveries unreliable. To date, the Committee has not received any convincing evidence to show how or why the SBA justified the decision not to collect COVID EIDLs of $100,000 or less based on collection results of the Express Loan program.
“Further, the SBA retained an outside consultant in May 2021 to determine whether pursuing a partial sale of delinquent COVID EIDLs would be in the best interest of the taxpayer. The consultant recommended the SBA sell part of the debt through a holistic disposition plan to ensure an exit strategy that would maximize the value of the portfolio. However, the SBA decided not to follow the consultant’s advice and did not provide the OIG with a reasonable explanation for that decision when asked. The Debt Collection Improvement Act specifies that an agency shall sell nontax delinquent debt after terminating collection actions if the Secretary of Treasury determines sale of debt is in the best interest of the United States.11 It is unclear if the SBA has consulted the Department of Treasury (Treasury) on their decision not to sell the portfolio.”