Treasury Cross-Servicing and Federal Collections: What COVID EIDL Borrowers Need to Know
When a COVID EIDL loan is referred to the Bureau of the Fiscal Service, it enters Treasury Cross-Servicing. This guide explains how federal collections work, the difference between SBA as creditor agency and Treasury as collector, and what tools Treasury uses to recover the debt.
What Happens After Your Loan Is Referred to Treasury?
Once the SBA certifies a defaulted COVID EIDL for referral, the Bureau of the Fiscal Service takes over collection activities. This is not optional for SBA -- the Debt Collection Improvement Act of 1996 requires federal agencies to refer eligible debts that are 120+ days delinquent to Fiscal Service for Cross-Servicing.
At referral, the debt enters the FedDebt system. Treasury can then deploy multiple collection tools simultaneously: the Treasury Offset Program (intercepting federal payments), Administrative Wage Garnishment (taking up to 15% of disposable pay), and private collection agency contact.
SBA (Creditor Agency) vs. Bureau of the Fiscal Service (Collector)
This distinction is critical for understanding your options after referral:
| Role | SBA (Creditor Agency) | Bureau of the Fiscal Service |
|---|---|---|
| Authority | Owns the debt, sets terms, approves settlements | Executes collection on SBA's behalf |
| Recall Power | Can recall the debt from Treasury | Cannot recall; only SBA can |
| Settlement | Approves Offer in Compromise | Collects; does not negotiate settlement terms |
| Disputes | Reviews certification and creditor-agency disputes | Processes debtor disputes on balance/notice |
| Payment Assistance | Only available pre-referral | Not available through Treasury |
Federal Collection Tools
Treasury deploys these tools, often simultaneously:
Treasury Offset Program (TOP)
Intercepts federal payments including tax refunds, Social Security (up to 15%), federal salary, and vendor payments. A 60-day pre-offset notice is required before the first offset.
Administrative Wage Garnishment (AWG)
Garnishes up to 15% of disposable pay without a court order under 31 C.F.R. 285.11. Borrowers have the right to request a hearing before or during garnishment.
Private Collection Agency (PCA) Contact
Treasury contracts with private agencies (ConServe, Coast Professional, CBE Group, and others) to contact borrowers by phone and letter. These agencies collect on Treasury's behalf but cannot negotiate settlements independently.
Frequently Asked Questions
What is Treasury Cross-Servicing?
Treasury Cross-Servicing is the federal debt collection program operated by the Bureau of the Fiscal Service. When federal agencies like SBA cannot collect a delinquent debt, they are required under the Debt Collection Improvement Act to refer it to Fiscal Service. Treasury then uses tools including the Treasury Offset Program, Administrative Wage Garnishment, and private collection agencies to recover the debt.
Who collects defaulted COVID EIDL loans?
After referral, the Bureau of the Fiscal Service manages collection. It uses private collection agency contractors (such as ConServe, Coast Professional, and CBE Group) for debtor contact, and deploys the Treasury Offset Program and Administrative Wage Garnishment directly. SBA remains the creditor agency and retains authority over settlements, recalls, and certain dispute resolutions.
Can they garnish wages without going to court?
Yes. Administrative Wage Garnishment (AWG) under 31 C.F.R. 285.11 allows Treasury to garnish up to 15% of disposable pay without a court order. Borrowers have the right to request a hearing within 15 business days of receiving the garnishment notice, or at any time during garnishment to contest the amount or terms.
Why did my loan go to Treasury?
Federal agencies are required to refer debts that are more than 120 days delinquent to the Bureau of the Fiscal Service, with certain exceptions. SBA certifies the debt as valid and legally enforceable before referral. If you believe the referral was improper, you may have grounds for a dispute or SBA creditor-agency review.