Ernst urges SBA to ‘reverse course’ on forgoing certain COVID-related debt collections

The Small Business Administration (SBA) has decided to forgo debt collections totaling roughly $71 billion on COVID Economic Injury Disaster Loans (EIDL) of less than $100,000, and U.S. Sen. Joni Ernst (R-IA) is not happy about it.

The SBA’s move is in addition to an April 2022 decision the agency made to forgo debt collection referrals to the U.S. Department of the Treasury on approximately $1.1 billion in Paycheck Protection Program (PPP) loans under $100,000, according to a March 29 letter Sen. Ernst sent to SBA Administrator Isabella Casillas Guzman.

“In total, the SBA could forgo collections on over $72 billion of COVID loan programs, without appropriate justification or authorization to do so by Congress,” wrote Sen. Ernst, ranking member of the U.S. Senate Small Business and Entrepreneurship Committee, which oversees certain SBA programs. 

In her letter, the lawmaker also pointed out that according to the SBA Office of Inspector General (OIG), which criticized the SBA’s decision to forgo PPP collections, the ability of a federal agency to collect on a delinquent debt decreases over time.

“SBA has chosen on at least four occasions to defer payments on EIDLs and, as time passes, it becomes more likely that these loans will never be repaid and less likely that any delinquent debts will ever be collected,” she wrote. “This is unacceptable, as is any potential attempt by the SBA to once again forgo collections altogether on a program it is tasked with managing on behalf of the American taxpayer.”

Loans under $100,000 constitute the overwhelming majority of loans made through EIDL and Congress has never intended for loans made through the EIDL program to be forgiven, Sen. Ernst wrote.

In an effort to ensure this cannot happen again, the senator asked the SBA administrator to answer several questions by April 5, including whether the SBA has made any attempt at contacting EIDL borrowers to assess their ability to repay their loans, and if not, why.

“I want to reiterate that it is unacceptable for SBA to write off taxpayer-funded loans by forgoing collections, and my concern… is that the longer SBA waits to begin repayment and collections, the less likely it is that taxpayers will ever be repaid,” wrote Sen. Ernst. “I urge the agency to reverse course immediately.”