January 7, 2015

Best Practices: Clarification of Credit Bureau Reporting SOP 50 57 – 7(a) Loan Servicing and Liquidation

by Kristen G. Dickey

The SBA recently published Information Notice 5000-1330 which became effective on December 15, 2014.  This Information Notice seeks to clarify SOP 50 57 7(a) Loan Servicing and Liquidation, Chapter 3, Paragraph F. 2 regarding credit bureau reporting with respect to 7(a) loans, which states:

In accordance with the Debt Collections Improvement Act of 1996, Lenders are required to report information to the appropriate credit reporting agencies whenever they extend credit via an SBA loan.  Thereafter, they should continue to routinely report information concerning servicing, liquidation, and charge-off activities throughout the life-cycle of the loan.

This Information Notice directs lenders to specific credit reporting references that identify who, where, when, and what to report and provides helpful information to assist lenders with reporting information whenever credit is extended under a federal program such as an SBA-guaranteed loan.  These sources include: (1)Debt Collection Improvement Act of 1996; (2) Federal Claims Collection Standards (FCCS), 3 C.F.R. 900-904; (3) OMB Circular A-129; (4); Treasury’s Managing Federal Receivables (MFR); (5) Guide to the Federal Credit Bureau Program (GFCBP); and (6) 31 U.S. C. 3711(e)(4).  Note:  Each commercial credit reporting agency will have its own requirements, so lenders should contact each agency for applicable requirements.

WHO?  Lenders must report borrowers, but not guarantors, of SBA-guaranteed loans to commercial credit reporting facilities.

WHERE?  Lenders must submit reports to designated credit reporting agencies for commercial accounts listed in Appendix 3 of the GFCBP.

WHEN?  As mentioned above, lenders must report this information whenever credit is extended to a borrower under a federal program.  This information should be reported throughout the entire life-cycle of the loan at least on a quarterly basis but possibly more frequent than that if necessary to “maintain the integrity and accuracy of the information being reported.”  See GFCBP – Reporting and Account Information

WHAT?  Lenders should: (1) identify the borrower by name, address, and taxpayer identification number; (2) provide the amount, status, and history of the debit; (3) identify the agency or program under which the debt arose; and (4) provide any ongoing information about the extension of credit to the borrower, including servicing, liquidation, and charge-off activities.

For more information regarding credit bureau reporting requirements, please contact Kristen at 407-618-0698