Treasury Department Contacted Me About EIDL Debt: Is This Fraud? | Federal PPP Fraud Defense Lawyers
So your probably thinking “I just received a letter from the U.S. Department of Treasury about my EIDL loan — does this mean they think I committed fraud, or is this just about the debt?” — and the answer depends entirely on WHO within Treasury contacted you and WHAT they’re asking for, because there’s a HUGE difference between receiving a collection notice from Treasury’s Bureau of the Fiscal Service (which handles routine debt collection for defaulted SBA loans) versus being contacted by the Treasury Office of Inspector General (which investigates criminal fraud). If its just debt collection, your dealing with civil consequences like wage garnishment, tax refund offsets, and payment negotiations — but if its a fraud investigation, your facing potential criminal charges, federal prosecution, and prison time. We’re gonna walk through exactly how to tell the difference between legitimate Treasury debt collection and fraud investigation, what happens when SBA transfers your EIDL debt to Treasury for collection (typically after 120-180 days of default), the collection powers Treasury has (wage garnishment without court order, Treasury Offset Program for intercepting federal payments, credit reporting), how to identify Treasury SCAMS (because scammers constantly impersonate Treasury to steal money and personal information), your options if this is legitimate debt collection (payment plans, offer in compromise, financial hardship status), and most importantly what you need to do RIGHT NOW if this contact is actually about fraud investigation rather than simple debt collection — because mistaking a criminal investigation for routine debt collection can result in you making statements or providing documents that lead directly to federal charges.
## Why Would the Department of Treasury Contact Me?
According to federal debt collection procedures, the U.S. Department of Treasury contacts individuals for several legitimate reasons — and you need to understand which type of contact your dealing with.
### Legitimate Reasons Treasury Contacts You:
**1. Defaulted Federal Loan Collection (Most Common)**
When you default on a federal loan (like EIDL, student loan, or other SBA loan), the originating agency (SBA in EIDL cases) will attempt collection internally for a period of time — usually 90-180 days after default.
If those collection efforts fail, the debt is **transferred to the U.S. Department of Treasury’s Bureau of the Fiscal Service** for continued collection.
**What this means:**
– Your EIDL loan is past due and SBA transferred it to Treasury
– This is CIVIL debt collection, not criminal fraud investigation
– Treasury will attempt to collect through offsets, garnishments, and negotiations
– This does NOT automatically mean they suspect fraud
**2. Treasury Offset Program (TOP) Notice**
If you owe a past-due federal debt, Treasury can intercept your federal payments to recover the debt.
**Payments That Can Be Offset:**
– Federal tax refunds
– Social Security benefits
– Federal wages (if you’re federal employee)
– Federal contractor payments
– Vendor payments
**How you’re notified:**
– Letter from Bureau of the Fiscal Service
– Notice before offset occurs (minimum 60 days for tax refunds)
– Explains debt amount, agency you owe, your offset rights
**3. Administrative Wage Garnishment Notice**
Treasury can garnish your wages to collect defaulted federal debt WITHOUT going to court first.
**How it works:**
– Treasury sends notice to you and your employer
– Can garnish up to 15% of disposable pay
– Must provide opportunity to dispute or negotiate before garnishment starts
– Applies to private sector employment (not just federal jobs)
**4. Treasury Office of Inspector General (OIG) Investigation**
This is COMPLETELY DIFFERENT from debt collection.
If Treasury OIG contacts you, they’re investigating potential **criminal fraud** — not just collecting debt.
**Red flags this is fraud investigation, not debt collection:**
– Contact from Treasury Office of Inspector General (not Fiscal Service)
– Letter mentions “investigation” or “allegations of fraud”
– Requests interview or asks you to answer questions about loan application
– Asks for documents related to eligibility, use of funds, or application information
– Mentions potential criminal penalties
**CRITICAL:** If contacted by OIG about investigation, you need attorney IMMEDIATELY — this is NOT routine debt collection.
## What Is Considered EIDL Fraud?
According to federal fraud statutes, EIDL fraud occurs when someone provides false information to obtain Economic Injury Disaster Loans or uses EIDL funds for unauthorized purposes.
### Common Types of EIDL Fraud:
**1. Application Fraud (False Statements)**
Making false representations on EIDL application:
– **Fabricated business revenue:** Claiming business earned $500,000 annually when real revenue was $100,000
– **Falsified employee numbers:** Stating 25 employees when business had 5
– **Fake business:** Claiming to operate business that doesn’t actually exist or wasn’t operational before disaster
– **Inflated cost of goods sold:** Overstating expenses to increase loan amount
– **False certifications:** Certifying business was in operation since before disaster when it wasnt
**2. Misuse of EIDL Funds**
Using EIDL loan for purposes other than what’s authorized:
**AUTHORIZED Uses:**
– Working capital to cover operating expenses
– Normal operating expenses (rent, utilities, payroll)
– Accounts payable
– Debts that could have been paid had disaster not occurred
**PROHIBITED Uses:**
– Owner compensation above pre-disaster levels
– Bonuses or profit distributions
– Paying down debt that wasnt related to disaster
– Expanding business operations
– Refinancing long-term debt
– Purchasing real estate or fixed assets
– Personal expenses unrelated to business
**Example of Misuse:**
Borrower receives $150,000 EIDL loan, then immediately transfers $100,000 to personal account and uses funds to buy luxury car, invest in cryptocurrency, and pay off personal credit cards. This is clear misuse and potential fraud.
**3. Multiple EIDL Loans (Loan Stacking)**
Obtaining multiple EIDL loans by:
– Using multiple EINs for same business
– Creating shell companies to apply multiple times
– Applying under both EIN and SSN for same business
– Having family members apply for same business
**4. Identity Theft in EIDL Applications**
Using stolen identities to obtain EIDL loans:
– Stolen Social Security numbers
– Stolen EINs
– Real people’s information without their knowledge
– Deceased individuals’ information
### Criminal Charges for EIDL Fraud:
– **18 USC §1343 (Wire Fraud):** Up to 20-30 years prison
– **18 USC §1014 (False Statements to SBA):** Up to 30 years prison
– **18 USC §1001 (False Statements):** Up to 5 years prison
– **18 USC §1028A (Aggravated Identity Theft):** Mandatory 2 years consecutive
– **Civil False Claims Act:** Treble damages (3x loan amount) + penalties
## What Happens If Your SBA Loan Goes to the Treasury?
If you default on your EIDL loan and SBA transfers the debt to Treasury, here’s exactly what happens:
### Stage 1: SBA Default Process (Days 1-180)
**Initial Default:**
– Miss first payment → 30 days past due
– SBA sends delinquency notice
– Additional late notices at 60, 90 days
**SBA Collection Efforts:**
– Phone calls and letters requesting payment
– May offer payment plans or modification
– Opportunity to submit Offer in Compromise
– Final notice before Treasury transfer (typically 120-180 days delinquent)
**What SBA looks for:**
– Are you communicating and attempting to resolve?
– Did you request hardship consideration?
– Are you completely ignoring collection efforts?
### Stage 2: Treasury Transfer (180+ Days)
If SBA exhausts its collection efforts or you dont respond:
**Transfer to Treasury Bureau of the Fiscal Service:**
– Debt transferred to Treasury’s Debt Management Service
– Treasury becomes collection agent for the debt
– SBA no longer primary contact (Treasury handles collection)
**What Treasury receives:**
– Full account history
– Loan amount, payments made, current balance
– Your contact information
– Any communications with SBA
– Information about your loan application
**You’re notified:**
– Letter from Bureau of the Fiscal Service
– Explains debt has been transferred to Treasury
– States current balance owed
– Provides payment options and contact information
– Informs you of Treasury’s collection authorities
### Stage 3: Treasury Collection Efforts
Once Treasury has your debt, they have broad collection powers:
**1. Treasury Offset Program (TOP)**
Automatic interception of federal payments:
– **Tax refunds:** Most common offset — if you’re owed refund, Treasury keeps it to pay EIDL debt
– **Social Security benefits:** Can offset up to 15% of monthly benefit
– **Federal wages:** If you work for federal government, can offset salary
– **Federal payments:** Vendor payments, contractor payments, grants
**How it works:**
– Treasury searches for any federal payments you’re entitled to
– When payment identified, Treasury intercepts before you receive it
– Applies intercepted funds to your EIDL debt
– Sends notice after offset occurs
**Important:** You receive notice BEFORE tax refund offset (60 days minimum), giving you opportunity to dispute or negotiate.
**2. Administrative Wage Garnishment (AWG)**
Treasury can garnish your wages WITHOUT going to court:
**Process:**
– Treasury sends notice to your employer
– Employer must withhold up to 15% of disposable pay
– Garnishment continues until debt paid or you negotiate alternative
**Notice requirements:**
– Treasury must notify you 30 days before garnishment starts
– Must provide opportunity to dispute debt or request hardship review
– Must offer hearing if you dispute amount owed
**Disposable pay calculation:**
– Disposable pay = gross pay minus mandatory deductions (taxes, Social Security)
– Treasury can garnish 15% of THIS amount (not gross pay)
**Example:**
– Gross monthly pay: $5,000
– Minus mandatory deductions: -$1,200
– Disposable pay: $3,800
– Maximum garnishment: $570/month (15% of $3,800)
**3. Credit Reporting**
Treasury reports defaulted federal debt to credit bureaus:
– Appears on credit report as federal debt in default
– Severely damages credit score
– Remains on report for 7 years from date of default
**4. Referral to Private Collection Agencies**
Treasury may refer your debt to private collection agencies:
– Third-party collectors contact you
– May offer settlement negotiations
– Still must follow Fair Debt Collection Practices Act (FDCPA)
**5. Referral to Department of Justice (DOJ)**
For larger debts or if other collection efforts fail:
– Treasury may refer to DOJ for lawsuit
– DOJ files lawsuit in federal court
– Court judgment allows seizure of assets, bank levies
– Judgment remains enforceable for 20 years
### Can You Negotiate With Treasury After Transfer?
**YES** — Treasury offers several resolution options:
**Option 1: Payment in Full**
– Pay entire balance immediately
– Ends collection efforts
– May be able to negotiate slight reduction in penalties/interest
**Option 2: Installment Agreement**
– Negotiate monthly payment plan
– Typically requires payments over 3-5 years
– Must demonstrate ability to make payments
– Interest continues to accrue during payment period
**Option 3: Offer in Compromise (OIC)**
– Settle debt for less than full amount
– Must prove financial hardship (can’t pay full amount)
– Treasury analyzes income, assets, expenses
– Approval NOT guaranteed
**Example:** $150,000 EIDL debt, you offer $40,000 lump sum settlement. Treasury analyzes your financial situation and may accept if you can prove you cant pay full amount.
**Option 4: Currently Not Collectible (CNC) Status**
– Temporary halt to collection activities
– Must prove severe financial hardship
– Treasury periodically reviews financial situation
– Debt NOT forgiven — just collection paused
**How to Request:**
– Contact Bureau of the Fiscal Service directly
– Provide financial documentation (tax returns, pay stubs, bank statements, expense records)
– Explain circumstances and proposed resolution
– Attorney can help negotiate better terms
## How to Tell If Treasury Contact Is Legitimate or Scam
This is CRITICAL because Treasury impersonation scams are rampant.
### Signs Contact Is LEGITIMATE:
**1. Contact Method**
**Legitimate:**
– Initial contact by U.S. mail (postal service)
– Official Treasury letterhead
– Letter includes specific debt details (amount, account number, originating agency)
– Provides official .gov contact information
**Red flag (scam):**
– UNSOLICITED phone call claiming to be Treasury
– Email or text message as first contact
– No written notice precedes phone contact
**2. Payment Methods**
**Legitimate:**
– Accepts check, money order, or electronic payment through official Treasury website (pay.gov)
– Provides official payment mailing address
– Never demands immediate payment via unusual methods
**Red flag (scam):**
– Demands payment via gift cards (iTunes, Google Play, etc.)
– Requests wire transfer to individual account
– Asks for cryptocurrency payment
– Wants prepaid debit cards
– Demands immediate payment “or else”
**3. Information Requested**
**Legitimate:**
– Asks you to verify debt amount
– May request financial documents if negotiating settlement
– Provides information TO you (balance owed, account details)
**Red flag (scam):**
– Asks for Social Security number over phone
– Requests bank account information via email/phone
– Demands credit card numbers
– Asks for personal identifying information before verifying your identity
**4. Tone and Tactics**
**Legitimate:**
– Professional correspondence
– Explains your rights and options
– Provides reasonable timeline for response
– References specific federal law and procedures
**Red flag (scam):**
– Threatens immediate arrest
– Claims police are on the way
– Uses aggressive, threatening language
– Creates extreme urgency (“pay within 1 hour or…”)
– Threatens deportation
– Claims your Social Security number will be “canceled”
**5. Caller ID and Contact Information**
**Legitimate:**
– Official .gov email addresses (@fiscal.treasury.gov)
– Official phone numbers that you can verify on treasury.gov website
– Mailing addresses that match official Treasury locations
**Red flag (scam):**
– Spoofed caller ID (shows “U.S. Treasury” but isnt real number)
– Gmail, Yahoo, or other free email addresses
– Phone numbers that dont match official Treasury contact info
– No physical address provided
### Common Treasury Scams (2025):
According to Treasury Office of Inspector General fraud alerts:
**Scam #1: IRS/Treasury Tax Debt Scam**
– Robocall claims you owe back taxes
– Threatens arrest or legal action
– Demands immediate payment via gift cards
**Scam #2: Treasury Grant Scam**
– Claims you’ve been “selected” for government grant
– Says you must pay processing fee to receive grant
– Government grants NEVER require upfront payment
**Scam #3: Treasury Inspector General Impersonation**
– Caller claims to be Treasury OIG investigating you
– Demands you pay fine to avoid charges
– Real OIG does NOT call demanding payment
**Scam #4: Treasury Check Scam**
– You receive check claiming to be from Treasury for grant/refund
– Asks you to deposit and wire back “processing fee”
– Check is fake, you lose money you wired
**How to Verify Legitimate Treasury Contact:**
**STEP 1:** If you receive call or email, DO NOT provide any information
**STEP 2:** Hang up or dont respond
**STEP 3:** Contact Treasury directly using phone number from official treasury.gov website
**STEP 4:** Ask Treasury to confirm whether contact was legitimate
**STEP 5:** If legitimate, handle through official channels only
## Treasury Debt Collection vs. Fraud Investigation: Critical Differences
You MUST understand this distinction:
### Treasury Debt Collection (Civil):
**Who contacts you:**
– Bureau of the Fiscal Service
– Treasury’s Debt Management Services
– Private collection agency working for Treasury
**What they want:**
– Payment of debt
– Financial information to negotiate settlement
– Agreement on payment plan
**Consequences if you dont respond:**
– Wage garnishment
– Tax refund offset
– Social Security offset
– Credit damage
– Possible lawsuit and judgment
– **NO CRIMINAL CHARGES** (this is civil debt collection)
**How to handle:**
– Attorney can negotiate on your behalf
– Evaluate settlement options
– Determine if offer in compromise appropriate
– Request hardship status if applicable
### Treasury OIG Fraud Investigation (Criminal):
**Who contacts you:**
– Treasury Office of Inspector General
– Sometimes FBI or DOJ in coordination with OIG
**What they want:**
– Information about your EIDL application
– Documents related to loan
– Interview about eligibility, use of funds, representations made
– Evidence for criminal prosecution
**Consequences if you dont respond appropriately:**
– Criminal charges (wire fraud, false statements, bank fraud)
– Federal prosecution
– Prison time (5-30 years)
– Restitution (repayment of full loan amount)
– Fines and penalties
– Permanent criminal record
**How to handle:**
– Hire experienced federal criminal defense attorney IMMEDIATELY
– DO NOT respond to investigation without attorney
– DO NOT provide documents without attorney review
– DO NOT agree to interview without attorney present
– Attorney conducts privileged assessment of exposure
**Example of Each:**
**Scenario A: Debt Collection (Civil)**
You receive letter from Bureau of the Fiscal Service:
> “Your EIDL loan account #12345 in the amount of $150,000 has been transferred to the U.S. Department of Treasury for collection. The current balance owed is $148,500. If you do not pay within 60 days, we may offset your federal payments including tax refunds. Contact us at 1-888-826-3127 to discuss payment options.”
**This is civil debt collection.** Consequences are financial (garnishment, offset, lawsuit). NO criminal charges from this alone.
**Scenario B: Fraud Investigation (Criminal)**
You receive letter from Treasury Office of Inspector General:
> “The Treasury Office of Inspector General is investigating allegations of false statements in connection with EIDL loan application #12345. You are requested to appear for interview on March 15, 2025 to provide information regarding your business revenue, employee count, and use of loan proceeds. Failure to cooperate may result in referral to Department of Justice for prosecution.”
**This is criminal fraud investigation.** You are potential criminal target. DO NOT respond without federal criminal defense attorney. Statements you make can result in criminal charges.
## What to Do If Treasury Contacted You About EIDL Debt
Your response depends on TYPE of contact:
### If This Is Civil Debt Collection (From Fiscal Service):
**STEP 1: Verify Contact Is Legitimate**
– Check letter for official letterhead, .gov contact info
– Call Bureau of the Fiscal Service using number from treasury.gov (NOT number on letter if you suspect scam)
– Confirm debt amount and that transfer occurred
**STEP 2: Review Your Financial Situation**
– Can you pay in full? (ends collection immediately)
– Can you afford monthly payments? (installment agreement)
– Are you facing severe financial hardship? (offer in compromise or CNC status)
**STEP 3: Gather Financial Documentation**
If negotiating settlement or hardship:
– Last 2 years tax returns
– Pay stubs or proof of income
– Bank statements
– List of monthly expenses
– Asset information (property, vehicles, savings)
**STEP 4: Contact Attorney Experienced in Federal Debt Resolution**
Attorney can:
– Negotiate better settlement terms
– Prepare offer in compromise with supporting documentation
– Request Currently Not Collectible status if appropriate
– Prevent wage garnishment or offset while negotiating
– Protect your rights throughout process
**STEP 5: Respond Timely**
Dont ignore Treasury notices:
– Ignoring leads to automatic garnishment and offsets
– Responding shows good faith and opens negotiation options
– Earlier you respond, more options you have
**STEP 6: Negotiate Resolution**
Work with attorney to:
– Present financial documentation supporting hardship
– Propose realistic payment plan or settlement offer
– Get agreement in writing before making payment
– Ensure terms are manageable long-term
### If This Is Fraud Investigation (From Treasury OIG):
**STEP 1: DO NOT Respond Without Attorney**
If letter mentions investigation, fraud allegations, or requests interview:
– DO NOT call them back
– DO NOT provide any information
– DO NOT agree to interview
– DO NOT provide documents
**STEP 2: Hire Federal Criminal Defense Attorney IMMEDIATELY**
You need someone who specifically has:
– Federal fraud defense experience
– EIDL/PPP fraud case experience
– Relationships with U.S. Attorneys and federal prosecutors
– Track record defending against OIG investigations
**STEP 3: Attorney Conducts Privileged Assessment**
Your attorney should:
– Review your EIDL loan application
– Analyze use of funds
– Identify potential exposure
– Determine if any false statements were made
– Assess strength of government’s potential case
– Develop defense strategy
**This assessment is protected by attorney-client privilege** — government cant access it.
**STEP 4: Attorney Handles ALL Communication**
– Attorney responds to OIG on your behalf
– Attorney negotiates scope of any document production
– Attorney determines whether interview appropriate (usually NOT)
– Attorney protects your rights throughout investigation
**STEP 5: DO NOT Discuss With Anyone Except Attorney**
– Dont tell business partners, employees, family
– Dont post on social media
– Everyone except attorney can be subpoenaed and required to testify
**STEP 6: Preserve All Documents**
– Keep ALL EIDL-related documents
– Preserve emails, texts, bank records
– DO NOT destroy anything (document destruction = obstruction charges)
### If You Suspect Contact Is SCAM:
**DO:**
– Hang up immediately if phone call
– Dont click links in emails
– Dont provide any personal information
– Report to Treasury OIG: https://oig.treasury.gov/fraud-alerts
– Report to FTC: https://reportfraud.ftc.gov/
– Report to FBI IC3: https://ic3.gov
**DONT:**
– Engage with scammer
– Provide SSN, bank account, credit card info
– Send money via gift cards, wire transfer, crypto
– Feel pressured by threats
## Final Thoughts: Know What Your Dealing With
We’ve represented clients contacted by Treasury for both debt collection and fraud investigations. The outcomes depend entirely on understanding what type of contact your dealing with:
**Debt Collection Clients (Civil):**
✓ Those who engaged early and negotiated → Often resolved with payment plans or settlements
✓ Those who proved financial hardship → Sometimes obtained CNC status or reduced settlements
✓ Those who ignored notices → Faced wage garnishment, offsets, credit damage
**Fraud Investigation Clients (Criminal):**
✓ Those who hired attorney BEFORE responding → Better outcomes, often avoided charges
✓ Those who tried to “explain everything” themselves → Made incriminating statements, faced charges
✓ Those who cooperated without attorney → Provided evidence used against them
**Bottom line:** If Treasury contacted you about EIDL debt, your first step is determining WHETHER this is routine civil debt collection OR potential criminal fraud investigation. That determination changes EVERYTHING about how you respond.
**If civil debt collection:** You have negotiation options, but ignoring it leads to garnishment and offsets.
**If fraud investigation:** You need experienced federal criminal defense attorney IMMEDIATELY — how you respond determines whether charges are filed.
**If scam:** Dont engage, report it, verify through official channels before taking any action.
Contact an experienced attorney TODAY who can help you understand exactly what your dealing with and protect your rights appropriately.
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**LEGAL DISCLAIMER:** This article provides general information about Treasury Department contact regarding EIDL debts and does not constitute legal advice for any specific situation. If Treasury contacted you about EIDL debt or potential fraud investigation, contact an experienced attorney immediately for advice tailored to your circumstances. Nothing in this article creates an attorney-client relationship.