The Biden Administration has reversed its previously announced policy of not collecting some past-due COVID-19-era loans, The Washington Post reported.

The Small Business Administration (SBA) stopped collection activities for past-due COVID-19-related loans of $100,000 or less—totaling roughly $62 billion—in April 2023, figuring that those efforts would cost more than simply writing the loans off, the Post reported in October. The internal directive prompted House Republicans to open an investigation and to demand documents from the SBA, as did Senate Republicans.

The program in question, known as Economic Injury Disaster Loans (EIDL), began in 2020 to help cash-starved companies survive the pandemic-induced financial crisis. The SBA stopped accepting loan applications in May 2022. In contrast to other pandemic-era programs, such as the Paycheck Protection Program (PPP), borrowers were required to pay back their EIDL loans.

A Sept. 29, 2023, SBA Office of Inspector General report warned that the “SBA’s decision not to pursue all available collection activities for these loans does not hold those who borrowed upon the public trust accountable and could incentivize other COVID-19 EIDL recipients to stop paying on their loans.” The report also stated, "By prematurely ending active collection activities on delinquent COVID-19 EIDLs with balances of $100,000 or less, SBA risks violating the federal law prohibiting agencies from ending collections on fraudulent, false, or misrepresented claims, given that the full extent of fraudulent loans in the portfolio is unknown."

“The Small Business Administration constantly assesses the implementation of its programs and makes data-driven decisions to ensure the agency remains a responsible steward of taxpayer money in supporting America’s 33.5 million small businesses,” a spokesperson said in a statement to the Post. “The SBA’s long-standing policy is to use all cost-effective methods to collect on all pandemic-era loans as required by law, … and we will refer PPP and COVID EIDL loans less than $100,000 to Treasury in accordance with a recent, updated analysis demonstrating that this final collection step will be cost effective for the government.”

In June 2023, the SBA's Office of Inspector General estimated that losses from fraud alone exceeded $200 billion. That figure did not include borrowers who had fallen behind on their bills by 30 days or more, either as a result of economic hardship or negligence, the Post reported.

Before revising its policy in April 2023, the SBA placed 75.2 million phone calls and sent 7 million emails and 1.6 million letters to the recipients of EIDL loans that fell behind on their bills, the agency said last week. It also put delinquent businesses on an official list that prohibited them from obtaining federal loans and other related aid in the future, and it reported the late debts to credit-ratings bureaus—although federal watchdogs later found that the government had failed to do so in a timely, appropriate way, according to the Post.

Starting this year, SBA plans to refer pandemic borrowers in default to the Treasury Department after a 60-day grace period that will end in early March. The agency has the power to issue sanctions, and it can also retain a portion of a taxpayer’s refund or deduct amounts from other federal aid simply to recover unpaid government debt.