☕ Pull up a chair, grab your favorite beverage, and stay awhile...

Every law has a story. Every government program began because someone believed there was a problem that needed to be solved.

This series is about those stories.

My hope is that when you finish reading, you'll understand a little more than you did when you started.

Our Story Continues...

Last time, we left our little Wild West town just as some eligible delinquent federal debts were preparing for a change of scenery.

Congress had passed the Debt Collection Improvement Act of 1996, and many eligible debts that remained delinquent long enough would eventually have a new destination.

Treasury.

So, imagine an early morning in our little town.

The sun is coming up. Horses are being hitched to wagons. Steamer trunks are being packed and strapped down. A few travelers are checking their supplies one last time.

Some have packed lightly.

Others seem to be bringing everything but the kitchen sink.

And not everyone is leaving.

Some folks have come outside to wave goodbye. Others will soon head back inside, where there are plans to make, systems to figure out, and decisions about which debts may eventually need to make the journey themselves.

But for our first little group of travelers, it's time to go.

Their wagons turn away from town and begin the long journey east toward Treasury.

How hard could this be?

After all, Congress had already passed the law.

Well...

Anyone who knows a little about the people who once packed their belongings into wagons and crossed a country without highways, GPS, roadside hotels, or conveniently placed gas stations probably knows where this story is headed.

Knowing where you're going and having a road to get there are two very different things.

And back in 1996, the road was still being built.

The Road East Wasn't Exactly Paved

Our first travelers had a destination.

Getting there was another matter.

They had read the new law.

They knew Congress had created a new framework for transferring eligible delinquent federal debts to Treasury.

So they packed their wagons and headed east.

At first, perhaps the directions seemed straightforward enough.

But putting a new law into practice across the federal government was very different from reading it on paper.

The Debt Collection Improvement Act represented a major change in the way delinquent federal debt would be managed.

Agencies needed procedures.

Systems had to be developed.

Treasury had to prepare to receive the debts.

And everyone had to figure out how this new government-wide collection framework would actually work.

Knowing the destination was one thing.

Building a way to get there was another.

Sometimes You Have to Circle Up the Wagons

This journey wasn't completed in a day.

Turning Congress's new collection framework into a functioning government-wide process would take years.

And along the way, there were reasons to stop, look at what was working, figure out what wasn't, and study the next stretch of road.

Travelers making long journeys across the country had to do much the same thing.

At the end of a long day, wagons stopped. Animals needed rest. Supplies had to be checked. Something that broke along the trail might need to be repaired before morning. And sometimes the map needed another look before everyone headed out again.

So picture our first wagon train settling in for the night.

The wagons circle up. Someone tends to the horses. Someone checks a wheel that has been giving them trouble all afternoon. A few travelers gather around the campfire.

Then someone pulls out the instructions and takes another look.

Another traveler pulls out his copy.

Before long, they're comparing notes.

“That's not how I understood it.”

And there it is.

Our imaginary travelers have discovered something federal agencies and Treasury were confronting in the real world.

Passing a government-wide law was one thing.

Implementing it consistently across the federal government was another.

In the years following passage of the DCIA, federal agencies and Treasury continued working through how the new requirements would be implemented.

In 1998, the Office of Management and Budget (OMB) described the DCIA as comprehensive and complex and acknowledged that implementation had not met expectations. OMB called on affected agencies to work closely with Treasury to analyze and refer the appropriate delinquent debts.

The U.S. General Accounting Office, now known as the Government Accountability Office (GAO), would also document problems involving referral procedures, agency systems, implementation, and whether debts were being referred when required.

In other words, sometimes everyone really did need to compare notes.

Procedures were developed. Systems were tested. Plans were adjusted. Guidance became more detailed.

Then the journey continued.

The travelers still knew where they were going.

But now they understood a little more about what the journey required.

And with every mile traveled, the path was being forged for the wagon trains that would follow.

The Lights Are On at Treasury

Our travelers aren't the only ones preparing.

Farther east, the lights are burning at Treasury, too.

The first wagon train in our story is on its way.

And someone has to be ready when it arrives.

Treasury's Financial Management Service (FMS) had its own work to do as the federal government implemented the new law.

OMB directed affected agencies to work closely with Treasury, and Treasury directed FMS to meet with agencies to help move implementation forward.

So while our travelers are gathered around a campfire studying the instructions, people at Treasury are working through those instructions, too.

Processes have to be developed. Agencies and Treasury have to figure out how debts will move from one to the other. Systems have to be able to exchange the information needed for the journey. And Treasury has to prepare the collection operation that will be waiting when those wagons begin arriving.

There are lights burning at both ends of the road.

But there's one more place we need to visit.

Because back in our little Wild West town...

The lights are still burning there, too.

Not everyone left with the first wagon train.

Meanwhile, Back in Town...

Remember those folks who waved goodbye as the first wagons pulled away?

Some of them went back inside.

Walk past one of those buildings after dark and you might see a light burning upstairs.

Inside, people are gathered around a large wooden table.

Ledgers are open. Papers are scattered everywhere. There's a map stretched across the middle.

And somewhere nearby, a few empty steamer trunks are waiting to be packed.

Let's stop at one of those tables.

Over at the SBA Table...

The Small Business Administration gives us a good example of just how complicated packing those trunks could be.

In 1999, GAO examined whether SBA had a systematic process for identifying delinquent debts and promptly referring eligible debts to Treasury.

There was still work to do.

GAO found problems with timely transfers and recommended that SBA test its systems to verify that eligible loans were being identified and referred to Treasury and develop procedures that would allow appropriate loans to be transferred within the required timeframes. SBA later implemented those recommendations.

So picture the meeting around our SBA table.

Someone has the ledger. Someone has the map. Someone else is standing beside those empty trunks.

But the question isn't simply:

“When do we leave?”

It's also:

“Which of these debts belongs in the wagon?”

And that became even more important because not every SBA debt would ultimately be required to make this particular journey.

In January 2000, Treasury granted SBA an exemption from mandatory transfer for disaster loans and regular business loans over 180 days delinquent that were in active workout. Later Treasury descriptions refer to the exempt business loans as collateralized business loans in active workout.

So perhaps there are several stacks sitting on that wooden table.

This stack needs to go.

This one isn't ready.

And this one may be allowed to stay here while SBA continues working with it.

The steamer trunks suddenly make a lot more sense.

SBA wasn't simply packing.

It had to figure out what belonged in the wagon.

And Across Town,

Education Has a Different Map

At the Department of Education's table, the conversation looks different again.

Education already had substantial experience collecting delinquent and defaulted student loans.

Treasury records report that student loan debts owed to Education had been exempt from mandatory transfer for Cross-Servicing since November 1998, based on Education's demonstrated expertise in collecting those debts.

So perhaps someone at Education spreads out the map, studies the road our first wagon train is taking and realizes:

“Looks like these debts aren't taking that road.”

And that's an important part of our story.

The question wasn't simply whether an agency was going to Treasury.

The real question was which debts needed to make the journey.

Some would travel east. Some would remain with their original agency. Some classes of debt received exemptions from mandatory transfer.

And different agencies had different amounts of work to do before their next wagon was ready to leave.

But slowly, those meetings around the wooden tables began to produce something.

Decisions were made. Procedures were developed. Systems were tested.

And another set of steamer trunks was ready to be packed.

The next morning, our little town is stirring again.

A door opens. A trunk comes out. Then another.

Horses are brought around and hitched to a wagon.

This time, the folks standing on the boardwalk have seen this before.

They know what it means.

Another wagon is getting ready to head east.

Maybe this one is carrying more than the first.

And somewhere else, another agency may still have its map spread across the table.

That's okay.

They weren't all going to leave together.

One wagon train left.

Then another.

And over time, more eligible debts began making the journey.

Meanwhile, the travelers who left before them had continued forging the path ahead.

A rough trail was becoming easier to follow.

The stops along the way had taught them something.

The instructions were becoming clearer.

And each group that followed had the benefit of a path that someone else had already begun to forge.

Our little Wild West town was still there. The lights were still on. The meetings were still happening.

But now, every so often, another wagon rolled out of town and turned east.

The journey was no longer just beginning.

It was underway.

The Road Is Getting Easier to Follow

Meanwhile, our first travelers keep moving.

They've stopped along the trail. They've compared notes. They've pulled out the instructions more than once. They've made adjustments.

And then they've hitched the horses and started moving again.

Day after day, they continue east.

Until one day, after miles of open country and nights spent camped along the trail, someone riding near the front sees something different on the horizon.

Buildings.

Smoke rising from a chimney.

Maybe even the faint outline of a church steeple.

It's a town.

The first one they've reached since leaving home.

The horses probably appreciate the sight as much as the travelers do.

They pull into town tired, dusty, and ready for a break.

For once, nobody has to find a place to circle the wagons for the night.

There's a stable where the horses can rest. A general store where supplies can be replenished. And somewhere in town, there's probably a hot meal with their name on it.

After everything they've encountered along the trail, they've earned one.

But eventually, someone has to ask the question that's been on everyone's mind.

“How much farther to Treasury?”

A local looks up. Maybe he scratches his chin for a moment.

Then he points toward the road leading out of town.

“Treasury? You're getting close. Just keep heading that way. It's up yonder.”

Up yonder.

Those might be the best two words our travelers have heard since leaving home.

Because something has changed.

When they first pulled away from our little Wild West town, Treasury was little more than a destination written on a map.

They knew where Congress wanted eligible debts to go.

Figuring out how to get them there was another matter.

Now they've reached a place where someone can point down the road and tell them which way to go.

The path is becoming easier to follow.

Our travelers aren't at Treasury yet.

There are still miles ahead of them.

But tonight, the horses can rest. The travelers can replenish their supplies. And nobody needs to pull out the instructions around the campfire.

Tomorrow morning, they'll hitch the horses again.

They'll load those steamer trunks back onto the wagons.

And when they roll out of town, they'll know exactly which road to take.

Treasury is just up yonder.

They have almost made it to Treasury

Morning comes early.

The horses are rested. The supplies have been replenished. And those steamer trunks are strapped back onto the wagons one more time.

Our travelers thank the folks in town, climb aboard, and turn onto the road the local pointed out the night before.

Treasury is up yonder.

And this time, they don't have to wonder whether they're heading in the right direction.

They keep going.

A few more miles.

Another bend in the road.

Then finally...

There it is.

Treasury.

After all those miles, all those nights on the trail, all those conversations around the campfire, and more than one look back at the instructions, our first little wagon train has reached its destination.

The horses slow. The wheels finally stop turning. And one by one, those steamer trunks begin coming down from the wagons.

They made it.

There probably ought to be a celebration.

Maybe somebody at Treasury even feels like hanging a little banner.

But perhaps they should wait on that.

Because getting the debts to Treasury was an accomplishment.

Figuring out what to do with all of them was the next challenge.

Remember, Treasury hadn't been sitting around waiting for someone to knock on the door.

While our travelers were making their way east, FMS had been preparing for their arrival.

Now it was time to put those preparations to work.

The debts had to be received. The information accompanying them had to move through Treasury's systems. The agencies that sent them still needed to communicate with Treasury. And collection activity had to begin.

Our steamer trunks couldn't simply be unloaded and stacked against the wall.

The journey had changed locations, but the work wasn't finished.

And our little wagon train wouldn't be the last.

Back along the path they had helped forge, other agencies were making their own preparations.

More eligible debts would eventually be packed. More horses would be hitched. More wagons would turn east.

And over time, Treasury began learning what it meant to operate this new collection system in the real world.

That's when some of the challenges became easier to see.

GAO documented FMS's concern about the unpredictability of agency referrals. When some new agencies began participating, they referred thousands of older debts at one time, creating significant workload fluctuations.

So imagine someone at Treasury looking out toward the road one morning.

There's a wagon coming.

Then another.

And another.

Then five more appear over the hill.

And behind those...

Well...

“Um...has anybody counted how many wagons are behind them?”

Apparently, our first little wagon train was just the beginning.

As the volume of incoming debts changed, FMS had to manage changing workloads and determine how collection work would be handled.

And just like our travelers had discovered along the road, putting a new system into practice revealed things that couldn't always be anticipated from the instructions alone.

The systems themselves would continue to evolve. The procedures would continue to change. Problems would be identified and addressed. The operation would mature over time.

But something important had changed.

At the beginning of our story, eligible delinquent debts were sitting with separate federal agencies across our little Wild West town.

Now, more of those debts were making their way to Treasury.

Different agencies. Different programs. Different amounts of debt. Different times of arrival.

But increasingly, those wagons were reaching the same destination.

And Treasury wasn't supposed to become a giant warehouse filled with steamer trunks.

The debts inside those trunks still needed to be collected.

So all those separate trails leading from federal agencies to Treasury needed something more.

They needed a way for Treasury to receive eligible debts from federal agencies and perform collection activities on their behalf.

What had begun as separate trails was becoming a network.

And that network needed something to connect it all together.

It needed a bridge.

The Bridge That Makes It All Work

Remember that bridge I promised you?

Well...

We finally made it.

That bridge is called Cross-Servicing.

And this isn't a name we've invented for our story.

When Treasury issued its 1998 rule implementing the DCIA transfer requirements, it explained that “cross-servicing” is the term used for the function performed when one federal agency provides debt collection services for another federal agency. Treasury also described the transfer of eligible delinquent nontax debts to Treasury for collection as Cross-Servicing.

After the journey we've just taken, the name feels pretty fitting.

Debts that began with different federal agencies could now move into a centralized Treasury collection operation, where Treasury provided collection services on behalf of the agencies that sent them.

Different starting points.

Different trails.

One collection bridge.

And remember our sheriff from the last story?

The badge may have changed.

The debt generally didn't.

The originating federal agency remains the creditor agency. The regulation defines a creditor agency as the federal agency that is owed the debt, while Cross-Servicing is the program through which Fiscal Service provides delinquent nontax debt collection services.

So when your debt makes its way to Treasury, Treasury generally isn't buying it.

Treasury is collecting it on behalf of the federal agency that is owed the debt.

So, What Happens After My Debt Crosses the Bridge?

This is where our Wild West story starts looking a lot more like the letters people receive today.

Once an eligible debt is referred for Cross-Servicing, Treasury doesn't simply put the account in a filing cabinet and wait.

Today's Bureau of the Fiscal Service says Cross-Servicing may use a variety of collection tools, including demand letters, telephone calls, payment agreements, referrals to private collection agencies, credit bureau reporting, Administrative Wage Garnishment, referrals to the Department of Justice, and referral to the Treasury Offset Program.

Which tools may be used depends on the debt, the legal authority involved, and the information and authorization provided by the creditor agency. Fiscal Service's current guidance says the referring agency is responsible for determining the amount of the debt and telling Cross-Servicing what tools may be used.

So if your debt began with one federal agency and you later received correspondence from Treasury or a private collection agency working with Treasury, your debt didn't necessarily get sold somewhere along the trail.

It may have crossed the bridge.

The federal agency is still the creditor.

Treasury is now providing the collection services.

Same debt.

New badge.

The Bridge Didn't Stop Changing

Remember how many times our travelers had to stop and adjust along the way?

That didn't end when they reached Treasury.

The collection operation continued to mature.

Systems changed. Processes changed. Technology changed.

And problems discovered through experience led to further improvements.

By 2012, FMS officials told GAO that both the Treasury Offset Program and Cross-Servicing were fully mature, meaning the key elements had been implemented. Even then, FMS was continuing to pursue improvements intended to make centralized collection more efficient and effective.

And eventually, even the name on the badge changed.

In October 2012, the Financial Management Service and the Bureau of the Public Debt were consolidated to form the Bureau of the Fiscal Service (BFS).

Today, BFS administers the Cross-Servicing program and provides delinquent nontax debt collection services to federal agencies.

Our Wild West town has changed quite a bit.

Why This Journey Matters

We've traveled a long way since those first wagons left town.

And it might be tempting to look at all the laws, regulations, systems, agencies, acronyms, reports, and collection tools and wonder:

Why go through all this trouble?

Remember where our story started.

The DCIA fundamentally changed how the federal government managed delinquent debt. OMB explained in 1998 that Congress had directed the management of delinquent obligations to be centralized at Treasury to increase the efficiency of federal collection efforts.

The law gave Treasury a much larger role in government-wide debt collection.

But was the new system perfect on the day it began?

Our wagon train can probably answer that one.

Nope.

It took years of implementation, guidance, oversight, system changes, testing, cooperation between agencies, and adjustments to build the operation into what it would eventually become.

The little Wild West towns were no longer entirely on their own.

A network had been created.

And the paths between federal agencies and Treasury had become much easier to follow.

From the Trail to Today

If your federal debt has made its way to Treasury, you now know a little more about the journey that brought it there.

Your debt didn't simply disappear from one federal agency and mysteriously reappear somewhere else.

There is a system behind that movement.

A system that began taking shape after Congress passed the Debt Collection Improvement Act of 1996.

Federal agencies had to determine which debts were eligible to travel.

Treasury had to prepare to receive them.

Processes and technology had to be developed.

Problems had to be identified and corrected.

And over time, those separate trails became connected through Cross-Servicing.

Our travelers started this story with a law, a wagon full of steamer trunks, and a destination written on a map.

They had quite a journey.

But eventually...

they found the bridge.

And now you know where it leads.

☕ Before You Go...

If you've received a notice from the Bureau of the Fiscal Service and you're unsure what it means or what your options are, you don't have to figure it out alone.

At SBA & Federal Debt Advisory Services, LLC, we help individuals and small business owners understand non-tax federal debt collection and determine what steps may be available based on their circumstances.

Schedule a free 15-minute consultation

Phone: 307-243-9610

Website: Non-Tax Debt Help

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📚 The Bookshelf

You shouldn't have to dig through an entire government report to find the part we're talking about. Here are the specific places behind this story.

The rule that started our journey

Treasury's 1998 interim rule, “Transfer of Debts to Treasury for Collection,” Federal Register, Vol. 63, No. 63, April 2, 1998, beginning at page 16,354. Treasury explains the mandatory transfer requirement and the early meaning of Cross-Servicing.

Read the 1998 Treasury Cross-Servicing Rule

Why everyone had to circle up and compare notes

Office of Management and Budget Memorandum M-98-03, January 21, 1998. OMB said DCIA implementation had not met expectations, described the statute as comprehensive and complex, and called for agencies to work closely with Treasury.

Read OMB Memorandum M-98-03

What was happening at our SBA table

U.S. General Accounting Office, AIMD-00-45R, November 30, 1999. See GAO's recommendations concerning SBA's systems for identifying eligible delinquent loans and timely transfers.

Read the SBA GAO Report and Recommendations

Why some debts stayed behind

Treasury's exemption authority comes from 31 U.S.C. § 3711(g)(2). Historical government records document exemptions for specific classes of debt, including certain SBA debts and Education student loans.

See GAO's review of Treasury Cross-Servicing exemptions

SBA exemption detail

GAO's 2000 report records Treasury's January 2000 exemption for SBA disaster loans and certain business loans in active workout.

Read GAO AIMD-00-234

Education exemption detail

Treasury's historical Report to Congress states that Education student-loan debts had been exempt from mandatory Cross-Servicing since November 1998 based on Education's demonstrated expertise in collecting those debts.

Read Treasury's historical debt report

“Has anybody counted how many wagons are behind them?”

GAO AIMD-00-234 discusses referral patterns and workload problems as Cross-Servicing developed.

Read GAO AIMD-00-234

What Cross-Servicing means today

31 CFR § 285.12. See § 285.12(a) for the definitions of creditor agency and Cross-Servicing program.

Read 31 CFR § 285.12

Fiscal Service's current Cross-Servicing guidance

Fiscal Service provides a plain-English description of the program and collection tools.

Bureau of the Fiscal Service: Cross-Servicing

Fiscal Service FAQ

Fiscal Service explains what it means when an agency transfers or refers a debt to Cross-Servicing.

Fiscal Service Cross-Servicing FAQs

How FMS became BFS

On October 7, 2012, Treasury consolidated FMS and the Bureau of the Public Debt and established the Bureau of the Fiscal Service through Treasury Order 136-01.

Read Treasury Order 136-01

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