Section 1 Chapter 3: Credit Management Flashcards
What are the government credit programs?
- Direct Loans
- Loan Guarantees
- Extension of Credit
- Delinquent Taxes
What is OMB Circular A-129
Policies for Federal Credit Programs and Nontax Receivables: Defines Additional Requirements for Managing a Federal Credit Program
What are Program Management duties in Credit Programs?
- Determine eligibility for credit extension.
- Define the amount of credit to be extended.
- Establish terms and conditions.
- Negotiate work-out arrangements.
What are the Financial Management duties in Credit Programs?
- Budget Oversight
-Report to credit bureaus - Establish an accounting record for each borrower
- Promptly recording and depositing the borrower’s payments
- Monitoring each borrower’s repayments
- Reporting on the condition of the loans
- Initiating collection for delinquencies
- Dealing with uncollectible loans and loan guarantees
Components of a Credit Program
- Credit Extension: Deciding who my be granted credit, and how much
- Account Servicing: Receiving and crediting payments, monitoring debtor’s performance
- Debt Collection: Turning bad credit into good
- Close Out: Terminating the relationship
- Program Monitoring: Assessing if the program is meeting its objectives and how it is operating otherwise
Traditional Approach to Credit Evaluation (4 C’s)
- Character
- Capacity
- Collateral
- Capital
- Co-Signer is the optional 5th C
Steps to Extend Credit
- Determine Eligibility
- Evaluation for Credit Worthiness
- Other Steps
- Documentation
Steps to Account Servicing
- Establish Accounts
- Credit Bureau Reporting
- Establish Escrow
- Collect and Record Payments
- Negotiate Delinquencies/Reschedule
- Monitor Credit and Reporting
Debt Collection Improvement Act of 1996
Authorizes agencies to report all credit extended to individuals to credit bureaus.
Steps to Collecting Delinquent Debt
- Dunning Procedures
- Offsets
- Collection Agencies
- Asset Sales
- Referral for Litigation
Debt Collection Act of 1996
Requires agencies to transfer most debt that is delinquent more than 180 days to the Treasury Department of a Debt Collection Center
Dunning Procedures
A series of demand letters, expressing increasing concert and urgency. Should included a notice of intent to refer the debtor’s name to credit bureaus. Also performed by telephone.
Types of Offets
- Administrative Offsets
- Salary Offset
- Income Tax Refund Offset
Steps to Close-Out
- Debt write-off must be approved by a senior official
- Collateral that was posted is seized and sold
- Form 1099C is sent to the debtor and the IRS
Close out steps are specified in OMB Circular A-129, Section V, Sub-Section E: Debt more than 2 years old and “not economically collectible” should be written off.
Steps to Program Monitoring
- Objective Analysis
- Debt collection procedure effectiveness
