Section 1 Chapter 3: Credit Management

Question 1

What are the government credit programs?

Answer 1

• Direct Loans
• Loan Guarantees
• Extension of Credit
• Delinquent Taxes

Question 2

What is OMB Circular A-129

Answer 2

Policies for Federal Credit Programs and Nontax Receivables: Defines Additional Requirements for Managing a Federal Credit Program

Question 3

What are Program Management duties in Credit Programs?

Answer 3

• Determine eligibility for credit extension.
• Define the amount of credit to be extended.
• Establish terms and conditions.
• Negotiate work-out arrangements.

Question 4

What are the Financial Management duties in Credit Programs?

Answer 4

• 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

Question 5

Components of a Credit Program

Answer 5

• 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

Question 6

Traditional Approach to Credit Evaluation (4 C’s)

Answer 6

• Character
• Capacity
• Collateral
• Capital
• Co-Signer is the optional 5th C

Question 7

Steps to Extend Credit

Answer 7

• Determine Eligibility
• Evaluation for Credit Worthiness
• Other Steps
• Documentation

Question 8

Steps to Account Servicing

Answer 8

• Establish Accounts
• Credit Bureau Reporting
• Establish Escrow
• Collect and Record Payments
• Negotiate Delinquencies/Reschedule
• Monitor Credit and Reporting

Question 9

Debt Collection Improvement Act of 1996

Answer 9

Authorizes agencies to report all credit extended to individuals to credit bureaus.

Question 10

Steps to Collecting Delinquent Debt

Answer 10

• Dunning Procedures
• Offsets
• Collection Agencies
• Asset Sales
• Referral for Litigation

Question 11

Debt Collection Act of 1996

Answer 11

Requires agencies to transfer most debt that is delinquent more than 180 days to the Treasury Department of a Debt Collection Center

Question 12

Dunning Procedures

Answer 12

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.

Question 13

Types of Offets

Answer 13

• Administrative Offsets
• Salary Offset
• Income Tax Refund Offset

Question 14

Steps to Close-Out

Answer 14

• 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.

Question 15

Steps to Program Monitoring

Answer 15

• Objective Analysis
• Debt collection procedure effectiveness

Question 16

4 types of measures to monitor credit effectiveness

Answer 16

• Activity Measures:
• Effectiveness Measures
• Status Measures
• Efficiency Measures

Question 17

Activity Measures

Answer 17

• Indicate the volume of activities performed
• Intended to measure and manage workloads

Question 18

Effectiveness Measures

Answer 18

• Indicate the extent to which the program is achieving intended results
• Measures if the agency is receiving sufficient value for loans

Question 19

Status Measures

Answer 19

• Indicate the quantity and quality of loans made and retained (portfolio)

Question 20

Efficiency Measures

Answer 20

• Indicators of the cost per unit of various operations, including the various collection techniques