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[115th Congress Public Law 189]
[From the U.S. Government Publishing Office]

[[Page 1491]]

        SMALL BUSINESS 7(a) LENDING OVERSIGHT REFORM ACT OF 2018

[[Page 132 STAT. 1492]]

Public Law 115-189
115th Congress

                                 An Act

 
To amend the Small Business Act to strengthen the Office of Credit Risk 
   Management within the Small Business Administration, and for other 
            purposes. <<NOTE: June 21, 2018 -  [H.R. 4743]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, <<NOTE: Small Business 
7(a) Lending Oversight Reform Act of 2018. 15 USC 631 note.>> 
SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business 7(a) Lending Oversight 
Reform Act of 2018''.
SEC. 2. <<NOTE: 15 USC 657t note.>>  DEFINITIONS.

    In this Act, the terms ``Administration'' and ``Administrator'' mean 
the Small Business Administration and the Administrator thereof, 
respectively.
SEC. 3. CODIFICATION OF THE OFFICE OF CREDIT RISK MANAGEMENT AND 
                    THE LENDER OVERSIGHT COMMITTEE.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) 
is <<NOTE: 15 USC 631 note.>>  amended--
            (1) by redesignating section 47 as section 49; and
            (2) by inserting after section 46 the following new 
        sections:
``SEC. 47. <<NOTE: 15 USC 657t.>>  OFFICE OF CREDIT RISK 
                      MANAGEMENT.

    ``(a) Establishment.--There is established within the Administration 
the Office of Credit Risk Management (in this section referred to as the 
`Office').
    ``(b) Duties.--The Office shall be responsible for supervising--
            ``(1) any lender making loans under section 7(a) (in this 
        section referred to as a `7(a) lender');
            ``(2) any Lending Partner or Intermediary participant of the 
        Administration in a lending program of the Office of Capital 
        Access of the Administration; and
            ``(3) any small business lending company or a non-Federally 
        regulated lender without regard to the requirements of section 
        23.

    ``(c) Director.--
            ``(1) In general.--The Office shall be headed by the 
        Director of the Office of Credit Risk Management (in this 
        section referred to as the `Director'), who shall be a career 
        appointee in the Senior Executive Service (as defined in section 
        3132 of title 5, United States Code).
            ``(2) Duties.--The Director shall be responsible for 
        oversight of the lenders and participants described in 
        subsection (b), including by conducting periodic reviews of the 
        compliance and performance of such lenders and participants.

[[Page 132 STAT. 1493]]

    ``(d) Supervision Duties for 7(a) Lenders.--With respect to 7(a) 
lenders, an employee of the Office shall--
            ``(1) be present for and supervise any such review that is 
        conducted by a contractor of the Office on the premise of the 
        7(a) lender; and
            ``(2) supervise any such review that is not conducted on the 
        premise of the 7(a) lender.

    ``(e) Enforcement Authority Against 7(a) Lenders.--
            ``(1) Informal enforcement authority.--The Director may take 
        an informal enforcement action against a 7(a) lender if the 
        Director finds that the 7(a) lender has violated a statutory or 
        regulatory requirement under section 7(a) or any requirement in 
        a Standard Operating Procedures Manual or Policy Notice related 
        to a program or function of the Office of Capital Access.
            ``(2) Formal enforcement authority.--
                    ``(A) In general.--With the approval of the Lender 
                Oversight Committee established under section 48, the 
                Director may take a formal enforcement action against 
                any 7(a) lender if the Director finds that the 7(a) 
                lender has violated--
                          ``(i) a statutory or regulatory requirement 
                      under section 7(a), including a requirement 
                      relating to credit elsewhere; or
                          ``(ii) any requirement described in a Standard 
                      Operating Procedures Manual or Policy Notice, 
                      related to a program or function of the Office of 
                      Capital Access.
                    ``(B) Enforcement actions.--An enforcement action 
                imposed on a 7(a) lender by the Director under 
                subparagraph (A) shall be based on the severity or 
                frequency of the violation and may include assessing a 
                civil monetary penalty against the 7(a) lender in an 
                amount that is not greater than $250,000.
            ``(3) Appeal by lender.--A 7(a) lender may appeal an 
        enforcement action imposed by the Director described in this 
        subsection to the Office of Hearings and Appeals established 
        under section 5(i) or to an appropriate district court of the 
        United States.

    ``(f) <<NOTE: Deadline.>>  Regulations.--Not later than 1 year after 
the date of the enactment of this section, the Administrator shall issue 
regulations, after opportunity for notice and comment, to carry out 
subsection (e).

    ``(g) Servicing and Liquidation Responsibilities.--During any period 
during which a 7(a) lender is suspended or otherwise prohibited from 
making loans under section 7(a), the 7(a) lender shall remain obligated 
to maintain all servicing and liquidation activities delegated to the 
lender by the Administrator, unless otherwise specified by the Director.
    ``(h) Portfolio Risk Analysis of 7(a) Loans.--
            ``(1) In general.--The Director shall annually conduct a 
        risk analysis of the portfolio of the Administration with 
        respect to all loans guaranteed under section 7(a).
            ``(2) <<NOTE: Analyses.>>  Report to congress.--On December 
        1, 2018, and every December 1 thereafter, the Director shall 
        submit to Congress a report containing the results of each 
        portfolio risk analysis conducted under paragraph (1) during the 
        fiscal year preceding the submission of the report, which shall 
        include--

[[Page 132 STAT. 1494]]

                    ``(A) an analysis of the overall program risk of 
                loans guaranteed under section 7(a);
                    ``(B) an analysis of the program risk, set forth 
                separately by industry concentration;
                    ``(C) without identifying individual 7(a) lenders by 
                name, a consolidated analysis of the risk created by the 
                individual 7(a) lenders responsible for not less than 1 
                percent of the gross loan approvals set forth separately 
                for the year covered by the report by--
                          ``(i) the dollar value of the loans made by 
                      such 7(a) lenders; and
                          ``(ii) the number of loans made by such 7(a) 
                      lenders;
                    ``(D) steps taken by the Administrator to mitigate 
                the risks identified in subparagraphs (A), (B), and (C);
                    ``(E) the number of 7(a) lenders, the number of 
                loans made, and the gross and net dollar amount of loans 
                made;
                    ``(F) the number and dollar amount of total losses, 
                the number and dollar amount of total purchases, and the 
                percentage and dollar amount of recoveries at the 
                Administration;
                    ``(G) the number and type of enforcement actions 
                recommended by the Director;
                    ``(H) the number and type of enforcement actions 
                approved by the Lender Oversight Committee established 
                under section 48;
                    ``(I) the number and type of enforcement actions 
                disapproved by the Lender Oversight Committee; and
                    ``(J) the number and dollar amount of civil monetary 
                penalties assessed.

    ``(i) Budget Submission and Justification.--The Director shall 
annually provide, in writing, a fiscal year budget submission for the 
Office and a justification for such submission to the Administrator. 
Such submission and justification shall--
            ``(1) include salaries and expenses of the Office and the 
        charge for the lender oversight fees;
            ``(2) be submitted at or about the time of the budget 
        submission by the President under section 1105(a) of title 31; 
        and
            ``(3) <<NOTE: Public information. Time period.>>  be 
        maintained in an indexed form and made available for public 
        review for a period of not less than 5 years beginning on the 
        date of submission and justification.
``SEC. 48. <<NOTE: 15 USC 657u.>>  LENDER OVERSIGHT COMMITTEE.

    ``(a) Establishment.--There is established within the Administration 
the Lender Oversight Committee (in this section referred to as the 
`Committee').
    ``(b) Membership.--The Committee shall consist of at least 8 members 
selected by the Administrator, of which--
            ``(1) 3 members shall be voting members, 2 of whom shall be 
        career appointees in the Senior Executive Service (as defined in 
        section 3132 of title 5, United States Code); and
            ``(2) the remaining members shall be nonvoting members who 
        shall serve in an advisory capacity on the Committee.

    ``(c) Duties.--The Committee shall--
            ``(1) review reports on lender oversight activities;
            ``(2) review formal enforcement action recommendations of 
        the Director of the Office of Credit Risk Management with 
        respect to any lender making loans under section 7(a) and

[[Page 132 STAT. 1495]]

        any Lending Partner or Intermediary participant of the 
        Administration in a lending program of the Office of Capital 
        Access of the Administration;
            ``(3) <<NOTE: Recommenda- tions.>>  in carrying out 
        paragraph (2) with respect to formal enforcement actions taken 
        under subsection (d) or (e) of section 23, vote to recommend or 
        not recommend action to the Administrator or a designee of the 
        Administrator;
            ``(4) in carrying out paragraph (2) with respect to any 
        formal enforcement action not specified under subsection (d) or 
        (e) of section 23, vote to approve, disapprove, or modify the 
        action;
            ``(5) review, in an advisory capacity, any lender oversight, 
        portfolio risk management, or program integrity matters brought 
        by the Director; and
            ``(6) take such other actions and perform such other 
        functions as may be delegated to the Committee by the 
        Administrator.

    ``(d) Meetings.--
            ``(1) In general.--The Committee shall meet as necessary, 
        but not less frequently than on a quarterly basis.
            ``(2) Reports.--The Committee shall submit to the 
        Administrator a report detailing each meeting of the Committee, 
        including if the Committee does or does not vote to approve a 
        formal enforcement action of the Director of the Office of 
        Credit Risk Management with respect to a lender.''.

    (b) Supervision Duties for 7(a) Lenders.--Effective January 1, 2019, 
subsection (d) of section 47 (as added by subsection (a)) is 
amended <<NOTE: 15 USC 657t note.>>  to read as follows:

    ``(d) Supervision Duties for 7(a) Lenders.--
            ``(1) Reviews.--With respect to 7(a) lenders, an employee of 
        the Office shall--
                    ``(A) be present for and supervise any such review 
                that is conducted by a contractor of the Office on the 
                premise of the 7(a) lender; and
                    ``(B) supervise any such review that is not 
                conducted on the premise of the 7(a) lender.
            ``(2) Review report timeline.--
                    ``(A) In general.--Notwithstanding any other 
                requirements of the Office or the Administrator, the 
                Administrator shall develop and implement a review 
                report timeline which shall--
                          ``(i) require the Administrator to--
                                    ``(I) deliver a written report of 
                                the review to the 7(a) lender not later 
                                than 60 business days after the date on 
                                which the review is concluded; or
                                    ``(II) <<NOTE: Notification.>>  if 
                                the Administrator expects to submit the 
                                report after the end of the 60-day 
                                period described in clause (i), notify 
                                the 7(a) lender of the expected date of 
                                submission of the report and the reason 
                                for the delay; and
                          ``(ii) if a response by the 7(a) lender is 
                      requested in a report submitted under subparagraph 
                      (A), require the 7(a) lender to submit responses 
                      to the Administrator not later than 45 business 
                      days after the date on which the 7(a) lender 
                      receives the report.

[[Page 132 STAT. 1496]]

                    ``(B) Extension.--The Administrator may extend the 
                time frame described in subparagraph (A)(i)(II) with 
                respect to a 7(a) lender as the Administrator determines 
                necessary.''.

    (c) Transfer of Functions.--
            (1) <<NOTE: 15 USC 657t note.>>  Office of credit risk 
        management.--All functions of the Office of Credit Risk 
        Management of the Small Business Administration, including the 
        personnel, assets, and obligation of the Office of Credit Risk 
        Management, as in existence on the day before the date of the 
        enactment of this Act, shall be transferred to the Office of 
        Credit Risk Management established under section 47 of the Small 
        Business Act, as added by subsection (a).
            (2) <<NOTE: 15 USC 657u note.>>  Lender oversight 
        committee.--All functions of the Lender Oversight Committee of 
        the Small Business Administration, including the personnel, 
        assets, and obligations of the Lender Oversight Committee, as in 
        existence on the day before the date of the enactment of this 
        Act, shall be transferred to the Lender Oversight Committee 
        established under section 48 of the Small Business Act, as added 
        by subsection (a).

    (d) Deeming of Name.--
            (1) <<NOTE: 15 USC 657t note.>>  Office of credit risk 
        management.--Any reference in a law, regulation, guidance, 
        document, paper, or other record of the United States to the 
        Office of Credit Risk Management of the Small Business 
        Administration shall be deemed a reference to the Office of 
        Credit Risk Management, established under section 47 of the 
        Small Business Act, as added by subsection (a).
            (2) <<NOTE: 15 USC 657u note.>>  Lender oversight 
        committee.--Any reference in a law, regulation, guidance, 
        document, paper, or other record of the United States to the 
        Lender Oversight Committee of the Small Business Administration 
        shall be deemed a reference to the Lender Oversight Committee, 
        established under section 48 of the Small Business Act, as added 
        by subsection (a).

    (e) Technical Amendment.--Section 3(r)(2) of the Small Business Act 
(15 U.S.C. 632(r)(2)) is amended by striking ``regulated SBA lender'' 
each place it appears in heading and text and inserting ``regulated 
lender''.
SEC. 4. DEFINITION OF CREDIT ELSEWHERE.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--
            (1) by striking section 3(h) (15 U.S.C. 632(h)) and 
        inserting the following:

    ``(h) The term `credit elsewhere' means--
            ``(1) for the purposes of this Act (except as used in 
        section 7(b)), the availability of credit on reasonable terms 
        and conditions to the individual loan applicant from non-
        Federal, non-State, or non-local government sources, considering 
        factors associated with conventional lending practices, 
        including--
                    ``(A) the business industry in which the loan 
                applicant operates;
                    ``(B) whether the loan applicant is an enterprise 
                that has been in operation for a period of not more than 
                2 years;
                    ``(C) the adequacy of the collateral available to 
                secure the requested loan;

[[Page 132 STAT. 1497]]

                    ``(D) the loan term necessary to reasonably assure 
                the ability of the loan applicant to repay the debt from 
                the actual or projected cash flow of the business; and
                    ``(E) any other factor relating to the particular 
                credit application, as documented in detail by the 
                lender, that cannot be overcome except through obtaining 
                a Federal loan guarantee under prudent lending 
                standards; and
            ``(2) for the purposes of section 7(b), the availability of 
        credit on reasonable terms and conditions from non-Federal 
        sources taking into consideration the prevailing rates and terms 
        in the community in or near where the applicant business concern 
        transacts business, or the applicant homeowner resides, for 
        similar purposes and periods of time.''; and
            (2) in section 7(a)(1)(A)(i) (15 U.S.C. 636(a)(1)(A)(i)), by 
        inserting ``The Administrator has the authority to direct, and 
        conduct oversight for, the methods by which lenders determine 
        whether a borrower is able to obtain credit elsewhere.'' before 
        ``No financial assistance''.

    (b) Technical Amendment.--Section 18(b) of the Small Business Act 
(15 U.S.C. 647(b)) is amended to read as follows:
    ``(b) <<NOTE: Definition.>>  As used in this Act, the term 
`agricultural enterprises' means those small business concerns engaged 
in the production of food and fiber, ranching, and raising of livestock, 
aquaculture, and all other farming and agricultural-related 
industries.''.
SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE AMOUNT FOR GENERAL 
                    BUSINESS LOANS.

    Section 20 of the Small Business Act (15 U.S.C. 631 note) is 
amended--
            (1) by redesignating subsection (j) as subsection (f); and
            (2) by adding at the end the following new subsection:

    ``(g) Authority To Increase Amount of General Business Loans.--
            ``(1) <<NOTE: Determination.>>  In general.--Subject to 
        paragraphs (2) and (3) and with respect to fiscal year 2019 and 
        each fiscal year thereafter, if the Administrator determines 
        that the amount of commitments by the Administrator for general 
        business loans authorized under section 7(a) for a fiscal year 
        could exceed the limit on the total amount of commitments the 
        Administrator may make for those loans under this Act, an 
        appropriations Act, or any other provision of law, the 
        Administrator may make commitments for those loans for that 
        fiscal year in an aggregate amount equal to not more than 115 
        percent of that limit.
            ``(2) Notice required before exercising authority.--Not 
        later <<NOTE: Deadline.>>  than 30 days before the date on which 
        the Administrator intends to exercise the authority under 
        paragraph (1), the Administrator shall submit notice of intent 
        to exercise the authority to--
                    ``(A) the Committee on Small Business and 
                Entrepreneurship and the Subcommittee on Financial 
                Services and General Government of the Committee on 
                Appropriations of the Senate; and
                    ``(B) the Committee on Small Business and the 
                Subcommittee on Financial Services and General 
                Government of the Committee on Appropriations of the 
                House of Representatives.

[[Page 132 STAT. 1498]]

            ``(3) Limitation.--The Administrator shall not exercise the 
        authority under paragraph (1) more than once during any fiscal 
        year.''.
SEC. 6. <<NOTE: 15 USC 657t note.>>  ESTABLISHING A PROCESS FOR 
                    WAIVERS.

    (a) In General.--If the Administrator exercises statutory or 
regulatory authority to waive a regulation or a requirement in the 
Standard Operating Procedures Manual or Policy Notice related to a 
program or function of the Office of Capital Access of the 
Administration, the waiver shall be in writing and be maintained in an 
indexed form.
    (b) No New Waiver Authority.--Nothing in subsection (a) shall be 
construed as creating new authority for the Administrator to waive 
regulations of the Administration.
SEC. 7. REPEAL OF SMALL BUSINESS LOAN LOSS REPORT.

    Subsection (b) of section 10 of the Small Business Act (15 U.S.C. 
639(b)) is repealed.

    Approved June 21, 2018.

LEGISLATIVE HISTORY--H.R. 4743 (S. 2283):
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HOUSE REPORTS: No. 115-655 (Comm. on Small Business).
SENATE REPORTS: No. 115-265 (Comm. on Small Business and 
Entrepreneurship) accompanying S. 2283.
CONGRESSIONAL RECORD, Vol. 164 (2018):
            May 8, considered and passed House.
            June 5, considered and passed Senate.

                                  <all>
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