52296 Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Proposed Rules 

consider initiating a rulemaking on this 

subject in the future. 

Initiating a rulemaking at this time 

would not be an efficient or effective 

use of the Commission’s resources. See 

11 CFR 200.5(e). The Commission is 

currently defending the 

constitutionality of BCRA’s 

electioneering communication 

provisions against two as-applied 

challenges to the statute involving 

communications that the plaintiffs 

claim are ‘‘grassroots lobbying’’

communications. See Wisconsin Right 

to Life v. FEC, Civ. No. 04–1260 

(D.D.C.); Christian Civic League of 

Maine v. FEC, Civ. No. 06–614 (D.D.C.). 

Even if the Commission were to grant 

the Petitioners’ request to begin a 

rulemaking to create a ‘‘grassroots 

lobbying’’ exemption, the plaintiffs in 

these cases may well continue to pursue 

litigation or to initiate new litigation, 

particularly if the Commission were to 

craft an exemption narrower than that 

contemplated by the plaintiffs. 

Moreover, any eventual court decisions 

in these lawsuits may provide the 

Commission with guidance on whether 

and how the Commission should 

exercise its discretion in this area. 

Judicial guidance may well necessitate a 

reevaluation of any rules the 

Commission were to propose now. 

Therefore, in light of the pending asapplied challenges to the 

constitutionality of the electioneering 

communication provisions, the 

Commission believes that initiating a 

rulemaking at this time would not be an 

effective use of its resources or an 

appropriate way to proceed. 

Dated: August 29, 2006. 

Michael E. Toner, 

Chairman, Federal Election Commission. 

[FR Doc. E6–14638 Filed 9–1–06; 8:45 am] 

BILLING CODE 6715–01–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 120 

RIN 3245–AF49 

Business Loan Program; Lender 

Examination and Review Fees 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule 

implements a recent amendment to the 

Small Business Act authorizing the 

Small Business Administration (SBA) to 

assess fees to lenders participating in 

SBA’s 7(a) loan guarantee program 

(Lenders) to cover the costs of 

examinations, reviews, and other 

Lender oversight activities. The 

proposed rule describes the 

methodology for fee assessment. Under 

the proposed rule, Lenders would pay 

the actual costs to SBA of the on-site 

examinations and reviews, and would 

be allocated off-site review/monitoring 

costs based on each Lender’s 

proportionate share of loan dollars that 

SBA has guaranteed in the SBA 

portfolio. The proposed rule also 

describes the billing and payment 

processes. 

DATES: Comments must be received on 

or before October 5, 2006. 

ADDRESSES: You may submit comments, 

identified by [RIN number 3245–AF49], 

by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web Site: 

proprule@sba.gov. Follow the 

instructions for submitting comments. 

• E-mail: lender.oversight@sba.gov. 

• Fax: (202) 205–6831. 

• Mail: Bryan Hooper, Associate 

Administrator for Lender Oversight, 

Small Business Administration, 409 3rd 

Street, SW., 8th floor, Washington, DC 

20416. 

• Hand Delivery/Courier: 409 3rd 

Street, SW., 8th floor, Washington, DC 

20416. 

FOR FURTHER INFORMATION CONTACT: John 

White, Deputy Associate Administrator 

for Lender Oversight, (202) 205–6345, 

john.white@sba.gov; or Paul Bishop, 

Financial Analyst, Office of Lender 

Oversight, (202) 205–7516, 

paul.bishop@sba.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 7(a) of the Small Business 

Act, 15 U.S.C. 636(a), authorizes SBA to 

guarantee loans made by Lenders to 

eligible small businesses. Currently, 

there are over 5,000 Lenders authorized 

to make such SBA guaranteed loans. 

SBA conducts off-site reviews/ 

monitoring and on-site exams/reviews 

of these Lenders to ensure they are 

processing loans in accordance with 

prescribed standards, and to minimize 

losses. Section 5(b)(14) of the Small 

Business Act (15 U.S.C. 634(b)(14)), 

authorizes SBA to require these Lenders 

to pay fees to cover ‘‘the costs of [the] 

examinations, reviews, and other 

Lender oversight activities.’’ Congress 

granted SBA this new fee authority 

under section 131 of Division K of 

Public Law 108–447, enacted December 

8, 2004. 

Examination and review costs 

primarily consist of contractor charges 

for assistance with (i) on-site 

examinations; (ii) on-site reviews; and 

(iii) off-site reviews/monitoring 

activities. SBA’s contractors for on-site 

exams and reviews bill SBA separately 

for each examination/review as it is 

conducted. The contractor supporting 

off-site reviews/monitoring generally 

bills SBA on a quarterly basis to cover 

its contract price. 

A discussion of the proposal and a 

section-by-section analysis follows. 

II. Proposal 

A. Review and Examination 

SBA conducts the following 

examinations and reviews of Lenders: (i) 

Off-site reviews/monitoring; (ii) on-site 

examinations; and (iii) on-site reviews. 

Under the proposed rule, the fee that 

SBA would charge a Lender would 

generally depend on the reviews/ 

examinations that SBA conducts for that 

Lender. 

B. All Lenders 

All Lenders receive a quarterly off-site 

review. The off-site review is conducted 

using SBA’s Loan and Lender 

Monitoring System (L/LMS). This L/ 

LMS review is the primary method of 

monitoring all of SBA’s approximately 

5,200 Lenders. For lower volume 

Lenders, it also may be SBA’s sole 

method of reviewing them. L/LMS is 

also used in conjunction with SBA’s onsite exams/reviews, for purposes of 

planning and prioritization of exams/ 

reviews. Under the proposed rule, 

SBA’s cost of off-site review/monitoring 

(primarily the L/LMS contract cost) 

would be recovered through fees 

charged to all Lenders. The cost would 

be allocated according to each Lender’s 

respective outstanding SBA guarantees 

(guaranteed dollars) relative to the total 

guaranteed dollars SBA has outstanding 

in its 7(a) loan portfolio. Both Lenders’

outstanding SBA guarantees and the 

total guaranteed SBA dollars would be 

calculated using September 30 portfolio 

figures. Guaranteed dollars outstanding 

includes guarantees of both loans held 

by the Lender and loans sold into the 

secondary market, securitized, or for 

which a Lender has sold a participation 

interest. It also includes loans that have 

been purchased by SBA but have not yet 

been charged off. 

The annual cost of the L/LMS reviews 

under SBA’s current contract is about 

$82 per $1 million in outstanding 

guarantees. SBA proposes to use this 

ratio in calculating the Lender’s fee for 

off-site monitoring/reviews. Should 

SBA’s costs under the contract change, 

the ratio would change accordingly. 

SBA does not plan at this time to 


erjones on PRODPC60 with PROPOSALS
Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Proposed Rules 52297 

recover its own costs related to the 

conduct of the off-site review, including 

the salary and expenses of SBA 

employees involved in the review. 

Under the current formula, 

approximately 3,400 Lenders that have 

less than $1 million in outstanding SBA 

loan guarantees would incur an average 

annual fee of less than $25. The 

approximately 1,100 Lenders with 

between $1 million and $4 million in 

outstanding SBA loan guarantees would 

incur an annual off-site review fee 

ranging from $82 to $327. The 

approximately 300 Lenders with 

between $4 million and $10 million in 

outstanding SBA loan guarantees would 

pay an estimated annual off-site review 

fee ranging from $330 to $816. Finally, 

the remaining 380 Lenders with 

outstanding SBA loan guarantees of 

greater than $10 million would pay a 

median of $1,848 per year for off-site 

reviews/monitoring. Each Lender’s fee 

assessment will include a description of 

how the fee was calculated. This off-site 

review cost could, over time, serve to 

maintain on-site examination/review 

costs at a minimum by allowing SBA to 

focus its on-site reviews and 

examinations on those Lenders whose 

portfolios or operational performance 

present SBA with the most risk. SBA 

may waive or provide an exemption for 

the fees due from very small volume 

Lenders when the administrative costs 

of collecting the fee from a Lender are 

greater than the amount of the fee itself 

(i.e. when it is not cost effective to 

collect such fees). SBA is in the process 

of determining at which dollar amount 

it would not be cost effective for SBA 

to bill and collect. SBA is also in the 

process of estimating the total amount of 

fees in case SBA determines to 

implement the waiver/exemption. SBA 

is considering other methodologies for 

determining the appropriate basis for 

waiver/exemption. Should SBA decide 

to grant fee waivers/exemptions, such 

action will not affect the fee charged to 

other Lenders, and any shortfall will be 

made up with SBA’s available 

appropriations. 

C. SBA Supervised Lenders 

In addition to quarterly off-site 

reviews, SBA also performs on-site 

safety and soundness examinations of 

SBA’s Small Business Lending 

Companies (‘‘SBLCs’’) and large NonFederally Regulated Lenders (‘‘NFRLs’’) 

(together ‘‘SBA Supervised Lenders’’). 

Each SBLC is usually examined on a 12 

to 24 month cycle. NFRLs may also be 

examined on a 12 to 24 month cycle, 

depending upon such factors as size, 

level of SBA lending activity, and 

results of previous examinations. Under 

the proposed rule, each SBA Supervised 

Lender’s fees would, generally, include: 

(i) The annual L/LMS charge and (ii) the 

on-site examination cost (if an exam was 

performed that fiscal year). The 

examination fee component would be 

based primarily on actual hourly 

charges of, and travel expenses incurred 

by, the contractor (currently a Federal 

financial institution regulator). 

The safety and soundness 

examination that these Lenders receive 

is similar in scope to safety and 

soundness examinations conducted by 

other Federal regulators. However, the 

cost of an SBA examination is 

reasonable in relation to the assessments 

for examinations by other Federal 

regulators. For example, the Comptroller 

of the Currency’s current annual 

assessment on a bank with $1 billion in 

assets is $219,580, and the Office of 

Thrift Supervision assesses the same 

size institution $204,096; whereas the 

annual cost for an SBA-Supervised 

Lender on a 24 month exam cycle with 

$1 billion in outstanding loan balances 

(with 71% of that portfolio guaranteed 

by SBA) would average $139,220. This 

amount is calculated as follows: The 

biennial safety and soundness 

examination for a Lender with $1 billion 

in assets under the current contract 

typically costs $162,000, for an average 

annual cost of $81,000. In addition, the 

L/LMS fee for the same sized SBLC 

would be $58,220, for a total annual cost 

to the Lender of $139,220. 

D. Non-SBA Supervised Lenders 

In addition to quarterly off-site 

reviews/monitoring, SBA plans to 

conduct, on a 12 to 24 month review 

cycle, on-site reviews of the 7(a) 

operations of Lenders with $10 million 

or more in outstanding SBA loan 

guarantees. On-site reviews will not be 

conducted for the SBLCs and NFRLs 

that receive on-site examinations. Onsite reviews are performed with the 

assistance of a financial services firm 

under contract with SBA. Under the 

proposed rule, fees for the Lenders in 

this category would generally include: 

(i) The annual L/LMS charge and (ii) the 

on-site review fee (if a review was 

performed that fiscal year). On-site 

review costs of a Lender’s 7(a) 

operations currently range from $20,000 

to $24,000. Factors that may affect 

where a Lender falls in the estimated 

range include, but are not limited to, the 

complexity of a Lender’s 7(a) 

operations, rating trends, guaranteed 

dollars outstanding, and results of 

previous examinations. The timing of 

on-site reviews may also depend upon 

SBA’s ability to coordinate reviews of 

Lenders that will minimize travel 

expenses and achieve economies of 

scale, thus reducing Lenders’ review 

fees. 

In addition to Lenders with $10 

million or more in SBA in 7(a) loan 

guarantees, SBA may perform on-site 

reviews of Lenders with loan guarantees 

of as little as $4 million in situations 

where SBA’s off-site monitoring 

indicate such a Lender is a very high 

risk to SBA. 

E. SBA’s Other Lender Oversight 

Expenses 

Under the proposed rule, SBA has the 

authority to recover its other expenses 

in carrying out Lender oversight 

activities (for example, the salaries and 

travel expenses of SBA employees and 

equipment expenses that are related to 

carrying out Lender oversight activities). 

However, SBA does not plan at this time 

to charge Lenders for these costs. 

Should SBA decide to assess a fee for 

these expenses in the future, each 

Lender’s fee would be calculated by 

multiplying the total annual cost of 

SBA’s oversight operational expenses by 

the Lender’s dollar share of the total 

outstanding SBA guarantees. SBA will 

notify Lenders if it proposes to recover 

expenses resulting from its other Lender 

oversight activities. 

F. Assessment Methodology 

SBA’s proposed assessment formula is 

based primarily on allocating the actual 

cost of a particular Lender’s 

examination and review to that Lender. 

This is feasible because SBA’s on-site 

examination and review costs, unlike 

those of most of the other financial 

institution regulators, primarily consist 

of contractor assistance billed on a 

Lender-specific basis. 

For those costs that are not incurred 

on a Lender-by-Lender basis (for 

example, off-site monitoring/reviews), 

SBA proposes a risk-based formula 

based on a Lender’s outstanding 

guaranteed dollars relative to that of 

SBA’s outstanding guaranteed portfolio, 

as of September 30. The guaranteed 

dollar methodology ties a Lender’s 

charge to that of SBA’s risk of dollar 

loss. SBA considered allocating these 

costs based on the number of loans that 

a Lender has outstanding. The loan 

number-based methodology, however, 

fails to consider varying guarantee 

percentages in SBA’s loan programs (for 

example SBA Express at 50% versus 

regular 7(a) lending at 75% or more) and 

diversity of loan sizes. It also fails to 

consider that SBA’s dollar loss is 

directly related to the size of the loans 

rather than the number of loans; the loss 

from a large loan will greatly exceed the 

loss from a small loan. It, therefore, 


erjones on PRODPC60 with PROPOSALS
52298 Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Proposed Rules 

would result in a less equitable 

distribution of the costs. Finally, the 

loan-based methodology may be 

contrary to SBA’s goal to assist as many 

of America’s small businesses as are 

eligible for agency assistance. 

SBA also considered the fee 

assessment methodologies of the various 

federal financial institution regulators. 

The federal financial institution 

regulators’ methodologies are generally 

complex. There are approximately three 

common factors incorporated into the 

allocation formulas. The factors are: (i) 

An institution’s assets; (ii) an 

institution’s exam rating; and (iii) 

economies of scale. These factors were 

considered and incorporated into SBA’s 

proposed fee assessment methodology 

to determine the proposed on-site 

review charge. 

The off-site monitoring/review cost 

allocation formula is also based on 

outstanding guaranteed dollars of the 

institution’s SBA loan assets. Exam 

rating trends are indirectly incorporated 

into the methodology to the extent that 

better ratings could translate to less 

frequent on-site examinations and 

reviews. Overall, SBA’s proposed cost 

allocation methodology would result in 

fees that are reasonable relative to 

federal financial institution regulator 

assessments. It provides for equitable 

distribution of SBA costs. Finally, it is 

consistent with legislative guidance to 

tie fees to the ‘‘size of the lender’s 

portfolio being reviewed, and the time 

necessary to review the portfolios.’’ Sen. 

Rept. 108–124 pg. 12 (Aug. 26, 2003). 

III. Section-by-Section Analysis 

Section 120.454—PLP Performance 

Review. To eliminate redundancy, SBA 

proposes to strike the second sentence 

of this provision, which authorizes SBA 

to charge a PLP Lender fee to cover the 

costs of the PLP performance review. 

Subpart I—Lender Oversight. SBA 

would add a new subpart for lender 

oversight, which would initially consist 

of proposed section 120.1070 governing 

lender oversight fees. 

Section 120.1070—Lender Oversight 

Fees. SBA proposes to add this new 

section to part 120 of Title 13 CFR to 

implement the fee authority granted to 

SBA. 

Section 120.1070(a)—Fee 

Components. This provision sets forth 

the components that may be included in 

the total fee, including charges to cover 

the costs of: (1) On-site safety and 

soundness examinations conducted for 

SBLCs and NFRLs; (2) on-site reviews 

conducted for other Lenders; (3) off-site 

reviews/monitoring conducted for all 

Lenders; and (4) SBA’s other Lender 

oversight expenses, as assessed. The fee 

would be based on SBA’s costs. The 

amount of each Lender’s fee for the onsite examination or review would 

include the actual expenses incurred for 

that Lender’s on-site review or 

examination. In the case of off-site 

reviews/monitoring, SBA would 

allocate the charge based on the 

Lender’s share of SBA guaranteed 

dollars outstanding. Finally, if SBA later 

decides to include charges for other 

lender oversight activities, those costs 

would be allocated similar to the 

formula for allocating off-site review/ 

monitoring costs. 

Section 120.1070(b)—Billing Process. 

This provision describes the process for 

billing the Lenders for the fees. For the 

on-site examinations and reviews, SBA 

would bill the Lender following 

completion of the review. SBA would 

bill the Lender for the charges for the 

off-site reviews and SBA’s other Lender 

oversight expenses (the latter if 

assessed) on an annual basis. The bill 

will include the approved payment 

method(s). The payment due date will 

be no less than 30 calendar days from 

the bill date. 

Section 120.1070(c)—Delinquent 

Payment and Late-Payment Charges. 

This provision provides that any 

payment that is not received by the due 

date specified in the bill would be 

considered delinquent. It also provides 

that SBA may charge interest, penalties 

and other charges on delinquent 

payments, as provided by applicable 

law, and that SBA may waive the 

interest charge if circumstances warrant. 

IV. Comments 

The form and content of the proposal 

should not be viewed as exhaustive. 

SBA seeks comments on all aspects of 

the proposal and suggestions as to any 

modifications. For example, SBA would 

be interested in comments concerning 

the methodology used to distribute costs 

to Lenders. However, SBA will rely on 

its own expertise in making final 

determinations for the final rule. 

V. Compliance With Executive Orders 

12866, 12988, and 13132, the 

Regulatory Flexibility Act (5 U.S.C. 

601–612), and the Paperwork 

Reduction Act (44 U.S.C., Ch. 35) 

Executive Order 12866 

The Office of Management and Budget 

has determined that this rule constitutes 

a significant regulatory action under 

Executive Order 12866 thus requiring a 

Regulatory Impact Analysis, as set forth 

below. 

A. Regulatory Objective 

As the SBA moves to more 

streamlined lending processes and 

delegates more authority to its Lenders, 

the need for better and more 

comprehensive Lender oversight is 

essential. With the integration of 

L/LMS, the SBA has an early warning 

system that allows SBA to monitor its 

Lenders on a regular basis. Off-site 

reviews/monitoring and on-site 

examinations or reviews allow SBA to 

determine which Lenders pose the most 

risk to the SBA from both an exposure 

and credit risk perspective. By 

identifying Lenders with unacceptable 

levels of risk, the SBA can work with 

the Lenders to limit the risk. 

This proposed rule implements a 

recent amendment to the Small 

Business Act authorizing SBA to require 

7(a) Lenders to pay fees to cover the 

costs of examinations or reviews and 

other Lender oversight activities. SBA 

believes that the methodology for 

charging fees to Lenders, which is based 

on direct costs of individual Lender 

examination or review expenses and the 

allocation of off-site review expenses by 

each Lender’s share of the guaranteed 

dollars in the entire outstanding SBA 

portfolio, is equitable and reasonable. 

B. Baseline Costs 

SBA currently performs examinations 

and reviews for all 7(a) lenders. This 

proposal does not modify the current 

examination and review scope. Rather, 

it implements the recent amendment to 

the Small Business Act authorizing SBA 

to assess lenders fees to cover the costs 

of those examinations or reviews. 

Examination and review costs primarily 

consist of contractor charges for 

assistance with (i) on-site examinations; 

(ii) on-site reviews; and (iii) off-site 

reviews/monitoring activities. SBA’s 

contractors for on-site exams and 

reviews bill SBA separately for each 

examination/review as it is conducted. 

The total annual cost of contractor onsite examinations and reviews is 

$4,915,000. The contractor for off-site 

reviews/monitoring generally bills SBA 

one flat fee for the year to cover the 

reviews/monitoring of all Lenders. The 

total annual cost for off-site reviews/ 

monitoring is approximately $2,604,000; 

the apportionment of these costs at the 

Lender level have been discussed above 

in the ‘‘Supplemental Information, 

Section II Proposal.’’

C. Potential Benefits and Costs 

The costs to Lenders associated with 

SBA’s on-site and off-site reviews and 

monitoring are described elsewhere in 

this notice. The benefit for Lenders is 

that it allocates direct costs of on-site 

examinations or reviews to those 

Lenders for whom those costs are 

incurred. 


erjones on PRODPC60 with PROPOSALS
Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Proposed Rules 52299 

Indirect costs of off-site monitoring 

will be allocated according to each 

Lender’s participation level as measured 

by SBA guaranteed dollars, so that the 

costs will be proportionate to the 

benefits Lenders derive from 

participating in the 7(a) program. In 

addition, Lenders with the highest 

amount of SBA guaranteed dollars 

represent the most risk to SBA and 

require the greatest level of off-site 

monitoring; therefore, apportioning the 

monitoring costs in relation to the 

amount of SBA guaranteed dollars is 

more equitable to smaller or new 

Lenders that represent proportionately 

less risk to SBA. The 92% of 7(a) 

Lenders with under $10 million in 

outstanding SBA guarantees benefit by 

the off-site review process. Most of these 

Lenders will be subject to off-site 

reviews instead of on-site reviews, 

which will eliminate space and staff 

costs associated with SBA’s on-site 

review process. Payment of fees 

proposed in this rule will allow SBA to 

maintain the off-site review process for 

less active lenders while allocating the 

higher cost of on-site reviews and 

examinations to those active lenders 

that represent the most risk to SBA and 

for whom the expense is directly 

incurred. The SBA and lenders will 

incur additional administrative costs 

related to the billing, collection, and 

payment of the fees. These 

administrative costs are limited to 

accounting input for SBA’s bill and 

receipt system and writing a check by 

the lender. They are deemed to be 

minimal. 

Besides allocating its review and 

monitoring costs to its Lenders, SBA 

will benefit through the relative ease of 

administering the assessment process. 

SBA’s additional costs would only 

consist of new expenses incurred in 

collecting the fees. SBA anticipates that 

these new expenses would be minimal. 

D. Alternatives (Cost/Benefits 

Estimated) 

An alternative off-site review/ 

monitoring cost allocation plan was 

considered, based on the number of 

loans outstanding for each respective 

Lender. A significant portion of the cost 

of analytics used in the L/LMS is that 

of obtaining credit scores on borrowers 

with outstanding SBA guaranteed loans 

to assess the credit risk of the Lender’s 

7(a) loan portfolio. The benefit of this 

scheme is that it charges each Lender 

based on the credit scores obtained for 

their SBA portfolio. We have 

determined that this methodology is 

contrary to the SBA’s mission and 

would not be well related to risk. Our 

mission is to provide capital access to 

as many small business concerns as 

possible within the authorized funding 

level. Lending partners that reach out to 

very small businesses and startup 

businesses should not be charged the 

same off-site monitoring fee for their 

small loan as another Lender with a 

very large loan. The loan number based 

methodology also fails to consider 

varying guarantee percentages in SBA’s 

loan programs (for example SBA 

Express at 50% versus regular 7(a) 

lending at 75%). Risk considered is the 

dollar risk of defaulted guaranteed 

balances. Therefore, a scheme that 

assesses fees directly proportionate to 

the guaranteed balances is the most 

equitable. 

Executive Order 12988 

This proposed action meets 

applicable standards set forth in §§ 3(a) 

and 3(b)(2) of Executive Order 12988, 

Civil Justice Reform, to minimize 

litigation, eliminate ambiguity, and 

reduce burden. This rule would not 

have retroactive or pre-emptive effect. 

Executive Order 13132 

This proposed rule would not have 

substantial direct effects on the States, 

on the relationship between the Federal 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, for the 

purposes of Executive Order 13132, 

SBA has determined that this proposed 

rule has no federalism implications 

warranting preparation of a federalism 

assessment. 

Regulatory Flexibility Act 

When an agency issues a rulemaking 

proposal, the Regulatory Flexibility Act 

(RF), 5 U.S.C. 601–612, requires the 

agency to ‘‘prepare and make available 

for public comment an initial regulatory 

flexibility analysis’’ which will 

‘‘describe the impact of the proposed 

rule on small entities.’’ 5 U.S.C. 603(a). 

Section 605 of the RFA allows an 

agency to certify a rule, in lieu of 

preparing an analysis, if the proposed 

rulemaking is not expected to have a 

significant economic impact on a 

substantial number of small entities. 

Although this rulemaking may affect a 

substantial number of small entities, for 

the reasons stated below, SBA does not 

believe that this proposal will have a 

significant economic impact on a 

substantial number of small entities. 

This proposed rule implements Small 

Business Act 5(b)(14), which authorizes 

SBA to require 7(a) Lenders to pay 

examination and review fees. These fees 

are to be available to fund the costs of 

examinations, reviews, and other 

Lender oversight activities. 

The proposed would apply to all 7(a) 

lenders with outstanding SBA 

guaranteed loan balances. 

Approximately 5,200 lenders are 

currently participating in the 7(a) 

program, of which 11 are active SBLC 

Lenders. SBA has determined that 

SBLCs are classified under the size 

standard for NAICS 522298. Three of 

the 11 active SBLCs are below the $6.5 

million in average annual receipts and 

are deemed small business concerns. 

Nearly all of the remaining 7(a) Lenders 

are covered under NAICS 522110 for 

commercial banks and other depository 

financial institutions. About 3,000 of the 

Lenders in this classification have less 

than $165 million in assets and are 

deemed small business concerns. 

The proposed rule would not have a 

significant economic impact on a 

substantial number of the 3,000 Lenders 

covered under NAICS 522110. Most of 

these Lenders have very small SBA 

portfolios and would only be subject to 

fees for the off-site reviews/monitoring. 

The annual fee for 98% percent of these 

lenders would be less than $945, the 

cost of a one year subscription to the 

‘‘American Banker’’ magazine. The 

estimated annual fee for 2,068 of these 

small Lenders would be less than $50. 

SBA may waive the fees when it is not 

cost-effective to bill and collect. SBA is 

in the process of determining at which 

dollar amount it would not be cost 

effective for SBA to bill and collect. 

That determination may be revised 

periodically to reflect changes in SBA’s 

costs. Another 443 would be assessed 

annual fees of less than $100. For 469 

Lenders, the annual fee would be 

between $100 and $1,000. The largest of 

the approximately 51 remaining Lenders 

classified as small business concerns 

has over $100 million in outstanding 

SBA guarantees. The estimated 

annualized fee for this Lender, which 

would cover the cost of the bi-annual 

on-site review plus annual off-site 

monitoring cost, would be $21,440. The 

estimated annualized fee of the on-site 

exam plus the annual off-site 

monitoring cost fee for the three SBLCs 

classified as small business concerns 

would range from $26,034 to $40,302. 

Moreover, since SBA would calculate 

and bill for the fee, there would be 

virtually no recordkeeping or other 

compliance requirements of the rule. 

There are also no relevant Federal rules 

governing fees for the 7(a) program 

which may duplicate, overlap or 

conflict with the Proposed Rule. 

Accordingly, the Administrator of SBA 

hereby certifies to the Chief Counsel of 

Advocacy that this proposed rule will 


erjones on PRODPC60 with PROPOSALS
52300 Federal Register / Vol. 71, No. 171 / Tuesday, September 5, 2006 / Proposed Rules 

not have a significant economic impact 

on a substantial number of small 

entities. 

Paperwork Reduction Act 

SBA has determined that this 

proposed rule does not impose 

additional reporting or recordkeeping 

requirements under the Paperwork 

Reduction Act, 44 U.S.C. Chapter 35. 

List of Subjects in 13 CFR Part 120 

Loan programs—business, Small 

businesses. 

For the reasons discussed in the 

preamble, SBA proposes to amend 13 

CFR part 120 to read as follows: 

PART 120—BUSINESS LOANS 

1. The authority citation for part 120 

is revised to read as follows: 

Authority: 15 U.S.C. 634(b)(6), 634(b)(7), 

634(b)(14), 633(b)(3), 636(a) and (h), 650, and 

696(3) and 697(a)(2). 

2. Revise § 120.454 to read as follows: 

§ 120.454 PLP performance review. 

SBA may review the performance of 

a PLP Lender. 

3. Add a new Subpart I to read as 

follows: 

Subpart I—Lender Oversight 

§ 120.1070 Lender Oversight Fees. 

Lenders are required to pay to SBA 

fees to cover costs of examinations, 

reviews, and other Lender oversight 

activities. 

(a) Fee components: The fees may 

cover the following: 

(1) On-Site Examinations. The costs of 

conducting on-site safety and soundness 

examinations of an SBA-Supervised 

Lender, including any expenses that are 

incurred in relation to the examination. 

For the purposes of this paragraph, the 

term ‘‘SBA-Supervised Lender’’ means a 

Small Business Lending Company or a 

Non-Federally Regulated Lender. 

(2) On-Site Reviews. The costs of 

conducting an on-site review of a 

Lender, including any expenses that are 

incurred in relation to the review. 

(3) Off-Site Reviews/Monitoring. The 

costs of conducting off-site reviews/ 

monitoring of a Lender, including any 

expenses that are incurred in relation to 

the review/monitoring activities. SBA 

will assess this charge based on each 

Lender’s portion of the total dollar 

amount of SBA guarantees in SBA’s 

portfolio. 

(4) Other Lender Oversight Activities. 

The costs of additional expenses that 

SBA incurs in carrying out Lender 

oversight activities (for example, the 

salaries and travel expenses of SBA 

employees and equipment expenses that 

are directly related to carrying out 

Lender oversight activities). SBA will 

assess this charge based on each 

Lender’s portion of the total dollar 

amount of SBA guarantees in SBA’s 

portfolio. 

(b) Billing Process. For the on-site 

examinations or reviews conducted 

under paragraphs (a)(1) and (a)(2) of this 

section, SBA will bill each Lender for 

the amount owed following completion 

of the examination or review. For the 

off-site reviews/monitoring conducted 

under paragraph (a)(3) of this section 

and the other Lender oversight expenses 

incurred under paragraph (a)(4) of this 

section, SBA will bill each Lender for 

the amount owed on an annual basis. 

SBA will state in the bill the date by 

which payment is due SBA and the 

approved payment method(s). The 

payment due date will be no less than 

30 calendar days from the bill date. 

(c) Delinquent Payment and LatePayment Charges. Payments that are not 

received by the due date specified in the 

bill shall be considered delinquent. SBA 

will charge interest, and other 

applicable charges and penalties, on 

delinquent payments, as authorized by 

31 U.S.C. 3717. SBA may waive or abate 

the collection of interest, charges and/or 

penalties if circumstances warrant. In 

addition, a Lender’s failure to pay any 

of the fee components described in this 

section, or to pay interest, charges and 

penalties that have been charged, may 

result in a decision to suspend or revoke 

a participant’s eligibility under 

§ 120.415, or to limit a participant’s 

delegated authority under other 

provisions of this part. 

Dated: August 24, 2006. 

Steven C. Preston, 

Administrator. 

[FR Doc. 06–7399 Filed 9–1–06; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2006–25723; Directorate 

Identifier 2006–NM–007–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier 

Model DHC–8–400 Series Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for 

certain Bombardier Model DHC–8–400 

series airplanes. This proposed AD 

would require repetitive cleaning/ 

inspecting of the drain hole of each pitot 

static probe and repetitive cleaning of 

the pitot lines in the pitot static system. 

This proposed AD results from reports 

of incidents of airspeed mismatch 

between the pilot, co-pilot, and standby 

airspeed indications caused by 

contamination in the pitot static system. 

We are proposing this AD to prevent 

erroneous/misleading altitude and 

airspeed information from a 

contaminated pitot static system to the 

flightcrew, which could reduce the 

ability of the flightcrew to maintain the 

safe flight and landing of the airplane. 

DATES: We must receive comments on 

this proposed AD by October 5, 2006. 

ADDRESSES: Use one of the following 

addresses to submit comments on this 

proposed AD. 

• DOT Docket Web site: Go to 

http://dms.dot.gov and follow the 

instructions for sending your comments 

electronically. 

• Government-wide rulemaking Web 

site: Go to http://www.regulations.gov 

and follow the instructions for sending 

your comments electronically. 

• Mail: Docket Management Facility, 

U.S. Department of Transportation, 400 

Seventh Street, SW., Nassif Building, 

room PL–401, Washington, DC 20590. 

• Fax: (202) 493–2251. 

• Hand Delivery: Room PL–401 on 

the plaza level of the Nassif Building, 

400 Seventh Street, SW., Washington, 

DC, between 9 a.m. and 5 p.m., Monday 

through Friday, except Federal holidays. 

Contact Bombardier, Inc., Bombardier 

Regional Aircraft Division, 123 Garratt 

Boulevard, Downsview, Ontario M3K 

1Y5, Canada, for service information 

identified in this proposed AD. 

FOR FURTHER INFORMATION CONTACT: Ezra 

Sasson, Aerospace Engineer, Systems 

Flight Test Branch, ANE–172, FAA, 

New York Aircraft Certification Office, 

1600 Stewart Avenue, suite 410, 

Westbury, New York 11590; telephone 

(516) 228–7320; fax (516) 794–5531. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to submit any relevant 

written data, views, or arguments 

regarding this proposed AD. Send your 

comments to an address listed in the 

ADDRESSES section. Include the docket 

number ‘‘FAA–2006–25723; Directorate 

Identifier 2006–NM–007–AD’’ at the 

beginning of your comments. We 

specifically invite comments on the 

overall regulatory, economic, 


erjones on PRODPC60 with PROPOSALS