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115TH CONGRESS 

2D SESSION H. R. 4743 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Small Business 7(a) 

3 Lending Oversight Reform Act of 2018’’. 

4 SEC. 2. DEFINITIONS. 

5 In this Act, the terms ‘‘Administration’’ and ‘‘Admin6 istrator’’ mean the Small Business Administration and the 

7 Administrator thereof, respectively. 

8 SEC. 3. CODIFICATION OF THE OFFICE OF CREDIT RISK 

9 MANAGEMENT AND THE LENDER OVERSIGHT 

10 COMMITTEE. 

11 (a) IN GENERAL.—The Small Business Act (15 

12 U.S.C. 631 et seq.) is amended— 

13 (1) by redesignating section 47 as section 49; 

14 and 

15 (2) by inserting after section 46 the following 

16 new sections: 

17 ‘‘SEC. 47. OFFICE OF CREDIT RISK MANAGEMENT. 

18 ‘‘(a) ESTABLISHMENT.—There is established within 

19 the Administration the Office of Credit Risk Management 

20 (in this section referred to as the ‘Office’). 

21 ‘‘(b) DUTIES.—The Office shall be responsible for su22 pervising— 

23 ‘‘(1) any lender making loans under section 

24 7(a) (in this section referred to as a ‘7(a) lender’); 

25 ‘‘(2) any Lending Partner or Intermediary par26 ticipant of the Administration in a lending program 
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1 of the Office of Capital Access of the Administra2 tion; and 

3 ‘‘(3) any small business lending company or a 

4 non-Federally regulated lender without regard to the 

5 requirements of section 23. 

6 ‘‘(c) DIRECTOR.— 

7 ‘‘(1) IN GENERAL.—The Office shall be headed 

8 by the Director of the Office of Credit Risk Manage9 ment (in this section referred to as the ‘Director’), 

10 who shall be a career appointee in the Senior Execu11 tive Service (as defined in section 3132 of title 5, 

12 United States Code). 

13 ‘‘(2) DUTIES.—The Director shall be respon14 sible for oversight of the lenders and participants de15 scribed in subsection (b), including by conducting 

16 periodic reviews of the compliance and performance 

17 of such lenders and participants. 

18 ‘‘(d) SUPERVISION DUTIES FOR 7(a) LENDERS.— 

19 With respect to 7(a) lenders, an employee of the Office 

20 shall— 

21 ‘‘(1) be present for and supervise any such re22 view that is conducted by a contractor of the Office 

23 on the premise of the 7(a) lender; and 

24 ‘‘(2) supervise any such review that is not con25 ducted on the premise of the 7(a) lender. 
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1 ‘‘(e) ENFORCEMENT AUTHORITY AGAINST 7(a) 

2 LENDERS.— 

3 ‘‘(1) INFORMAL ENFORCEMENT AUTHORITY.— 

4 The Director may take an informal enforcement ac5 tion against a 7(a) lender if the Director finds that 

6 the 7(a) lender has violated a statutory or regulatory 

7 requirement under section 7(a) or any requirement 

8 in a Standard Operating Procedures Manual or Pol9 icy Notice related to a program or function of the 

10 Office of Capital Access. 

11 ‘‘(2) FORMAL ENFORCEMENT AUTHORITY.— 

12 ‘‘(A) IN GENERAL.—With the approval of 

13 the Lender Oversight Committee established 

14 under section 48, the Director may take a for15 mal enforcement action against any 7(a) lender 

16 if the Director finds that the 7(a) lender has 

17 violated— 

18 ‘‘(i) a statutory or regulatory require19 ment under section 7(a), including a re20 quirement relating to credit elsewhere; or 

21 ‘‘(ii) any requirement described in a 

22 Standard Operating Procedures Manual or 

23 Policy Notice, related to a program or 

24 function of the Office of Capital Access. 
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1 ‘‘(B) ENFORCEMENT ACTIONS.—An en2 forcement action imposed on a 7(a) lender by 

3 the Director under subparagraph (A) shall be 

4 based on the severity or frequency of the viola5 tion and may include assessing a civil monetary 

6 penalty against the 7(a) lender in an amount 

7 that is not greater than $250,000. 

8 ‘‘(3) APPEAL BY LENDER.—A 7(a) lender may 

9 appeal an enforcement action imposed by the Direc10 tor described in this subsection to the Office of 

11 Hearings and Appeals established under section 5(i) 

12 or to an appropriate district court of the United 

13 States. 

14 ‘‘(f) REGULATIONS.—Not later than 1 year after the 

15 date of the enactment of this section, the Administrator 

16 shall issue regulations, after opportunity for notice and 

17 comment, to carry out subsection (e). 

18 ‘‘(g) SERVICING AND LIQUIDATION RESPONSIBIL19 ITIES.—During any period during which a 7(a) lender is 

20 suspended or otherwise prohibited from making loans 

21 under section 7(a), the 7(a) lender shall remain obligated 

22 to maintain all servicing and liquidation activities dele23 gated to the lender by the Administrator, unless otherwise 

24 specified by the Director. 

25 ‘‘(h) PORTFOLIO RISK ANALYSIS OF 7(a) LOANS.— 
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1 ‘‘(1) IN GENERAL.—The Director shall annually 

2 conduct a risk analysis of the portfolio of the Ad3 ministration with respect to all loans guaranteed 

4 under section 7(a). 

5 ‘‘(2) REPORT TO CONGRESS.—On December 1, 

6 2018, and every December 1 thereafter, the Director 

7 shall submit to Congress a report containing the re8 sults of each portfolio risk analysis conducted under 

9 paragraph (1) during the fiscal year preceding the 

10 submission of the report, which shall include— 

11 ‘‘(A) an analysis of the overall program 

12 risk of loans guaranteed under section 7(a); 

13 ‘‘(B) an analysis of the program risk, set 

14 forth separately by industry concentration; 

15 ‘‘(C) without identifying individual 7(a) 

16 lenders by name, a consolidated analysis of the 

17 risk created by the individual 7(a) lenders re18 sponsible for not less than 1 percent of the 

19 gross loan approvals set forth separately for the 

20 year covered by the report by— 

21 ‘‘(i) the dollar value of the loans made 

22 by such 7(a) lenders; and 

23 ‘‘(ii) the number of loans made by 

24 such 7(a) lenders; 
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1 ‘‘(D) steps taken by the Administrator to 

2 mitigate the risks identified in subparagraphs 

3 (A), (B), and (C); 

4 ‘‘(E) the number of 7(a) lenders, the num5 ber of loans made, and the gross and net dollar 

6 amount of loans made; 

7 ‘‘(F) the number and dollar amount of 

8 total losses, the number and dollar amount of 

9 total purchases, and the percentage and dollar 

10 amount of recoveries at the Administration; 

11 ‘‘(G) the number and type of enforcement 

12 actions recommended by the Director; 

13 ‘‘(H) the number and type of enforcement 

14 actions approved by the Lender Oversight Com15 mittee established under section 48; 

16 ‘‘(I) the number and type of enforcement 

17 actions disapproved by the Lender Oversight 

18 Committee; and 

19 ‘‘(J) the number and dollar amount of civil 

20 monetary penalties assessed. 

21 ‘‘(i) BUDGET SUBMISSION AND JUSTIFICATION.— 

22 The Director shall annually provide, in writing, a fiscal 

23 year budget submission for the Office and a justification 

24 for such submission to the Administrator. Such submis25 sion and justification shall— 
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1 ‘‘(1) include salaries and expenses of the Office 

2 and the charge for the lender oversight fees; 

3 ‘‘(2) be submitted at or about the time of the 

4 budget submission by the President under section 

5 1105(a) of title 31; and 

6 ‘‘(3) be maintained in an indexed form and 

7 made available for public review for a period of not 

8 less than 5 years beginning on the date of submis9 sion and justification. 

10 ‘‘SEC. 48. LENDER OVERSIGHT COMMITTEE. 

11 ‘‘(a) ESTABLISHMENT.—There is established within 

12 the Administration the Lender Oversight Committee (in 

13 this section referred to as the ‘Committee’). 

14 ‘‘(b) MEMBERSHIP.—The Committee shall consist of 

15 at least 8 members selected by the Administrator, of 

16 which— 

17 ‘‘(1) 3 members shall be voting members, 2 of 

18 whom shall be career appointees in the Senior Exec19 utive Service (as defined in section 3132 of title 5, 

20 United States Code); and 

21 ‘‘(2) the remaining members shall be nonvoting 

22 members who shall serve in an advisory capacity on 

23 the Committee. 

24 ‘‘(c) DUTIES.—The Committee shall— 
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1 ‘‘(1) review reports on lender oversight activi2 ties; 

3 ‘‘(2) review formal enforcement action rec4 ommendations of the Director of the Office of Credit 

5 Risk Management with respect to any lender making 

6 loans under section 7(a) and any Lending Partner 

7 or Intermediary participant of the Administration in 

8 a lending program of the Office of Capital Access of 

9 the Administration; 

10 ‘‘(3) in carrying out paragraph (2) with respect 

11 to formal enforcement actions taken under sub12 section (d) or (e) of section 23, vote to recommend 

13 or not recommend action to the Administrator or a 

14 designee of the Administrator; 

15 ‘‘(4) in carrying out paragraph (2) with respect 

16 to any formal enforcement action not specified under 

17 subsection (d) or (e) of section 23, vote to approve, 

18 disapprove, or modify the action; 

19 ‘‘(5) review, in an advisory capacity, any lender 

20 oversight, portfolio risk management, or program in21 tegrity matters brought by the Director; and 

22 ‘‘(6) take such other actions and perform such 

23 other functions as may be delegated to the Com24 mittee by the Administrator. 

25 ‘‘(d) MEETINGS.— 
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1 ‘‘(1) IN GENERAL.—The Committee shall meet 

2 as necessary, but not less frequently than on a quar3 terly basis. 

4 ‘‘(2) REPORTS.—The Committee shall submit 

5 to the Administrator a report detailing each meeting 

6 of the Committee, including if the Committee does 

7 or does not vote to approve a formal enforcement ac8 tion of the Director of the Office of Credit Risk 

9 Management with respect to a lender.’’. 

10 (b) SUPERVISION DUTIES FOR 7(A) LENDERS.—Ef11 fective January 1, 2019, subsection (d) of section 47 (as 

12 added by subsection (a)) is amended to read as follows: 

13 ‘‘(d) SUPERVISION DUTIES FOR 7(A) LENDERS.— 

14 ‘‘(1) REVIEWS.—With respect to 7(a) lenders, 

15 an employee of the Office shall— 

16 ‘‘(A) be present for and supervise any such 

17 review that is conducted by a contractor of the 

18 Office on the premise of the 7(a) lender; and 

19 ‘‘(B) supervise any such review that is not 

20 conducted on the premise of the 7(a) lender. 

21 ‘‘(2) REVIEW REPORT TIMELINE.— 

22 ‘‘(A) IN GENERAL.—Notwithstanding any 

23 other requirements of the Office or the Admin24 istrator, the Administrator shall develop and 
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1 implement a review report timeline which 

2 shall— 

3 ‘‘(i) require the Administrator to— 

4 ‘‘(I) deliver a written report of 

5 the review to the 7(a) lender not later 

6 than 60 business days after the date 

7 on which the review is concluded; or 

8 ‘‘(II) if the Administrator expects 

9 to submit the report after the end of 

10 the 60-day period described in clause 

11 (i), notify the 7(a) lender of the ex12 pected date of submission of the re13 port and the reason for the delay; and 

14 ‘‘(ii) if a response by the 7(a) lender 

15 is requested in a report submitted under 

16 subparagraph (A), require the 7(a) lender 

17 to submit responses to the Administrator 

18 not later than 45 business days after the 

19 date on which the 7(a) lender receives the 

20 report. 

21 ‘‘(B) EXTENSION.—The Administrator 

22 may extend the time frame described in sub23 paragraph (A)(i)(II) with respect to a 7(a) 

24 lender as the Administrator determines nec25 essary.’’. 
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1 (c) TRANSFER OF FUNCTIONS.— 

2 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

3 All functions of the Office of Credit Risk Manage4 ment of the Small Business Administration, includ5 ing the personnel, assets, and obligation of the Of6 fice of Credit Risk Management, as in existence on 

7 the day before the date of the enactment of this Act, 

8 shall be transferred to the Office of Credit Risk 

9 Management established under section 47 of the 

10 Small Business Act, as added by subsection (a). 

11 (2) LENDER OVERSIGHT COMMITTEE.—All 

12 functions of the Lender Oversight Committee of the 

13 Small Business Administration, including the per14 sonnel, assets, and obligations of the Lender Over15 sight Committee, as in existence on the day before 

16 the date of the enactment of this Act, shall be trans17 ferred to the Lender Oversight Committee estab18 lished under section 48 of the Small Business Act, 

19 as added by subsection (a). 

20 (d) DEEMING OF NAME.— 

21 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

22 Any reference in a law, regulation, guidance, docu23 ment, paper, or other record of the United States to 

24 the Office of Credit Risk Management of the Small 

25 Business Administration shall be deemed a reference 
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1 to the Office of Credit Risk Management, estab2 lished under section 47 of the Small Business Act, 

3 as added by subsection (a). 

4 (2) LENDER OVERSIGHT COMMITTEE.—Any ref5 erence in a law, regulation, guidance, document, 

6 paper, or other record of the United States to the 

7 Lender Oversight Committee of the Small Business 

8 Administration shall be deemed a reference to the 

9 Lender Oversight Committee, established under sec10 tion 48 of the Small Business Act, as added by sub11 section (a). 

12 (e) TECHNICAL AMENDMENT.—Section 3(r)(2) of the 

13 Small Business Act (15 U.S.C. 632(r)(2)) is amended by 

14 striking ‘‘regulated SBA lender’’ each place it appears in 

15 heading and text and inserting ‘‘regulated lender’’. 

16 SEC. 4. DEFINITION OF CREDIT ELSEWHERE. 

17 (a) IN GENERAL.—The Small Business Act (15 

18 U.S.C. 631 et seq.) is amended— 

19 (1) by striking section 3(h) (15 U.S.C. 632(h)) 

20 and inserting the following: 

21 ‘‘(h) The term ‘credit elsewhere’ means— 

22 ‘‘(1) for the purposes of this Act (except as 

23 used in section 7(b)), the availability of credit on 

24 reasonable terms and conditions to the individual 

25 loan applicant from non-Federal, non-State, or non- 
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1 local government sources, considering factors associ2 ated with conventional lending practices, including— 

3 ‘‘(A) the business industry in which the 

4 loan applicant operates; 

5 ‘‘(B) whether the loan applicant is an en6 terprise that has been in operation for a period 

7 of not more than 2 years; 

8 ‘‘(C) the adequacy of the collateral avail9 able to secure the requested loan; 

10 ‘‘(D) the loan term necessary to reasonably 

11 assure the ability of the loan applicant to repay 

12 the debt from the actual or projected cash flow 

13 of the business; and 

14 ‘‘(E) any other factor relating to the par15 ticular credit application, as documented in de16 tail by the lender, that cannot be overcome ex17 cept through obtaining a Federal loan guar18 antee under prudent lending standards; and 

19 ‘‘(2) for the purposes of section 7(b), the avail20 ability of credit on reasonable terms and conditions 

21 from non-Federal sources taking into consideration 

22 the prevailing rates and terms in the community in 

23 or near where the applicant business concern trans24 acts business, or the applicant homeowner resides, 

25 for similar purposes and periods of time.’’; and 
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1 (2) in section 7(a)(1)(A)(i) (15 U.S.C. 

2 636(a)(1)(A)(i)), by inserting ‘‘The Administrator 

3 has the authority to direct, and conduct oversight 

4 for, the methods by which lenders determine whether 

5 a borrower is able to obtain credit elsewhere.’’ before 

6 ‘‘No financial assistance’’. 

7 (b) TECHNICAL AMENDMENT.—Section 18(b) of the 

8 Small Business Act (15 U.S.C. 647(b)) is amended to read 

9 as follows: 

10 ‘‘(b) As used in this Act, the term ‘agricultural enter11 prises’ means those small business concerns engaged in 

12 the production of food and fiber, ranching, and raising of 

13 livestock, aquaculture, and all other farming and agricul14 tural-related industries.’’. 

15 SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE 

16 AMOUNT FOR GENERAL BUSINESS LOANS. 

17 Section 20 of the Small Business Act (15 U.S.C. 631 

18 note) is amended— 

19 (1) by redesignating subsection (j) as sub20 section (f); and 

21 (2) by adding at the end the following new sub22 section: 

23 ‘‘(g) AUTHORITY TO INCREASE AMOUNT OF GEN24 ERAL BUSINESS LOANS.— 
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1 ‘‘(1) IN GENERAL.—Subject to paragraphs (2) 

2 and (3) and with respect to fiscal year 2019 and 

3 each fiscal year thereafter, if the Administrator de4 termines that the amount of commitments by the 

5 Administrator for general business loans authorized 

6 under section 7(a) for a fiscal year could exceed the 

7 limit on the total amount of commitments the Ad8 ministrator may make for those loans under this 

9 Act, an appropriations Act, or any other provision of 

10 law, the Administrator may make commitments for 

11 those loans for that fiscal year in an aggregate 

12 amount equal to not more than 115 percent of that 

13 limit. 

14 ‘‘(2) NOTICE REQUIRED BEFORE EXERCISING

15 AUTHORITY.—Not later than 30 days before the 

16 date on which the Administrator intends to exercise 

17 the authority under paragraph (1), the Adminis18 trator shall submit notice of intent to exercise the 

19 authority to— 

20 ‘‘(A) the Committee on Small Business 

21 and Entrepreneurship and the Subcommittee on 

22 Financial Services and General Government of 

23 the Committee on Appropriations of the Senate; 

24 and 
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1 ‘‘(B) the Committee on Small Business 

2 and the Subcommittee on Financial Services 

3 and General Government of the Committee on 

4 Appropriations of the House of Representatives. 

5 ‘‘(3) LIMITATION.—The Administrator shall not 

6 exercise the authority under paragraph (1) more 

7 than once during any fiscal year.’’. 

8 SEC. 6. ESTABLISHING A PROCESS FOR WAIVERS. 

9 (a) IN GENERAL.—If the Administrator exercises 

10 statutory or regulatory authority to waive a regulation or 

11 a requirement in the Standard Operating Procedures 

12 Manual or Policy Notice related to a program or function 

13 of the Office of Capital Access of the Administration, the 

14 waiver shall be in writing and be maintained in an indexed 

15 form. 

16 (b) NO NEW WAIVER AUTHORITY.—Nothing in sub17 section (a) shall be construed as creating new authority 

18 for the Administrator to waive regulations of the Adminis19 tration. 
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1 SEC. 7. REPEAL OF SMALL BUSINESS LOAN LOSS REPORT. 

2 Subsection (b) of section 10 of the Small Business 

3 Act (15 U.S.C. 639(b)) is repealed. 

Passed the House of Representatives May 8, 2018. 

Attest: 

Clerk. 

115TH CONGRESS 

2D SESSION H. R. 4743 

AN ACT 

To amend the Small Business Act to strengthen the 

purposes. Small Business Administration, and for other Office of Credit Risk Management within the