I 

115TH CONGRESS 

2D SESSION H. R. 4743 

To amend the Small Business Act to strengthen the Office of Credit Risk 

Management within the Small Business Administration, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 9, 2018 

Mr. CHABOT (for himself and Ms. VELA ́ZQUEZ) introduced the following bill; 

which was referred to the Committee on Small Business 

A BILL 

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, 

3 SECTION 1. SHORT TITLE. 

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

5 Lending Oversight Reform Act of 2018’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act, the terms ‘‘Administration’’ and ‘‘Admin8 istrator’’ mean the Small Business Administration and the 

9 Administrator thereof, respectively. 


lotter on DSKBCFDHB2PROD with BILLS
2 

•HR 4743 IH

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

2 MANAGEMENT AND THE LENDER OVERSIGHT 

3 COMMITTEE. 

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

5 U.S.C. 631 et seq.) is amended— 

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

7 and 

8 (2) by inserting after section 46 the following 

9 new sections: 

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

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

12 the Administration the Office of Credit Risk Management 

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

14 ‘‘(b) DUTIES.—The Office shall be responsible for su15 pervising— 

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

17 7(a) (in this section referred to as a ‘7(a) lender’); 

18 ‘‘(2) any participant in a lending program of 

19 the Office of Capital Access of the Administration; 

20 and 

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

22 non-Federally regulated lender without regard to the 

23 requirements of section 23. 

24 ‘‘(c) DIRECTOR.— 

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

26 by the Director of the Office of Credit Risk ManageVerDate Sep 11 2014 02:43 Jan 10, 2018 Jkt 079200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.IH H4743

lotter on DSKBCFDHB2PROD with BILLS
3 

•HR 4743 IH

1 ment (in this section referred to as the ‘Director’), 

2 who shall be a career appointee in the Senior Execu3 tive Service (as defined in section 3132 of title 5, 

4 United States Code). 

5 ‘‘(2) DUTIES.—The Director shall be respon6 sible for oversight of the lenders and participants de7 scribed in subsection (b), including by conducting 

8 periodic reviews of the compliance and performance 

9 of such lenders and participants. 

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

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

12 an employee of the Office shall— 

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

14 review that is conducted by a contractor of the 

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

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

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

18 ‘‘(2) REVIEW REPORT TIMELINE.—Notwith19 standing any other requirements of the Office or the 

20 Administrator, the Administrator shall develop and 

21 implement a review report timeline which shall— 

22 ‘‘(A) require the Administrator to— 

23 ‘‘(i) deliver a written report of the re24 view to the 7(a) lender not later than 60 


lotter on DSKBCFDHB2PROD with BILLS
4 

•HR 4743 IH

1 business days after the date on which the 

2 review is conducted; or 

3 ‘‘(ii) if the Administrator expects to 

4 submit the report after the end of the 60- 

5 day period described in clause (i), notify 

6 the 7(a) lender of the expected date of sub7 mission of the report and the reason for 

8 the delay; and 

9 ‘‘(B) if a response by the 7(a) lender is re10 quested in a report submitted under subpara11 graph (A), require the 7(a) lender to submit re12 sponses to the Administrator not later than 45 

13 business days after the date on which the 7(a) 

14 lender receives the report. 

15 ‘‘(e) ENFORCEMENT AUTHORITY AGAINST 7(a) 

16 LENDERS.— 

17 ‘‘(1) INFORMAL ENFORCEMENT AUTHORITY.— 

18 The Director may take an informal enforcement ac19 tion against a 7(a) lender if the Director finds that 

20 the 7(a) lender has violated a requirement under 

21 section 7(a) or any requirement in a Standard Oper22 ating Procedures Manual or Policy Notice related to 

23 a program or function of the Office of Capital Ac24 cess. 

25 ‘‘(2) FORMAL ENFORCEMENT AUTHORITY.— 


lotter on DSKBCFDHB2PROD with BILLS
5 

•HR 4743 IH

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

2 the Lender Oversight Committee established 

3 under section 48, the Director may take a for4 mal enforcement action against any 7(a) lender 

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

6 violated— 

7 ‘‘(i) a requirement under section 7(a), 

8 including a requirement relating to credit 

9 elsewhere, or any regulation implementing 

10 such section; or 

11 ‘‘(ii) any requirement described in a 

12 Standard Operating Procedures Manual or 

13 Policy Notice, related to a program or 

14 function of the Office of Capital Access. 

15 ‘‘(B) ENFORCEMENT ACTIONS.—An en16 forcement action imposed on a 7(a) lender by 

17 the Director under subparagraph (A) shall be 

18 based on the severity or frequency of the viola19 tion and may include assessing a civil monetary 

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

21 that is not greater than $250,000. 

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

23 appeal an enforcement action imposed by the Direc24 tor described in paragraph (2) to the Office of HearVerDate Sep 11 2014 02:43 Jan 10, 2018 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.IH H4743

lotter on DSKBCFDHB2PROD with BILLS
6 

•HR 4743 IH

1 ings and Appeals established under section 5(i) or to 

2 an appropriate district court of the United States. 

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

4 date of the enactment of this section, the Administrator 

5 shall issue regulations, after opportunity for notice and 

6 comment, to carry out subsection (e). 

7 ‘‘(g) SERVICING AND LIQUIDATION RESPONSIBIL8 ITIES.—During any period during which a 7(a) lender is 

9 suspended or otherwise prohibited from making loans 

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

11 to maintain all servicing and liquidation activities dele12 gated to the lender by the Administrator, unless otherwise 

13 specified by the Director. 

14 ‘‘(h) PORTFOLIO RISK ANALYSIS OF 7(a) LOANS.— 

15 ‘‘(1) IN GENERAL.—The Director shall annually 

16 conduct a risk analysis of the portfolio of the Ad17 ministration with respect to all loans guaranteed 

18 under section 7(a). 

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

20 2018, and every December 1 thereafter, the Director 

21 shall submit to Congress a report containing the re22 sults of each portfolio risk analysis conducted under 

23 paragraph (1) during the fiscal year preceding the 

24 submission of the report, which shall include— 


lotter on DSKBCFDHB2PROD with BILLS
7 

•HR 4743 IH

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

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

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

4 forth separately by industry concentration; 

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

6 lenders by name, a consolidated analysis of the 

7 risk created by the individual 7(a) lenders re8 sponsible for not less than 1 percent of the 

9 gross loan approvals set forth separately for the 

10 year covered by the report by— 

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

12 by such 7(a) lenders; and 

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

14 such 7(a) lenders; 

15 ‘‘(D) steps taken by the Administrator to 

16 mitigate the risks identified in subparagraphs 

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

18 ‘‘(E) the number of 7(a) lenders, the num19 ber of loans made, and the gross and net dollar 

20 amount of loans made; 

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

22 total defaults, the number and dollar amount of 

23 total repurchases, and the percentage and dol24 lar amount of recoveries; 


lotter on DSKBCFDHB2PROD with BILLS
8 

•HR 4743 IH

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

2 actions recommended by the Director; 

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

4 actions approved by the Lender Oversight Com5 mittee established under section 48; 

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

7 actions disapproved by the Lender Oversight 

8 Committee; and 

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

10 monetary penalties assessed. 

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

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

13 year budget submission for the Office and a justification 

14 for such submission to the Administrator. Such submis15 sion and justification shall— 

16 ‘‘(1) include salaries and expenses of the Office 

17 and the charge for the lender oversight fees; 

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

19 budget submission by the President under section 

20 1105(a) of title 31; and 

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

22 made available for public review for a period of not 

23 less than 5 years beginning on the date of submis24 sion and justification. 


lotter on DSKBCFDHB2PROD with BILLS
9 

•HR 4743 IH

1 ‘‘SEC. 48. LENDER OVERSIGHT COMMITTEE. 

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

3 the Administration the Lender Oversight Committee (in 

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

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

6 11 members selected by the Administrator, of which— 

7 ‘‘(1) 3 members shall be voting members, 2 of 

8 whom shall be career appointees in the Senior Exec9 utive Service (as defined in section 3132 of title 5, 

10 United States Code); and 

11 ‘‘(2) 8 members shall be nonvoting members 

12 who shall serve in an advisory capacity on the Com13 mittee. 

14 ‘‘(c) DUTIES.—The Committee shall— 

15 ‘‘(1) review reports on lender oversight activi16 ties; 

17 ‘‘(2) review formal enforcement action rec18 ommendations of the Director of the Office of Credit 

19 Risk Management with respect to any lender making 

20 loans under section 7(a) and any participant in a 

21 lending program of the Office of Capital Access of 

22 the Administration; 

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

24 to formal enforcement actions taken under sub25 section (d) or (e) of section 23, vote to recommend 


lotter on DSKBCFDHB2PROD with BILLS
10 

•HR 4743 IH

1 or not recommend action to the Administrator or a 

2 designee of the Administrator; 

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

4 to any formal enforcement action not specified under 

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

6 disapprove, or modify the action; 

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

8 oversight, portfolio risk management, or program in9 tegrity matters brought by the Director; and 

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

11 other functions as may be delegated to the Com12 mittee by the Administrator. 

13 ‘‘(d) MEETINGS.— 

14 ‘‘(1) IN GENERAL.—The Committee shall meet 

15 as necessary, but not less frequently than on a quar16 terly basis. 

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

18 to the Administrator a report detailing each meeting 

19 of the Committee, including if the Committee does 

20 or does not vote to recommend a formal enforcement 

21 action of the Director of the Office of Credit Risk 

22 Management with respect to a lender.’’. 

23 (b) TRANSFER OF FUNCTIONS.— 

24 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

25 All functions of the Office of Credit Risk ManageVerDate Sep 11 2014 02:43 Jan 10, 2018 Jkt 079200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.IH H4743

lotter on DSKBCFDHB2PROD with BILLS
11 

•HR 4743 IH

1 ment of the Small Business Administration, includ2 ing the personnel, assets, and obligation of the Of3 fice of Credit Risk Management, as in existence on 

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

5 shall be transferred to the Office of Credit Risk 

6 Management established under section 47 of the 

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

8 (2) LENDER OVERSIGHT COMMITTEE.—All 

9 functions of the Lender Oversight Committee of the 

10 Small Business Administration, including the per11 sonnel, assets, and obligations of the Lender Over12 sight Committee, as in existence on the day before 

13 the date of the enactment of this Act, shall be trans14 ferred to the Lender Oversight Committee estab15 lished under section 48 of the Small Business Act, 

16 as added by subsection (a). 

17 (c) DEEMING OF NAME.— 

18 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

19 Any reference in a law, regulation, guidance, docu20 ment, paper, or other record of the United States to 

21 the Office of Credit Risk Management of the Small 

22 Business Administration shall be deemed a reference 

23 to the Office of Credit Risk Management, estab24 lished under section 47 of the Small Business Act, 

25 as added by subsection (a). 


lotter on DSKBCFDHB2PROD with BILLS
12 

•HR 4743 IH

1 (2) LENDER OVERSIGHT COMMITTEE.—Any ref2 erence in a law, regulation, guidance, document, 

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

4 Lender Oversight Committee of the Small Business 

5 Administration shall be deemed a reference to the 

6 Lender Oversight Committee, established under sec7 tion 48 of the Small Business Act, as added by sub8 section (a). 

9 (d) TECHNICAL AMENDMENT.—Section 3(r)(2) of 

10 the Small Business Act (15 U.S.C. 632(r)(2)) is amended 

11 by striking ‘‘regulated SBA lender’’ each place it appears 

12 in heading and text and inserting ‘‘regulated lender’’. 

13 SEC. 4. DEFINITION OF CREDIT ELSEWHERE. 

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

15 U.S.C. 631 et seq.) is amended— 

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

17 and inserting the following: 

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

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

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

21 reasonable terms and conditions to the individual 

22 loan applicant from non-Federal, non-State, or non23 local government sources, considering factors associ24 ated with conventional lending practices, including— 


lotter on DSKBCFDHB2PROD with BILLS
13 

•HR 4743 IH

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

2 loan applicant operates; 

3 ‘‘(B) whether the loan applicant is an en4 terprise that has been in operation for a period 

5 of not more than 2 years; 

6 ‘‘(C) the adequacy of the collateral avail7 able to secure the requested loan; 

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

9 assure the ability of the loan applicant to repay 

10 the debt from the actual or projected cash flow 

11 of the business; and 

12 ‘‘(E) any other factor relating to the par13 ticular credit application, as documented in de14 tail by the lender, that cannot be overcome ex15 cept through obtaining a Federal loan guar16 antee under prudent lending standards; and 

17 ‘‘(2) for the purposes of section 7(b), the avail18 ability of credit on reasonable terms and conditions 

19 from non-Federal sources taking into consideration 

20 the prevailing rates and terms in the community in 

21 or near where the applicant small business concern 

22 transacts business, or the applicant homeowner re23 sides, for similar purposes and periods of time.’’; 

24 and 


lotter on DSKBCFDHB2PROD with BILLS
14 

•HR 4743 IH

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.— 


lotter on DSKBCFDHB2PROD with BILLS
15 

•HR 4743 IH

1 ‘‘(1) IN GENERAL.—With respect to fiscal year 

2 2018 and each fiscal year thereafter, if the Adminis3 trator determines that the amount of commitments 

4 by the Administrator for general business loans au5 thorized under section 7(a) for a fiscal year could 

6 exceed the limit on the total amount of commitments 

7 the Administrator may make for those loans under 

8 this Act, an appropriations Act, or any other provi9 sion of law, the Administrator may make commit10 ments for those loans for that fiscal year in an ag11 gregate amount equal to not more than 115 percent 

12 of that limit. 

13 ‘‘(2) APPROVAL REQUIRED BEFORE EXER14 CISING AUTHORITY.— 

15 ‘‘(A) IN GENERAL.—Not later than 30 

16 days before the date on which the Adminis17 trator intends to exercise the authority under 

18 paragraph (1), the Administrator shall submit 

19 notice of intent to exercise the authority to— 

20 ‘‘(i) the Committee on Small Business 

21 and Entrepreneurship and the Sub22 committee on Financial Services and Gen23 eral Government of the Committee on Ap24 propriations of the Senate; and 


lotter on DSKBCFDHB2PROD with BILLS
16 

•HR 4743 IH

1 ‘‘(ii) the Committee on Small Busi2 ness and the Subcommittee on Financial 

3 Services and General Government of the 

4 Committee on Appropriations of the House 

5 of Representatives. 

6 ‘‘(B) APPROVAL.—The Administrator may 

7 not exercise the authority under paragraph (1) 

8 unless such exercise of authority has been ap9 proved, in writing, by the Committee on Appro10 priations and the Committee on Small Business 

11 and Entrepreneurship of the Senate and the 

12 Committee on Appropriations and the Com13 mittee on Small Business of the House of Rep14 resentatives. 

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

16 exercise the authority under paragraph (1) more 

17 than once during any fiscal year.’’. 

18 SEC. 6. DISCLOSURE OF WAIVERS. 

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

20 statutory or regulatory authority to waive a regulation re21 lated to a program or function of the Office of Capital 

22 Access of the Administration— 

23 (1) the waiver shall be in writing and shall 

24 specify the grounds for approving the waiver; and 


lotter on DSKBCFDHB2PROD with BILLS
17 

•HR 4743 IH

1 (2) the Administrator shall notify the public of 

2 all waivers of regulations approved by the Adminis3 tration, which notice shall— 

4 (A) be published in the Federal Register 

5 not less than annually; 

6 (B) cover the period beginning on the date 

7 after the last day covered by the previous no8 tice; 

9 (C) describe the nature of the requirement 

10 that has been waived and specify the regulation 

11 involved; 

12 (D) include a brief description of the 

13 grounds for approval of the waiver; and 

14 (E) state how more information about the 

15 waiver and a copy of the request and the ap16 proval may be obtained. 

17 (b) NO NEW WAIVER AUTHORITY.—Nothing in sub18 section (a) shall be construed as creating new authority 

19 for the Administrator to waive regulations of the Adminis20 tration. 

21 (c) GAO STUDY ON STANDARD OPERATING PROCE22 DURES MANUAL OR POLICY NOTICE WAIVER PROCESS.— 

23 Not later than 1 year after the date of the enactment of 

24 this Act, the Comptroller General of the United States 

25 shall submit to the Committee on Small Business and EnVerDate Sep 11 2014 02:43 Jan 10, 2018 Jkt 079200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.IH H4743

lotter on DSKBCFDHB2PROD with BILLS
18 

•HR 4743 IH

1 trepreneurship of the Senate and the Committee on Small 

2 Business of the House of Representatives a report evalu3 ating— 

4 (1) the methods and specific processes used by 

5 the Small Business Administration to waive require6 ments in Standard Operating Procedures Manual or 

7 Policy Notices relating to loans made under section 

8 7(a) of the Small Business Act (15 U.S.C. 636(a)); 

9 and 

10 (2) the number of such waivers granted during 

11 the period of 5 fiscal years preceding the date of the 

12 enactment of this Act. 

Æ 


lotter on DSKBCFDHB2PROD with BILLS