II 

Calendar No. 431 

115TH CONGRESS 

2D SESSION H. R. 4743 

IN THE SENATE OF THE UNITED STATES 

MAY 23, 2018 

Received; read twice and placed on the calendar 

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, 

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. 


sradovich on DSK3GMQ082PROD with BILLS
2 

HR 4743 PCS2 

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 Lending Partner or Intermediary par19 ticipant of the Administration in a lending program 

20 of the Office of Capital Access of the Administra21 tion; and 

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

23 non-Federally regulated lender without regard to the 

24 requirements of section 23. 

25 ‘‘(c) DIRECTOR.— 


sradovich on DSK3GMQ082PROD with BILLS
3 

HR 4743 PCS2 

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

2 by the Director of the Office of Credit Risk Manage3 ment (in this section referred to as the ‘Director’), 

4 who shall be a career appointee in the Senior Execu5 tive Service (as defined in section 3132 of title 5, 

6 United States Code). 

7 ‘‘(2) DUTIES.—The Director shall be respon8 sible for oversight of the lenders and participants de9 scribed in subsection (b), including by conducting 

10 periodic reviews of the compliance and performance 

11 of such lenders and participants. 

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

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

14 shall— 

15 ‘‘(1) be present for and supervise any such re16 view that is conducted by a contractor of the Office 

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

18 ‘‘(2) supervise any such review that is not con19 ducted on the premise of the 7(a) lender. 

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

21 LENDERS.— 

22 ‘‘(1) INFORMAL ENFORCEMENT AUTHORITY.— 

23 The Director may take an informal enforcement ac24 tion against a 7(a) lender if the Director finds that 

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


sradovich on DSK3GMQ082PROD with BILLS
4 

HR 4743 PCS2 

1 requirement under section 7(a) or any requirement 

2 in a Standard Operating Procedures Manual or Pol3 icy Notice related to a program or function of the 

4 Office of Capital Access. 

5 ‘‘(2) FORMAL ENFORCEMENT AUTHORITY.— 

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

7 the Lender Oversight Committee established 

8 under section 48, the Director may take a for9 mal enforcement action against any 7(a) lender 

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

11 violated— 

12 ‘‘(i) a statutory or regulatory require13 ment under section 7(a), including a re14 quirement relating to credit elsewhere; or 

15 ‘‘(ii) any requirement described in a 

16 Standard Operating Procedures Manual or 

17 Policy Notice, related to a program or 

18 function of the Office of Capital Access. 

19 ‘‘(B) ENFORCEMENT ACTIONS.—An en20 forcement action imposed on a 7(a) lender by 

21 the Director under subparagraph (A) shall be 

22 based on the severity or frequency of the viola23 tion and may include assessing a civil monetary 

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

25 that is not greater than $250,000. 


sradovich on DSK3GMQ082PROD with BILLS
5 

HR 4743 PCS2 

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

2 appeal an enforcement action imposed by the Direc3 tor described in this subsection to the Office of 

4 Hearings and Appeals established under section 5(i) 

5 or to an appropriate district court of the United 

6 States. 

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

8 date of the enactment of this section, the Administrator 

9 shall issue regulations, after opportunity for notice and 

10 comment, to carry out subsection (e). 

11 ‘‘(g) SERVICING AND LIQUIDATION RESPONSIBIL12 ITIES.—During any period during which a 7(a) lender is 

13 suspended or otherwise prohibited from making loans 

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

15 to maintain all servicing and liquidation activities dele16 gated to the lender by the Administrator, unless otherwise 

17 specified by the Director. 

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

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

20 conduct a risk analysis of the portfolio of the Ad21 ministration with respect to all loans guaranteed 

22 under section 7(a). 

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

24 2018, and every December 1 thereafter, the Director 

25 shall submit to Congress a report containing the reVerDate Sep 11 2014 23:05 May 23, 2018 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.PCS2 H4743

sradovich on DSK3GMQ082PROD with BILLS
6 

HR 4743 PCS2 

1 sults of each portfolio risk analysis conducted under 

2 paragraph (1) during the fiscal year preceding the 

3 submission of the report, which shall include— 

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

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

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

7 forth separately by industry concentration; 

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

9 lenders by name, a consolidated analysis of the 

10 risk created by the individual 7(a) lenders re11 sponsible for not less than 1 percent of the 

12 gross loan approvals set forth separately for the 

13 year covered by the report by— 

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

15 by such 7(a) lenders; and 

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

17 such 7(a) lenders; 

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

19 mitigate the risks identified in subparagraphs 

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

21 ‘‘(E) the number of 7(a) lenders, the num22 ber of loans made, and the gross and net dollar 

23 amount of loans made; 

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

25 total losses, the number and dollar amount of 


sradovich on DSK3GMQ082PROD with BILLS
7 

HR 4743 PCS2 

1 total purchases, and the percentage and dollar 

2 amount of recoveries at the Administration; 

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

4 actions recommended by the Director; 

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

6 actions approved by the Lender Oversight Com7 mittee established under section 48; 

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

9 actions disapproved by the Lender Oversight 

10 Committee; and 

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

12 monetary penalties assessed. 

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

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

15 year budget submission for the Office and a justification 

16 for such submission to the Administrator. Such submis17 sion and justification shall— 

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

19 and the charge for the lender oversight fees; 

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

21 budget submission by the President under section 

22 1105(a) of title 31; and 

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

24 made available for public review for a period of not 


sradovich on DSK3GMQ082PROD with BILLS
8 

HR 4743 PCS2 

1 less than 5 years beginning on the date of submis2 sion and justification. 

3 ‘‘SEC. 48. LENDER OVERSIGHT COMMITTEE. 

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

5 the Administration the Lender Oversight Committee (in 

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

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

8 at least 8 members selected by the Administrator, of 

9 which— 

10 ‘‘(1) 3 members shall be voting members, 2 of 

11 whom shall be career appointees in the Senior Exec12 utive Service (as defined in section 3132 of title 5, 

13 United States Code); and 

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

15 members who shall serve in an advisory capacity on 

16 the Committee. 

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

18 ‘‘(1) review reports on lender oversight activi19 ties; 

20 ‘‘(2) review formal enforcement action rec21 ommendations of the Director of the Office of Credit 

22 Risk Management with respect to any lender making 

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

24 or Intermediary participant of the Administration in 


sradovich on DSK3GMQ082PROD with BILLS
9 

HR 4743 PCS2 

1 a lending program of the Office of Capital Access of 

2 the Administration; 

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

4 to formal enforcement actions taken under sub5 section (d) or (e) of section 23, vote to recommend 

6 or not recommend action to the Administrator or a 

7 designee of the Administrator; 

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

9 to any formal enforcement action not specified under 

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

11 disapprove, or modify the action; 

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

13 oversight, portfolio risk management, or program in14 tegrity matters brought by the Director; and 

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

16 other functions as may be delegated to the Com17 mittee by the Administrator. 

18 ‘‘(d) MEETINGS.— 

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

20 as necessary, but not less frequently than on a quar21 terly basis. 

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

23 to the Administrator a report detailing each meeting 

24 of the Committee, including if the Committee does 

25 or does not vote to approve a formal enforcement acVerDate Sep 11 2014 23:05 May 23, 2018 Jkt 079200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.PCS2 H4743

sradovich on DSK3GMQ082PROD with BILLS
10 

HR 4743 PCS2 

1 tion of the Director of the Office of Credit Risk 

2 Management with respect to a lender.’’. 

3 (b) SUPERVISION DUTIES FOR 7(A) LENDERS.—Ef4 fective January 1, 2019, subsection (d) of section 47 (as 

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

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

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

8 an employee of the Office shall— 

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

10 review that is conducted by a contractor of the 

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

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

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

14 ‘‘(2) REVIEW REPORT TIMELINE.— 

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

16 other requirements of the Office or the Admin17 istrator, the Administrator shall develop and 

18 implement a review report timeline which 

19 shall— 

20 ‘‘(i) require the Administrator to— 

21 ‘‘(I) deliver a written report of 

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

23 than 60 business days after the date 

24 on which the review is concluded; or 


sradovich on DSK3GMQ082PROD with BILLS
11 

HR 4743 PCS2 

1 ‘‘(II) if the Administrator expects 

2 to submit the report after the end of 

3 the 60-day period described in clause 

4 (i), notify the 7(a) lender of the ex5 pected date of submission of the re6 port and the reason for the delay; and 

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

8 is requested in a report submitted under 

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

10 to submit responses to the Administrator 

11 not later than 45 business days after the 

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

13 report. 

14 ‘‘(B) EXTENSION.—The Administrator 

15 may extend the time frame described in sub16 paragraph (A)(i)(II) with respect to a 7(a) 

17 lender as the Administrator determines nec18 essary.’’. 

19 (c) TRANSFER OF FUNCTIONS.— 

20 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

21 All functions of the Office of Credit Risk Manage22 ment of the Small Business Administration, includ23 ing the personnel, assets, and obligation of the Of24 fice of Credit Risk Management, as in existence on 

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


sradovich on DSK3GMQ082PROD with BILLS
12 

HR 4743 PCS2 

1 shall be transferred to the Office of Credit Risk 

2 Management established under section 47 of the 

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

4 (2) LENDER OVERSIGHT COMMITTEE.—All 

5 functions of the Lender Oversight Committee of the 

6 Small Business Administration, including the per7 sonnel, assets, and obligations of the Lender Over8 sight Committee, as in existence on the day before 

9 the date of the enactment of this Act, shall be trans10 ferred to the Lender Oversight Committee estab11 lished under section 48 of the Small Business Act, 

12 as added by subsection (a). 

13 (d) DEEMING OF NAME.— 

14 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

15 Any reference in a law, regulation, guidance, docu16 ment, paper, or other record of the United States to 

17 the Office of Credit Risk Management of the Small 

18 Business Administration shall be deemed a reference 

19 to the Office of Credit Risk Management, estab20 lished under section 47 of the Small Business Act, 

21 as added by subsection (a). 

22 (2) LENDER OVERSIGHT COMMITTEE.—Any ref23 erence in a law, regulation, guidance, document, 

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

25 Lender Oversight Committee of the Small Business 


sradovich on DSK3GMQ082PROD with BILLS
13 

HR 4743 PCS2 

1 Administration shall be deemed a reference to the 

2 Lender Oversight Committee, established under sec3 tion 48 of the Small Business Act, as added by sub4 section (a). 

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

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

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

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

9 SEC. 4. DEFINITION OF CREDIT ELSEWHERE. 

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

11 U.S.C. 631 et seq.) is amended— 

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

13 and inserting the following: 

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

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

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

17 reasonable terms and conditions to the individual 

18 loan applicant from non-Federal, non-State, or non19 local government sources, considering factors associ20 ated with conventional lending practices, including— 

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

22 loan applicant operates; 

23 ‘‘(B) whether the loan applicant is an en24 terprise that has been in operation for a period 

25 of not more than 2 years; 


sradovich on DSK3GMQ082PROD with BILLS
14 

HR 4743 PCS2 

1 ‘‘(C) the adequacy of the collateral avail2 able to secure the requested loan; 

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

4 assure the ability of the loan applicant to repay 

5 the debt from the actual or projected cash flow 

6 of the business; and 

7 ‘‘(E) any other factor relating to the par8 ticular credit application, as documented in de9 tail by the lender, that cannot be overcome ex10 cept through obtaining a Federal loan guar11 antee under prudent lending standards; and 

12 ‘‘(2) for the purposes of section 7(b), the avail13 ability of credit on reasonable terms and conditions 

14 from non-Federal sources taking into consideration 

15 the prevailing rates and terms in the community in 

16 or near where the applicant business concern trans17 acts business, or the applicant homeowner resides, 

18 for similar purposes and periods of time.’’; and 

19 (2) in section 7(a)(1)(A)(i) (15 U.S.C. 

20 636(a)(1)(A)(i)), by inserting ‘‘The Administrator 

21 has the authority to direct, and conduct oversight 

22 for, the methods by which lenders determine whether 

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

24 ‘‘No financial assistance’’. 


sradovich on DSK3GMQ082PROD with BILLS
15 

HR 4743 PCS2 

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

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

3 as follows: 

4 ‘‘(b) As used in this Act, the term ‘agricultural enter5 prises’ means those small business concerns engaged in 

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

7 livestock, aquaculture, and all other farming and agricul8 tural-related industries.’’. 

9 SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE 

10 AMOUNT FOR GENERAL BUSINESS LOANS. 

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

12 note) is amended— 

13 (1) by redesignating subsection (j) as sub14 section (f); and 

15 (2) by adding at the end the following new sub16 section: 

17 ‘‘(g) AUTHORITY TO INCREASE AMOUNT OF GEN18 ERAL BUSINESS LOANS.— 

19 ‘‘(1) IN GENERAL.—Subject to paragraphs (2) 

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

21 each fiscal year thereafter, if the Administrator de22 termines that the amount of commitments by the 

23 Administrator for general business loans authorized 

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

25 limit on the total amount of commitments the AdVerDate Sep 11 2014 23:05 May 23, 2018 Jkt 079200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H4743.PCS2 H4743

sradovich on DSK3GMQ082PROD with BILLS
16 

HR 4743 PCS2 

1 ministrator may make for those loans under this 

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

3 law, the Administrator may make commitments for 

4 those loans for that fiscal year in an aggregate 

5 amount equal to not more than 115 percent of that 

6 limit. 

7 ‘‘(2) NOTICE REQUIRED BEFORE EXERCISING

8 AUTHORITY.—Not later than 30 days before the 

9 date on which the Administrator intends to exercise 

10 the authority under paragraph (1), the Adminis11 trator shall submit notice of intent to exercise the 

12 authority to— 

13 ‘‘(A) the Committee on Small Business 

14 and Entrepreneurship and the Subcommittee on 

15 Financial Services and General Government of 

16 the Committee on Appropriations of the Senate; 

17 and 

18 ‘‘(B) the Committee on Small Business 

19 and the Subcommittee on Financial Services 

20 and General Government of the Committee on 

21 Appropriations of the House of Representatives. 

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

23 exercise the authority under paragraph (1) more 

24 than once during any fiscal year.’’. 


sradovich on DSK3GMQ082PROD with BILLS
17 

HR 4743 PCS2 

1 SEC. 6. ESTABLISHING A PROCESS FOR WAIVERS. 

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

3 statutory or regulatory authority to waive a regulation or 

4 a requirement in the Standard Operating Procedures 

5 Manual or Policy Notice related to a program or function 

6 of the Office of Capital Access of the Administration, the 

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

8 form. 

9 (b) NO NEW WAIVER AUTHORITY.—Nothing in sub10 section (a) shall be construed as creating new authority 

11 for the Administrator to waive regulations of the Adminis12 tration. 


sradovich on DSK3GMQ082PROD with BILLS
18 

HR 4743 PCS2 

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: KAREN L. HAAS, 

Clerk. 


sradovich on DSK3GMQ082PROD with BILLS

sradovich on DSK3GMQ082PROD with BILLS
Calendar No. 431 

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 

MAY 23, 2018 

Received; read twice and placed on the calendar 


sradovich on DSK3GMQ082PROD with BILLS