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[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4743 Engrossed in House (EH)]

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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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business 7(a) Lending 
Oversight Reform Act of 2018''.

SEC. 2. DEFINITIONS.

    In this Act, the terms ``Administration'' and ``Administrator'' 
mean the Small Business Administration and the Administrator thereof, 
respectively.

SEC. 3. CODIFICATION OF THE OFFICE OF CREDIT RISK MANAGEMENT AND THE 
              LENDER OVERSIGHT COMMITTEE.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--
            (1) by redesignating section 47 as section 49; and
            (2) by inserting after section 46 the following new 
        sections:

``SEC. 47. OFFICE OF CREDIT RISK MANAGEMENT.

    ``(a) Establishment.--There is established within the 
Administration the Office of Credit Risk Management (in this section 
referred to as the `Office').
    ``(b) Duties.--The Office shall be responsible for supervising--
            ``(1) any lender making loans under section 7(a) (in this 
        section referred to as a `7(a) lender');
            ``(2) any Lending Partner or Intermediary participant of 
        the Administration in a lending program of the Office of 
        Capital Access of the Administration; and
            ``(3) any small business lending company or a non-Federally 
        regulated lender without regard to the requirements of section 
        23.
    ``(c) Director.--
            ``(1) In general.--The Office shall be headed by the 
        Director of the Office of Credit Risk Management (in this 
        section referred to as the `Director'), who shall be a career 
        appointee in the Senior Executive Service (as defined in 
        section 3132 of title 5, United States Code).
            ``(2) Duties.--The Director shall be responsible for 
        oversight of the lenders and participants described in 
        subsection (b), including by conducting periodic reviews of the 
        compliance and performance of such lenders and participants.
    ``(d) Supervision Duties for 7(a) Lenders.--With respect to 7(a) 
lenders, an employee of the Office shall--
            ``(1) be present for and supervise any such review that is 
        conducted by a contractor of the Office on the premise of the 
        7(a) lender; and
            ``(2) supervise any such review that is not conducted on 
        the premise of the 7(a) lender.
    ``(e) Enforcement Authority Against 7(a) Lenders.--
            ``(1) Informal enforcement authority.--The Director may 
        take an informal enforcement action against a 7(a) lender if 
        the Director finds that the 7(a) lender has violated a 
        statutory or regulatory requirement under section 7(a) or any 
        requirement in a Standard Operating Procedures Manual or Policy 
        Notice related to a program or function of the Office of 
        Capital Access.
            ``(2) Formal enforcement authority.--
                    ``(A) In general.--With the approval of the Lender 
                Oversight Committee established under section 48, the 
                Director may take a formal enforcement action against 
                any 7(a) lender if the Director finds that the 7(a) 
                lender has violated--
                            ``(i) a statutory or regulatory requirement 
                        under section 7(a), including a requirement 
                        relating to credit elsewhere; or
                            ``(ii) any requirement described in a 
                        Standard Operating Procedures Manual or Policy 
                        Notice, related to a program or function of the 
                        Office of Capital Access.
                    ``(B) Enforcement actions.--An enforcement action 
                imposed on a 7(a) lender by the Director under 
                subparagraph (A) shall be based on the severity or 
                frequency of the violation and may include assessing a 
                civil monetary penalty against the 7(a) lender in an 
                amount that is not greater than $250,000.
            ``(3) Appeal by lender.--A 7(a) lender may appeal an 
        enforcement action imposed by the Director described in this 
        subsection to the Office of Hearings and Appeals established 
        under section 5(i) or to an appropriate district court of the 
        United States.
    ``(f) Regulations.--Not later than 1 year after the date of the 
enactment of this section, the Administrator shall issue regulations, 
after opportunity for notice and comment, to carry out subsection (e).
    ``(g) Servicing and Liquidation Responsibilities.--During any 
period during which a 7(a) lender is suspended or otherwise prohibited 
from making loans under section 7(a), the 7(a) lender shall remain 
obligated to maintain all servicing and liquidation activities 
delegated to the lender by the Administrator, unless otherwise 
specified by the Director.
    ``(h) Portfolio Risk Analysis of 7(a) Loans.--
            ``(1) In general.--The Director shall annually conduct a 
        risk analysis of the portfolio of the Administration with 
        respect to all loans guaranteed under section 7(a).
            ``(2) Report to congress.--On December 1, 2018, and every 
        December 1 thereafter, the Director shall submit to Congress a 
        report containing the results of each portfolio risk analysis 
        conducted under paragraph (1) during the fiscal year preceding 
        the submission of the report, which shall include--
                    ``(A) an analysis of the overall program risk of 
                loans guaranteed under section 7(a);
                    ``(B) an analysis of the program risk, set forth 
                separately by industry concentration;
                    ``(C) without identifying individual 7(a) lenders 
                by name, a consolidated analysis of the risk created by 
                the individual 7(a) lenders responsible for not less 
                than 1 percent of the gross loan approvals set forth 
                separately for the year covered by the report by--
                            ``(i) the dollar value of the loans made by 
                        such 7(a) lenders; and
                            ``(ii) the number of loans made by such 
                        7(a) lenders;
                    ``(D) steps taken by the Administrator to mitigate 
                the risks identified in subparagraphs (A), (B), and 
                (C);
                    ``(E) the number of 7(a) lenders, the number of 
                loans made, and the gross and net dollar amount of 
                loans made;
                    ``(F) the number and dollar amount of total losses, 
                the number and dollar amount of total purchases, and 
                the percentage and dollar amount of recoveries at the 
                Administration;
                    ``(G) the number and type of enforcement actions 
                recommended by the Director;
                    ``(H) the number and type of enforcement actions 
                approved by the Lender Oversight Committee established 
                under section 48;
                    ``(I) the number and type of enforcement actions 
                disapproved by the Lender Oversight Committee; and
                    ``(J) the number and dollar amount of civil 
                monetary penalties assessed.
    ``(i) Budget Submission and Justification.--The Director shall 
annually provide, in writing, a fiscal year budget submission for the 
Office and a justification for such submission to the Administrator. 
Such submission and justification shall--
            ``(1) include salaries and expenses of the Office and the 
        charge for the lender oversight fees;
            ``(2) be submitted at or about the time of the budget 
        submission by the President under section 1105(a) of title 31; 
        and
            ``(3) be maintained in an indexed form and made available 
        for public review for a period of not less than 5 years 
        beginning on the date of submission and justification.

``SEC. 48. LENDER OVERSIGHT COMMITTEE.

    ``(a) Establishment.--There is established within the 
Administration the Lender Oversight Committee (in this section referred 
to as the `Committee').
    ``(b) Membership.--The Committee shall consist of at least 8 
members selected by the Administrator, of which--
            ``(1) 3 members shall be voting members, 2 of whom shall be 
        career appointees in the Senior Executive Service (as defined 
        in section 3132 of title 5, United States Code); and
            ``(2) the remaining members shall be nonvoting members who 
        shall serve in an advisory capacity on the Committee.
    ``(c) Duties.--The Committee shall--
            ``(1) review reports on lender oversight activities;
            ``(2) review formal enforcement action recommendations of 
        the Director of the Office of Credit Risk Management with 
        respect to any lender making loans under section 7(a) and any 
        Lending Partner or Intermediary participant of the 
        Administration in a lending program of the Office of Capital 
        Access of the Administration;
            ``(3) in carrying out paragraph (2) with respect to formal 
        enforcement actions taken under subsection (d) or (e) of 
        section 23, vote to recommend or not recommend action to the 
        Administrator or a designee of the Administrator;
            ``(4) in carrying out paragraph (2) with respect to any 
        formal enforcement action not specified under subsection (d) or 
        (e) of section 23, vote to approve, disapprove, or modify the 
        action;
            ``(5) review, in an advisory capacity, any lender 
        oversight, portfolio risk management, or program integrity 
        matters brought by the Director; and
            ``(6) take such other actions and perform such other 
        functions as may be delegated to the Committee by the 
        Administrator.
    ``(d) Meetings.--
            ``(1) In general.--The Committee shall meet as necessary, 
        but not less frequently than on a quarterly basis.
            ``(2) Reports.--The Committee shall submit to the 
        Administrator a report detailing each meeting of the Committee, 
        including if the Committee does or does not vote to approve a 
        formal enforcement action of the Director of the Office of 
        Credit Risk Management with respect to a lender.''.
    (b) Supervision Duties for 7(a) Lenders.--Effective January 1, 
2019, subsection (d) of section 47 (as added by subsection (a)) is 
amended to read as follows:
    ``(d) Supervision Duties for 7(a) Lenders.--
            ``(1) Reviews.--With respect to 7(a) lenders, an employee 
        of the Office shall--
                    ``(A) be present for and supervise any such review 
                that is conducted by a contractor of the Office on the 
                premise of the 7(a) lender; and
                    ``(B) supervise any such review that is not 
                conducted on the premise of the 7(a) lender.
            ``(2) Review report timeline.--
                    ``(A) In general.--Notwithstanding any other 
                requirements of the Office or the Administrator, the 
                Administrator shall develop and implement a review 
                report timeline which shall--
                            ``(i) require the Administrator to--
                                    ``(I) deliver a written report of 
                                the review to the 7(a) lender not later 
                                than 60 business days after the date on 
                                which the review is concluded; or
                                    ``(II) if the Administrator expects 
                                to submit the report after the end of 
                                the 60-day period described in clause 
                                (i), notify the 7(a) lender of the 
                                expected date of submission of the 
                                report and the reason for the delay; 
                                and
                            ``(ii) if a response by the 7(a) lender is 
                        requested in a report submitted under 
                        subparagraph (A), require the 7(a) lender to 
                        submit responses to the Administrator not later 
                        than 45 business days after the date on which 
                        the 7(a) lender receives the report.
                    ``(B) Extension.--The Administrator may extend the 
                time frame described in subparagraph (A)(i)(II) with 
                respect to a 7(a) lender as the Administrator 
                determines necessary.''.
    (c) Transfer of Functions.--
            (1) Office of credit risk management.--All functions of the 
        Office of Credit Risk Management of the Small Business 
        Administration, including the personnel, assets, and obligation 
        of the Office of Credit Risk Management, as in existence on the 
        day before the date of the enactment of this Act, shall be 
        transferred to the Office of Credit Risk Management established 
        under section 47 of the Small Business Act, as added by 
        subsection (a).
            (2) Lender oversight committee.--All functions of the 
        Lender Oversight Committee of the Small Business 
        Administration, including the personnel, assets, and 
        obligations of the Lender Oversight Committee, as in existence 
        on the day before the date of the enactment of this Act, shall 
        be transferred to the Lender Oversight Committee established 
        under section 48 of the Small Business Act, as added by 
        subsection (a).
    (d) Deeming of Name.--
            (1) Office of credit risk management.--Any reference in a 
        law, regulation, guidance, document, paper, or other record of 
        the United States to the Office of Credit Risk Management of 
        the Small Business Administration shall be deemed a reference 
        to the Office of Credit Risk Management, established under 
        section 47 of the Small Business Act, as added by subsection 
        (a).
            (2) Lender oversight committee.--Any reference in a law, 
        regulation, guidance, document, paper, or other record of the 
        United States to the Lender Oversight Committee of the Small 
        Business Administration shall be deemed a reference to the 
        Lender Oversight Committee, established under section 48 of the 
        Small Business Act, as added by subsection (a).
    (e) Technical Amendment.--Section 3(r)(2) of the Small Business Act 
(15 U.S.C. 632(r)(2)) is amended by striking ``regulated SBA lender'' 
each place it appears in heading and text and inserting ``regulated 
lender''.

SEC. 4. DEFINITION OF CREDIT ELSEWHERE.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--
            (1) by striking section 3(h) (15 U.S.C. 632(h)) and 
        inserting the following:
    ``(h) The term `credit elsewhere' means--
            ``(1) for the purposes of this Act (except as used in 
        section 7(b)), the availability of credit on reasonable terms 
        and conditions to the individual loan applicant from non-
        Federal, non-State, or non-local government sources, 
        considering factors associated with conventional lending 
        practices, including--
                    ``(A) the business industry in which the loan 
                applicant operates;
                    ``(B) whether the loan applicant is an enterprise 
                that has been in operation for a period of not more 
                than 2 years;
                    ``(C) the adequacy of the collateral available to 
                secure the requested loan;
                    ``(D) the loan term necessary to reasonably assure 
                the ability of the loan applicant to repay the debt 
                from the actual or projected cash flow of the business; 
                and
                    ``(E) any other factor relating to the particular 
                credit application, as documented in detail by the 
                lender, that cannot be overcome except through 
                obtaining a Federal loan guarantee under prudent 
                lending standards; and
            ``(2) for the purposes of section 7(b), the availability of 
        credit on reasonable terms and conditions from non-Federal 
        sources taking into consideration the prevailing rates and 
        terms in the community in or near where the applicant business 
        concern transacts business, or the applicant homeowner resides, 
        for similar purposes and periods of time.''; and
            (2) in section 7(a)(1)(A)(i) (15 U.S.C. 636(a)(1)(A)(i)), 
        by inserting ``The Administrator has the authority to direct, 
        and conduct oversight for, the methods by which lenders 
        determine whether a borrower is able to obtain credit 
        elsewhere.'' before ``No financial assistance''.
    (b) Technical Amendment.--Section 18(b) of the Small Business Act 
(15 U.S.C. 647(b)) is amended to read as follows:
    ``(b) As used in this Act, the term `agricultural enterprises' 
means those small business concerns engaged in the production of food 
and fiber, ranching, and raising of livestock, aquaculture, and all 
other farming and agricultural-related industries.''.

SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE AMOUNT FOR GENERAL 
              BUSINESS LOANS.

    Section 20 of the Small Business Act (15 U.S.C. 631 note) is 
amended--
            (1) by redesignating subsection (j) as subsection (f); and
            (2) by adding at the end the following new subsection:
    ``(g) Authority To Increase Amount of General Business Loans.--
            ``(1) In general.--Subject to paragraphs (2) and (3) and 
        with respect to fiscal year 2019 and each fiscal year 
        thereafter, if the Administrator determines that the amount of 
        commitments by the Administrator for general business loans 
        authorized under section 7(a) for a fiscal year could exceed 
        the limit on the total amount of commitments the Administrator 
        may make for those loans under this Act, an appropriations Act, 
        or any other provision of law, the Administrator may make 
        commitments for those loans for that fiscal year in an 
        aggregate amount equal to not more than 115 percent of that 
        limit.
            ``(2) Notice required before exercising authority.--Not 
        later than 30 days before the date on which the Administrator 
        intends to exercise the authority under paragraph (1), the 
        Administrator shall submit notice of intent to exercise the 
        authority to--
                    ``(A) the Committee on Small Business and 
                Entrepreneurship and the Subcommittee on Financial 
                Services and General Government of the Committee on 
                Appropriations of the Senate; and
                    ``(B) the Committee on Small Business and the 
                Subcommittee on Financial Services and General 
                Government of the Committee on Appropriations of the 
                House of Representatives.
            ``(3) Limitation.--The Administrator shall not exercise the 
        authority under paragraph (1) more than once during any fiscal 
        year.''.

SEC. 6. ESTABLISHING A PROCESS FOR WAIVERS.

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

SEC. 7. REPEAL OF SMALL BUSINESS LOAN LOSS REPORT.

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

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