IB 

Union Calendar No. 503 

115TH CONGRESS 

2D SESSION H. R. 4743 

[Report No. 115–655] 

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 

APRIL 26, 2018 

Additional sponsors: Mr. MARSHALL, Miss GONZA ́LEZ-COLO ́N of Puerto Rico, 

Mrs. RADEWAGEN, Ms. JUDY CHU of California, Mrs. MURPHY of Florida, Mr. ESPAILLAT, Mr. EVANS, Ms. CLARKE of New York, Mr. NORMAN, and Mr. LAWSON of Florida 

APRIL 26, 2018 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on January 9, 2018] 


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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. 


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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. 

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

11 MANAGEMENT AND THE LENDER OVERSIGHT 

12 COMMITTEE. 

13 (a) IN GENERAL.—The Small Business Act (15 U.S.C. 

14 631 et seq.) is amended— 

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

16 and 

17 (2) by inserting after section 46 the following 

18 new sections: 

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

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

21 the Administration the Office of Credit Risk Management 

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

23 ‘‘(b) DUTIES.—The Office shall be responsible for su24 pervising— 


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1 ‘‘(1) any lender making loans under section 7(a) 

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

3 ‘‘(2) any Lending Partner or Intermediary par4 ticipant of the Administration in a lending program 

5 of the Office of Capital Access of the Administration; 

6 and 

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

8 non-Federally regulated lender without regard to the 

9 requirements of section 23. 

10 ‘‘(c) DIRECTOR.— 

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

12 the Director of the Office of Credit Risk Management 

13 (in this section referred to as the ‘Director’), who 

14 shall be a career appointee in the Senior Executive 

15 Service (as defined in section 3132 of title 5, United 

16 States Code). 

17 ‘‘(2) DUTIES.—The Director shall be responsible 

18 for oversight of the lenders and participants described 

19 in subsection (b), including by conducting periodic 

20 reviews of the compliance and performance of such 

21 lenders and participants. 

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

23 respect to 7(a) lenders, an employee of the Office shall— 


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1 ‘‘(1) be present for and supervise any such re2 view that is conducted by a contractor of the Office 

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

4 ‘‘(2) supervise any such review that is not con5 ducted on the premise of the 7(a) lender. 

6 ‘‘(e) ENFORCEMENT AUTHORITY AGAINST 7(a) LEND7 ERS.— 

8 ‘‘(1) INFORMAL ENFORCEMENT AUTHORITY.—The 

9 Director may take an informal enforcement action 

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

11 7(a) lender has violated a statutory or regulatory re12 quirement under section 7(a) or any requirement in 

13 a Standard Operating Procedures Manual or Policy 

14 Notice related to a program or function of the Office 

15 of Capital Access. 

16 ‘‘(2) FORMAL ENFORCEMENT AUTHORITY.— 

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

18 the Lender Oversight Committee established 

19 under section 48, the Director may take a formal 

20 enforcement action against any 7(a) lender if the 

21 Director finds that the 7(a) lender has violated— 

22 ‘‘(i) a statutory or regulatory require23 ment under section 7(a), including a re24 quirement relating to credit elsewhere; or 


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1 ‘‘(ii) any requirement described in a 

2 Standard Operating Procedures Manual or 

3 Policy Notice, related to a program or func4 tion of the Office of Capital Access. 

5 ‘‘(B) ENFORCEMENT ACTIONS.—An enforce6 ment action imposed on a 7(a) lender by the Di7 rector under subparagraph (A) shall be based on 

8 the severity or frequency of the violation and 

9 may include assessing a civil monetary penalty 

10 against the 7(a) lender in an amount that is not 

11 greater than $250,000. 

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

13 appeal an enforcement action imposed by the Director 

14 described in this subsection to the Office of Hearings 

15 and Appeals established under section 5(i) or to an 

16 appropriate district court of the United States. 

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

18 date of the enactment of this section, the Administrator 

19 shall issue regulations, after opportunity for notice and 

20 comment, to carry out subsection (e). 

21 ‘‘(g) SERVICING AND LIQUIDATION RESPONSIBIL22 ITIES.—During any period during which a 7(a) lender is 

23 suspended or otherwise prohibited from making loans under 

24 section 7(a), the 7(a) lender shall remain obligated to main25 tain all servicing and liquidation activities delegated to the 


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1 lender by the Administrator, unless otherwise specified by 

2 the Director. 

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

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

5 conduct a risk analysis of the portfolio of the Admin6 istration with respect to all loans guaranteed under 

7 section 7(a). 

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

9 2018, and every December 1 thereafter, the Director 

10 shall submit to Congress a report containing the re11 sults of each portfolio risk analysis conducted under 

12 paragraph (1) during the fiscal year preceding the 

13 submission of the report, which shall include— 

14 ‘‘(A) an analysis of the overall program risk 

15 of loans guaranteed under section 7(a); 

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

17 forth separately by industry concentration; 

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

19 lenders by name, a consolidated analysis of the 

20 risk created by the individual 7(a) lenders re21 sponsible for not less than 1 percent of the gross 

22 loan approvals set forth separately for the year 

23 covered by the report by— 

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

25 by such 7(a) lenders; and 


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1 ‘‘(ii) the number of loans made by such 

2 7(a) lenders; 

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

4 mitigate the risks identified in subparagraphs 

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

6 ‘‘(E) the number of 7(a) lenders, the number 

7 of loans made, and the gross and net dollar 

8 amount of loans made; 

9 ‘‘(F) the number and dollar amount of total 

10 losses, the number and dollar amount of total 

11 purchases, and the percentage and dollar amount 

12 of recoveries at the Administration; 

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

14 actions recommended by the Director; 

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

16 actions approved by the Lender Oversight Com17 mittee established under section 48; 

18 ‘‘(I) the number and type of enforcement ac19 tions disapproved by the Lender Oversight Com20 mittee; and 

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

22 monetary penalties assessed. 

23 ‘‘(i) BUDGET SUBMISSION AND JUSTIFICATION.—The 

24 Director shall annually provide, in writing, a fiscal year 

25 budget submission for the Office and a justification for such 


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1 submission to the Administrator. Such submission and jus2 tification shall— 

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

4 and the charge for the lender oversight fees; 

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

6 budget submission by the President under section 

7 1105(a) of title 31; and 

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

9 made available for public review for a period of not 

10 less than 5 years beginning on the date of submission 

11 and justification. 

12 ‘‘SEC. 48. LENDER OVERSIGHT COMMITTEE. 

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

14 the Administration the Lender Oversight Committee (in 

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

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

17 least 8 members selected by the Administrator, of which— 

18 ‘‘(1) 3 members shall be voting members, 2 of 

19 whom shall be career appointees in the Senior Execu20 tive Service (as defined in section 3132 of title 5, 

21 United States Code); and 

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

23 members who shall serve in an advisory capacity on 

24 the Committee. 

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


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1 ‘‘(1) review reports on lender oversight activities; 

2 ‘‘(2) review formal enforcement action rec3 ommendations of the Director of the Office of Credit 

4 Risk Management with respect to any lender making 

5 loans under section 7(a) and any Lending Partner or 

6 Intermediary participant of the Administration in a 

7 lending program of the Office of Capital Access of the 

8 Administration; 

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

10 to formal enforcement actions taken under subsection 

11 (d) or (e) of section 23, vote to recommend or not rec12 ommend action to the Administrator or a designee of 

13 the Administrator; 

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

15 to any formal enforcement action not specified under 

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

17 disapprove, or modify the action; 

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

19 oversight, portfolio risk management, or program in20 tegrity matters brought by the Director; and 

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

22 other functions as may be delegated to the Committee 

23 by the Administrator. 

24 ‘‘(d) MEETINGS.— 


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

2 necessary, but not less frequently than on a quarterly 

3 basis. 

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

5 the Administrator a report detailing each meeting of 

6 the Committee, including if the Committee does or 

7 does not vote to approve a formal enforcement action 

8 of the Director of the Office of Credit Risk Manage9 ment with respect to a lender.’’. 

10 (b) SUPERVISION DUTIES FOR 7(A) LENDERS.—Effec11 tive January 1, 2019, subsection (d) of section 47 (as added 

12 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, an 

15 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 Adminis24 trator, the Administrator shall develop and im25 plement a review report timeline which shall— 


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1 ‘‘(i) require the Administrator to— 

2 ‘‘(I) deliver a written report of the 

3 review to the 7(a) lender not later than 

4 60 business days after the date on 

5 which the review is concluded; or 

6 ‘‘(II) if the Administrator expects 

7 to submit the report after the end of the 

8 60-day period described in clause (i), 

9 notify the 7(a) lender of the expected 

10 date of submission of the report and 

11 the reason for the delay; and 

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

13 requested in a report submitted under sub14 paragraph (A), require the 7(a) lender to 

15 submit responses to the Administrator not 

16 later than 45 business days after the date 

17 on which the 7(a) lender receives the report. 

18 ‘‘(B) EXTENSION.—The Administrator may 

19 extend the time frame described in subparagraph 

20 (A)(i)(II) with respect to a 7(a) lender as the 

21 Administrator determines necessary.’’. 

22 (c) TRANSFER OF FUNCTIONS.— 

23 (1) OFFICE OF CREDIT RISK MANAGEMENT.—All 

24 functions of the Office of Credit Risk Management of 

25 the Small Business Administration, including the 


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1 personnel, assets, and obligation of the Office of Cred2 it Risk Management, as in existence on the day before 

3 the date of the enactment of this Act, shall be trans4 ferred to the Office of Credit Risk Management estab5 lished under section 47 of the Small Business Act, as 

6 added by subsection (a). 

7 (2) LENDER OVERSIGHT COMMITTEE.—All func8 tions of the Lender Oversight Committee of the Small 

9 Business Administration, including the personnel, as10 sets, and obligations of the Lender Oversight Com11 mittee, as in existence on the day before the date of 

12 the enactment of this Act, shall be transferred to the 

13 Lender Oversight Committee established under section 

14 48 of the Small Business Act, as added by subsection 

15 (a). 

16 (d) DEEMING OF NAME.— 

17 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

18 Any reference in a law, regulation, guidance, docu19 ment, paper, or other record of the United States to 

20 the Office of Credit Risk Management of the Small 

21 Business Administration shall be deemed a reference 

22 to the Office of Credit Risk Management, established 

23 under section 47 of the Small Business Act, as added 

24 by subsection (a). 


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

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

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

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

13 SEC. 4. DEFINITION OF CREDIT ELSEWHERE. 

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

15 631 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 used 

20 in section 7(b)), the availability of credit on reason21 able terms and conditions to the individual loan ap22 plicant from non-Federal, non-State, or non-local gov23 ernment sources, considering factors associated with 

24 conventional lending practices, including— 


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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 available 

7 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 of 

11 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 except 

15 through obtaining a Federal loan guarantee 

16 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 business concern trans22 acts business, or the applicant homeowner resides, for 

23 similar purposes and periods of time.’’; and 

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

25 636(a)(1)(A)(i)), by inserting ‘‘The Administrator has 


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1 the authority to direct, and conduct oversight for, the 

2 methods by which lenders determine whether a bor3 rower is able to obtain credit elsewhere.’’ before ‘‘No 

4 financial assistance’’. 

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

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

7 as follows: 

8 ‘‘(b) As used in this Act, the term ‘agricultural enter9 prises’ means those small business concerns engaged in the 

10 production of food and fiber, ranching, and raising of live11 stock, aquaculture, and all other farming and agricultural12 related industries.’’. 

13 SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE 

14 AMOUNT FOR GENERAL BUSINESS LOANS. 

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

16 note) is amended— 

17 (1) by redesignating subsection (j) as subsection 

18 (f); and 

19 (2) by adding at the end the following new sub20 section: 

21 ‘‘(g) AUTHORITY TO INCREASE AMOUNT OF GENERAL

22 BUSINESS LOANS.— 

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

24 2018 and each fiscal year thereafter, if the Adminis25 trator determines that the amount of commitments by 


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1 the Administrator for general business loans author2 ized under section 7(a) for a fiscal year could exceed 

3 the limit on the total amount of commitments the Ad4 ministrator may make for those loans under this Act, 

5 an appropriations Act, or any other provision of law, 

6 the Administrator may make commitments for those 

7 loans for that fiscal year in an aggregate amount 

8 equal to not more than 115 percent of that limit. 

9 ‘‘(2) APPROVAL REQUIRED BEFORE EXERCISING

10 AUTHORITY.— 

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

12 before the date on which the Administrator in13 tends to exercise the authority under paragraph 

14 (1), the Administrator shall submit notice of in15 tent to exercise the authority to— 

16 ‘‘(i) the Committee on Small Business 

17 and Entrepreneurship and the Sub18 committee on Financial Services and Gen19 eral Government of the Committee on Ap20 propriations of the Senate; and 

21 ‘‘(ii) the Committee on Small Business 

22 and the Subcommittee on Financial Serv23 ices and General Government of the Com24 mittee on Appropriations of the House of 

25 Representatives. 


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

2 not exercise the authority under paragraph (1) 

3 unless such exercise of authority has been ap4 proved, in writing, by the Committee on Appro5 priations and the Committee on Small Business 

6 and Entrepreneurship of the Senate and the 

7 Committee on Appropriations and the Com8 mittee on Small Business of the House of Rep9 resentatives. 

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

11 exercise the authority under paragraph (1) more than 

12 once during any fiscal year.’’. 

13 SEC. 6. ESTABLISHING A PROCESS FOR WAIVERS. 

14 (a) IN GENERAL.—If the Administrator exercises stat15 utory or regulatory authority to waive a regulation or a 

16 requirement in the Standard Operating Procedures Manual 

17 or Policy Notice related to a program or function of the 

18 Office of Capital Access of the Administration, the waiver 

19 shall be in writing and be maintained in an indexed form. 

20 (b) NO NEW WAIVER AUTHORITY.—Nothing in sub21 section (a) shall be construed as creating new authority for 

22 the Administrator to waive regulations of the Administra23 tion. 


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Union Calendar No. 503 

115TH CONGRESS 

2D SESSION H. R. 4743 

[Report No. 115–655] 

A BILL 

To amend the Small Business Act to strengthen the 

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

APRIL 26, 2018 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


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