II 

115TH CONGRESS 

2D SESSION S. 2283 

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 SENATE OF THE UNITED STATES 

JANUARY 9, 2018 

Mr. RISCH (for himself and Mrs. SHAHEEN) introduced the following bill; 

which was read twice and referred to the Committee on Small Business 

and Entrepreneurship 

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. 


sradovich on DSK3GMQ082PROD with BILLS
2 

•S 2283 IS

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

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

11 the Administration the Office of Credit Risk Management 

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

13 ‘‘(b) DUTIES.—The Office shall be responsible for su14 pervising— 

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

16 7(a) (in this section referred to as a ‘7(a) lender’); 

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

18 the Office of Capital Access of the Administration; 

19 and 

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

21 non-Federally regulated lender without regard to the 

22 requirements of section 23. 

23 ‘‘(c) DIRECTOR.—The Office is headed by the Direc24 tor of the Office of Credit Risk Management (in this sec25 tion referred to as the ‘Director’), who shall— 


sradovich on DSK3GMQ082PROD with BILLS
3 

•S 2283 IS

1 ‘‘(1) be a career appointee in a Senior Execu2 tive Service position (as defined in section 3132 of 

3 title 5, United States Code); and 

4 ‘‘(2) be responsible for oversight of the lenders 

5 and participants described in subsection (b), includ6 ing by conducting periodic reviews of the compliance 

7 and performance of those lenders and participants. 

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

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

10 an employee of the Office shall— 

11 ‘‘(A) be present for and supervise any re12 view of a 7(a) lender that is conducted by a 

13 contractor of the Office on the premises of the 

14 7(a) lender; and 

15 ‘‘(B) supervise any review of a 7(a) lender 

16 that is not conducted on the premises of the 

17 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 


sradovich on DSK3GMQ082PROD with BILLS
4 

•S 2283 IS

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 business-day period described in clause (i), 

6 notify the 7(a) lender in writing of the ex7 pected submission day of the report and 

8 the reason for 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 a 

12 response 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.— 


sradovich on DSK3GMQ082PROD with BILLS
5 

•S 2283 IS

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 func14 tion of the Office of Capital Access. 

15 ‘‘(B) ENFORCEMENT ACTIONS.— 

16 ‘‘(i) IN GENERAL.—Any enforcement 

17 action taken with respect to a 7(a) lender 

18 by the Director under subparagraph (A)— 

19 ‘‘(I) shall be based on the sever20 ity or frequency of the violation; and 

21 ‘‘(II) may include assessing a 

22 civil monetary penalty against the 

23 7(a) lender in an amount that is not 

24 greater than $250,000. 


sradovich on DSK3GMQ082PROD with BILLS
6 

•S 2283 IS

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

2 appeal an enforcement action imposed by the Direc3 tor described in paragraph (2) to the Office of Hear4 ings and Appeals established under section 5(i) or to 

5 an appropriate district court of the United States. 

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

7 date of enactment of the Small Business 7(a) Lending 

8 Oversight Reform Act of 2018, the Administrator shall 

9 issue regulations, after opportunity for notice and com10 ment under section 553 of title 5, United States Code, 

11 to carry out subsection (e). 

12 ‘‘(g) SERVICING AND LIQUIDATION RESPONSIBIL13 ITIES.—During any period during which a 7(a) lender is 

14 suspended from participating under section 7(a), or if a 

15 7(a) lender is prohibited from making loans under section 

16 7(a), the 7(a) lender shall remain obligated to maintain 

17 all servicing and liquidation activities delegated to the 

18 lender by the Administrator, unless otherwise specified by 

19 the Director. 

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

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

22 conduct a risk analysis of the portfolio of the Ad23 ministration with respect to all loans guaranteed 

24 under section 7(a). 


sradovich on DSK3GMQ082PROD with BILLS
7 

•S 2283 IS

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

2 2018, and every December 1 thereafter, the Director 

3 shall submit to Congress an annual report con4 taining the results of each portfolio risk analysis 

5 conducted under paragraph (1) during the fiscal 

6 year preceding the submission of the report, which 

7 shall include— 

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

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

10 ‘‘(B) an analysis of program risk, set forth 

11 separately by industry concentration; 

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

13 lenders by name, a consolidated analysis of the 

14 risk created by the individual 7(a) lenders re15 sponsible for not less than 1 percent of the 

16 gross loan approvals by dollar and amount of 

17 loans for the year covered by the report; 

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 gross 

22 and net number of loans made, and the gross 

23 and net dollar amount of loans made; 


sradovich on DSK3GMQ082PROD with BILLS
8 

•S 2283 IS

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

2 total defaults and total repurchases, and the 

3 percentage and total amount of recoveries; 

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

5 actions recommended by the Director; 

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

7 actions approved by the Lender Oversight Com8 mittee established under section 48; 

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

10 actions disapproved by the Lender Oversight 

11 Committee; and 

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

13 monetary penalties assessed. 

14 ‘‘(i) BUDGET SUBMISSION AND JUSTIFICATION.—Ef15 fective for the first fiscal year occurring after the date of 

16 enactment of the Small Business 7(a) Lending Oversight 

17 Reform Act of 2018, and each fiscal year thereafter, the 

18 Director shall provide, in writing a budget submission and 

19 justification for the submission to the Administrator, 

20 which shall— 

21 ‘‘(1) include the salaries and expenses of the 

22 Office and lender oversight fees; 

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

24 budget submission by the President under section 

25 1105(a) of title 31, United States Code; and 


sradovich on DSK3GMQ082PROD with BILLS
9 

•S 2283 IS

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

2 made available for public review for a period of not 

3 less than 5 years beginning on the date of submis4 sion. 

5 ‘‘SEC. 48. LENDER OVERSIGHT COMMITTEE. 

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

7 the Administration the Lender Oversight Committee (in 

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

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

10 11 members appointed by the Administrator, of whom— 

11 ‘‘(1) 3 members shall be voting members, of 

12 whom 2 shall be career appointees serving in a Sen13 ior Executive Service position (as defined in section 

14 3132 of title 5, United States Code); and 

15 ‘‘(2) 8 members shall be nonvoting members 

16 who shall serve in an advisory capacity on the Com17 mittee. 

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

19 ‘‘(1) review reports on lender oversight activi20 ties; 

21 ‘‘(2) review formal enforcement action rec22 ommendations of the Director of the Office of Credit 

23 Risk Management with respect to any lender making 

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


sradovich on DSK3GMQ082PROD with BILLS
10 

•S 2283 IS

1 lending program of the Office of Capital Access of 

2 the Administration; 

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

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

6 the action or vote to not recommend the action to 

7 the Administrator or a designee of the Adminis8 trator; 

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

10 to any other formal enforcement action not other11 wise specified in subsection (d) or (e) of section 23, 

12 vote to approve, disapprove, or modify the action; 

13 ‘‘(5) review in an advisory capacity any lender 

14 oversight, portfolio risk management, or program in15 tegrity matters brought by the Director of the Office 

16 of Credit Risk Management; and 

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

18 other functions as may be delegated to the Com19 mittee by the Administrator. 

20 ‘‘(d) MEETINGS.— 

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

22 as necessary, but not less frequently than on a quar23 terly basis. 

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

25 to the Administrator a report detailing each meeting 


sradovich on DSK3GMQ082PROD with BILLS
11 

•S 2283 IS

1 of the Committee, including if the Committee does 

2 or does not vote to recommend a formal enforcement 

3 action of the Director of the Office of Credit Risk 

4 Management with respect to a lender.’’. 

5 (b) TRANSFER OF FUNCTIONS.— 

6 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

7 All functions of the Office of Credit Risk Manage8 ment of the Administration, including the personnel, 

9 assets, and obligations of the Office of Credit Risk 

10 Management, as in existence on the day before the 

11 date of enactment of this Act, shall be transferred 

12 to the Office of Credit Risk Management established 

13 under section 47 of the Small Business Act, as 

14 added by subsection (a). 

15 (2) LENDER OVERSIGHT COMMITTEE.—All 

16 functions of the Lender Oversight Committee of the 

17 Administration, including the personnel, assets, and 

18 obligations of the Lender Oversight Committee, as 

19 in existence on the day before the date of enactment 

20 of this Act, shall be transferred to the Lender Over21 sight Committee established under section 48 of the 

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

23 (c) DEEMING OF NAME.— 

24 (1) OFFICE OF CREDIT RISK MANAGEMENT.— 

25 Any reference in a law, regulation, document, paper, 


sradovich on DSK3GMQ082PROD with BILLS
12 

•S 2283 IS

1 or other record of the United States to the Office of 

2 Credit Risk Management of the Administration shall 

3 be deemed a reference to the Office of Credit Risk 

4 Management of the Administration established 

5 under section 47 of the Small Business Act, as 

6 added by subsection (a). 

7 (2) LENDER OVERSIGHT COMMITTEE.—Any ref8 erence in a law, regulation, document, paper, or 

9 other record of the United States to the Lender 

10 Oversight Committee of the Administration shall be 

11 deemed a reference to the Lender Oversight Com12 mittee of the Administration established under sec13 tion 48 of the Small Business Act, as added by sub14 section (a). 

15 (d) TECHNICAL AND CONFORMING AMENDMENTS.— 

16 The Small Business Act (15 U.S.C. 631 et seq.) is amend17 ed— 

18 (1) in section 3(r)(2) (15 U.S.C. 632(r)(2))— 

19 (A) in this paragraph heading, by striking 

20 ‘‘SBA’’; and 

21 (B) in the matter preceding subparagraph 

22 (A), by striking ‘‘SBA’’; and 

23 (2) in section 18 (15 U.S.C. 647), by striking 

24 subsection (b) and inserting the following: 


sradovich on DSK3GMQ082PROD with BILLS
13 

•S 2283 IS

1 ‘‘(b) As used in this Act, the term ‘agricultural enter2 prises’ means those small business concerns engaged in 

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

4 livestock, aquaculture, and all other farming and agricul5 tural related industries.’’. 

6 SEC. 4. DEFINITION OF CREDIT ELSEWHERE. 

7 The Small Business Act (15 U.S.C. 631 et seq.) is 

8 amended— 

9 (1) in section 3 (15 U.S.C. 632), by striking 

10 subsection (h) and inserting the following: 

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

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

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

14 reasonable terms and conditions to the individual 

15 loan applicant from non-Federal, non-State, or non16 local government sources, considering factors associ17 ated with conventional lending practices, including— 

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

19 loan applicant operates; 

20 ‘‘(B) whether the loan applicant is an en21 terprise that has been in operation for a period 

22 of not more than 2 years; 

23 ‘‘(C) the adequacy of the collateral avail24 able to secure the requested loan; 


sradovich on DSK3GMQ082PROD with BILLS
14 

•S 2283 IS

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

2 assure the ability of the loan applicant to repay 

3 the debt from the actual or projected cash flow 

4 of the business; and 

5 ‘‘(E) any other factor relating to the par6 ticular credit application, as documented in de7 tail by the lender, that cannot be overcome ex8 cept through obtaining a Federal loan guar9 antee under prudent lending standards; and 

10 ‘‘(2) for the purposes of section 7(b), the avail11 ability of credit on reasonable terms and conditions 

12 from non-Federal sources taking into consideration 

13 the prevailing rates and terms in the community in 

14 or near where the applicant small business concern 

15 transacts business, or the applicant homeowner re16 sides, for similar purposes and periods of time.’’; 

17 and 

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

19 636(a)(1)(A)(i)), by inserting ‘‘The Administrator 

20 has the authority to direct, and conduct oversight 

21 for, the methods by which lenders determine whether 

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

23 ‘‘No financial assistance’’. 


sradovich on DSK3GMQ082PROD with BILLS
15 

•S 2283 IS

1 SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE 

2 AMOUNT FOR GENERAL BUSINESS LOANS. 

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

4 note) is amended— 

5 (1) by redesignating subsection (j) as sub6 section (f); and 

7 (2) by adding at the end the following: 

8 ‘‘(g) AUTHORITY TO INCREASE AMOUNT OF GEN9 ERAL BUSINESS LOANS.— 

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

11 2018 and each fiscal year thereafter, if the Adminis12 trator determines that the amount of commitments 

13 by the Administrator for general business loans au14 thorized under section 7(a) for a fiscal year could 

15 exceed the limit on the total amount of commitments 

16 the Administrator may make for those loans under 

17 this Act, an appropriations Act, or any other provi18 sion of law, the Administrator may make commit19 ments for those loans for that fiscal year in total 

20 amount equal to not more than 115 percent of that 

21 limit. 

22 ‘‘(2) APPROVAL REQUIRED BEFORE EXER23 CISING AUTHORITY.— 

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

25 days before the date on which the Adminis26 trator intends to exercise the authority under 


sradovich on DSK3GMQ082PROD with BILLS
16 

•S 2283 IS

1 paragraph (1), the Administrator shall submit 

2 notice of the intent of the Administrator to ex3 ercise the authority to— 

4 ‘‘(i) the Committee on Small Business 

5 and Entrepreneurship and the Sub6 committee on Financial Services and Gen7 eral Government of the Committee on Ap8 propriations of the Senate; and 

9 ‘‘(ii) the Committee on Small Busi10 ness and the Subcommittee on Financial 

11 Services and General Government of the 

12 Committee on Appropriations of the House 

13 of Representatives. 

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

15 not exercise the authority under paragraph (1) 

16 unless the exercise of authority has been ap17 proved, in writing, by the Committee on Appro18 priations and the Committee on Small Business 

19 and Entrepreneurship of the Senate and the 

20 Committee on Appropriations and the Com21 mittee on Small Business of the House of Rep22 resentatives. 

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

24 exercise the authority under paragraph (1) more 

25 than once during any fiscal year.’’. 


sradovich on DSK3GMQ082PROD with BILLS
17 

•S 2283 IS

1 SEC. 6. DISCLOSURE OF WAIVERS. 

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

3 statutory or regulatory authority to waive a regulation re4 lated to a program or function of the Office of Capital 

5 Access of the Administration— 

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

7 specify the grounds for approving the waiver; and 

8 (2) the Administrator shall notify the public of 

9 all waivers of regulations approved by the Adminis10 tration, which notice shall— 

11 (A) be published in the Federal Register 

12 not less than annually; 

13 (B) cover the period beginning on the date 

14 after the last day covered by the previous no15 tice; 

16 (C) describe the nature of the requirement 

17 that has been waived and specify the regulation 

18 involved; 

19 (D) include a brief description of the 

20 grounds for approval of the waiver; and 

21 (E) state how more information about the 

22 waiver and a copy of the request and the ap23 proval may be obtained. 

24 (b) NO NEW WAIVER AUTHORITY.—Nothing in sub25 section (a) shall be construed as creating new authority 


sradovich on DSK3GMQ082PROD with BILLS
18 

•S 2283 IS

1 for the Administrator to waive regulations of the Adminis2 tration. 

3 (c) GAO STUDY ON STANDARD OPERATING PROCE4 DURES MANUAL OR POLICY NOTICE WAIVER PROCESS.— 

5 Not later than 1 year after the date of enactment of this 

6 Act, the Comptroller General of the United States shall 

7 submit to the Committee on Small Business and Entrepre8 neurship of the Senate and the Committee on Small Busi9 ness of the House of Representatives a report evalu10 ating— 

11 (1) the methods and specific processes used by 

12 the Administration to waive requirements in the 

13 Standard Operating Procedures Manual or Policy 

14 Notices relating to loans made under section 7(a) of 

15 the Small Business Act (15 U.S.C. 636(a)); and 

16 (2) the number of waivers described in para17 graph (1) granted during the period of 5 fiscal years 

18 preceding the date of enactment of this Act. 

Æ 


sradovich on DSK3GMQ082PROD with BILLS