II 

111TH CONGRESS 

1ST SESSION S. 2824 

To establish a small dollar loan-loss guarantee fund, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 2, 2009 

Mr. KOHL (for himself and Mr. DURBIN) introduced the following bill; which 

was read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

A BILL 

To establish a small dollar loan-loss guarantee fund, 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. CDFI SMALL DOLLAR LOAN-LOSS GUARANTEE 

4 FUND. 

5 The Community Development Banking and Financial 

6 Institutions Act of 1994 (12 U.S.C. 4701 et seq.) is 

7 amended by adding at the end the following: 


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1 ‘‘SEC. 122. CDFI SMALL DOLLAR LOAN-LOSS GUARANTEE 

2 FUND. 

3 ‘‘(a) PURPOSE.—The purpose of this section are to 

4 establish a small dollar loan-loss guarantee fund to— 

5 ‘‘(1) serve as a loss reserve for qualifying loans 

6 to consumers offered by eligible financial institu7 tions; 

8 ‘‘(2) increase the number of qualifying loan 

9 products offered to consumers by such institutions; 

10 and 

11 ‘‘(3) increase consumer access to mainstream fi12 nancial institutions and provide consumers with al13 ternative choices to pay day loans. 

14 ‘‘(b) DEFINITIONS.—For purposes of this section, the 

15 following definitions shall apply: 

16 ‘‘(1) CONSUMER REPORTING AGENCY THAT

17 COMPILES AND MAINTAINS FILES ON CONSUMERS ON

18 A NATIONWIDE BASIS.—The term ‘consumer report19 ing agency that compiles and maintains files on con20 sumers on a nationwide basis’ has the same meaning 

21 given such term in section 603(p) of the Fair Credit 

22 Reporting Act (15 U.S.C. 1681a(p)). 

23 ‘‘(2) ELIGIBLE FINANCIAL INSTITUTION.—The 

24 term ‘eligible financial institution’ means— 

25 ‘‘(A) any community development financial 

26 institution, provided that if such institution is 


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1 subject to examination under the Community 

2 Reinvestment Act of 1977, that such institution 

3 received a satisfactory or an outstanding rating 

4 in meeting the needs of the community as part 

5 of its last examination under such Act; and 

6 ‘‘(B) any other entity, organization, or in7 stitution whose primary mission is to serve low8 to moderate-income individuals, as determined 

9 appropriate by the Administrator. 

10 ‘‘(3) FUND.—The term ‘Fund’ means the 

11 CDFI Small Dollar Loan-Loss Guarantee Fund es12 tablished under subsection (c). 

13 ‘‘(4) QUALIFYING LOAN.—The term ‘qualifying 

14 loan’ means a loan that satisfies the following re15 quirements: 

16 ‘‘(A) The loan is made to a consumer by 

17 an eligible financial institution. 

18 ‘‘(B) The loan is made in an amount not 

19 exceeding $2,500. 

20 ‘‘(C) The loan— 

21 ‘‘(i) has a repayment period of at 

22 least 60 days; 

23 ‘‘(ii) is repaid in installments, and 

24 such installment payments result in the reVerDate Nov 24 2008 00:35 Dec 03, 2009 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2824.IS S2824

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1 duction in the principle balance owed on 

2 the loan; 

3 ‘‘(iii) has an annual percentage rate 

4 that the Administrator determines to be 

5 acceptable through the application process 

6 for the purposes of this section, but in no 

7 event shall such annual percentage rate ex8 ceed 36 percent; and 

9 ‘‘(iv) has no pre-payment penalty. 

10 ‘‘(D) At the time of origination of the loan, 

11 the eligible financial institution that made the 

12 loan offered the consumer information. 

13 ‘‘(E) The eligible financial institution mak14 ing the loan reports payments regarding the 

15 loan to at least 1 of the consumer reporting 

16 agencies that compiles and maintains files on 

17 consumers on a nationwide basis. 

18 ‘‘(c) ESTABLISHMENT.— 

19 ‘‘(1) IN GENERAL.—There is established a 

20 CDFI Small Dollar Loan-Loss Guarantee Fund, 

21 which shall be used by the Administrator to defray 

22 the cost of losses on qualifying loans to consumers 

23 made by eligible financial institutions. 

24 ‘‘(2) USE OF FUND AMOUNTS.— 


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1 ‘‘(A) REIMBURSEMENT.—From amounts 

2 available in the Fund, the Administrator may 

3 provide reimbursement of a qualifying loan loss 

4 that is up to 60 percent of the loss on the 

5 qualifying loan to an eligible financial institu6 tion that has submitted an application pursuant 

7 to the requirements of subparagraph (B). The 

8 Administrator shall take into consideration the 

9 overall default rates of the qualifying loan port10 folio in an eligible financial institution when de11 termining the reimbursement rate of loan loss. 

12 ‘‘(B) APPLICATION.—In order to receive 

13 any amounts from the Fund under this section, 

14 each eligible financial institution shall submit 

15 an application at such time, in, such form, and 

16 with such information and assurances as the 

17 Administrator may require. 

18 ‘‘(3) DEPOSITS.— 

19 ‘‘(A) IN GENERAL.—The Fund shall con20 sist of— 

21 ‘‘(i) any amounts deposited pursuant 

22 to subsection (d)(4); 

23 ‘‘(ii) any amounts borrowed pursuant 

24 to subsection (e); 


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1 ‘‘(iii) a portion, as determined by the 

2 Administrator, of the proceeds of fees col3 lected by an eligible financial institution 

4 for the origination of the qualifying loans 

5 to consumers; and 

6 ‘‘(iv) any amounts transferred, cred7 ited, donated, or bequeathed to the Fund 

8 by any individual, foundation, corporation, 

9 or other legal entity. 

10 ‘‘(B) SOLVENCY OF FUND.—In making the 

11 determination required under subparagraph 

12 (A), the Administrator shall give priority con13 sideration to that amount that would best pro14 tect and ensure the solvency of the Fund. 

15 ‘‘(C) INVESTMENT AUTHORITY.—Funds 

16 that are not otherwise distributed by the Fund 

17 to eligible financial institutions for reimburse18 ment of qualifying loan losses shall be invested 

19 in obligations of the United States or in obliga20 tions guaranteed as principle and interest by 

21 the United States. 

22 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.— 

23 ‘‘(1) IN GENERAL.—There are authorized to be 

24 appropriated for each fiscal year such sums as are 

25 necessary to carry out this section. 


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1 ‘‘(2) ADMINISTRATIVE COSTS.—From amounts 

2 made available under this section, the Administrator 

3 may reserve not more than 10 percent for adminis4 trative costs. 

5 ‘‘(3) TECHNICAL ASSISTANCE GRANTS.— 

6 Amounts made available under this section may be 

7 used to make technical assistance grants to appli8 cants to develop and support a small dollar loan pro9 gram. Any technical assistance grants made under 

10 this paragraph shall be made in accordance with 

11 subsections (b), (c), and (d) of section 108, provided 

12 that the Administrator may waive the requirements 

13 of subsection (e) of such section 108 with respect to 

14 such grants. 

15 ‘‘(4) DEPOSIT INTO FUND.—Amounts made 

16 available under this section may be deposited into 

17 the CDFI Small Dollar Loan-Loss Guarantee Fund 

18 established under this section. 

19 ‘‘(e) BORROWING AUTHORITY.—The Administrator 

20 is authorized to borrow from the Treasury, and the Sec21 retary of the Treasury is authorized and directed to loan 

22 to the Administrator on such terms as may be fixed by 

23 the Administrator and the Secretary, such funds as in the 

24 judgment of the Administrator are from time to time re25 quired to maintain the solvency of the Fund, not exceeding 


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1 in the aggregate $75,000,000 outstanding at any one 

2 time, subject to the approval of the Secretary of the Treas3 ury: Provided, That the rate of interest to be charged in 

4 connection with any loan made pursuant to this subsection 

5 shall not be less than an amount determined by the Sec6 retary of the Treasury, taking into consideration current 

7 market yields on outstanding marketable obligations of the 

8 United States of comparable maturity. For such purpose 

9 the Secretary of the Treasury is authorized to use as a 

10 public-debt transaction the proceeds of the sale of any se11 curities hereafter issued under the Second Liberty Bond 

12 Act, as amended, and the purposes for which securities 

13 may be issued under the Second Liberty Bond Act, as 

14 amended, are extended to include such loans. Any such 

15 loan shall be used by the Administrator solely in carrying 

16 out its functions with respect to the Fund. All loans and 

17 repayments under this subsection shall be treated as pub18 lic-debt transactions of the United States. The Adminis19 trator may employ any amounts obtained under this sub20 section for purposes of the Fund and the borrowing shall 

21 become a liability of the Fund to the extent funds are em22 ployed therefor. 

23 ‘‘(f) REPORT TO CONGRESS.—Not later than 1 year 

24 after the CDFI Small Dollar Loan-Loss Guarantee Fund 

25 makes its first reimbursement to an eligible financial instiVerDate Nov 24 2008 00:35 Dec 03, 2009 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2824.IS S2824

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1 tution, and every year thereafter, the Administrator shall 

2 submit to the Banking, Housing, and Urban Affairs Com3 mittee of the Senate, the Financial Services Committee 

4 of the House of Representatives, and the Committee on 

5 Appropriations of both the Senate and the House of Rep6 resentatives a report describing— 

7 ‘‘(1) the activities of the Fund, including the 

8 cumulative volume and amounts of loan reimburse9 ments that have been distributed from the Fund 

10 during the prior 12 months; 

11 ‘‘(2) the solvency of the Fund; 

12 ‘‘(3) the default rate of qualifying loans; and 

13 ‘‘(4) any measurable results, as appropriate and 

14 available, related to the achievement of the purposes 

15 of this section as such purposes are set forth under 

16 subsection (a).’’. 

Æ 


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