H. R. 923 

One Hundred Eighth Congress 

of the 

United States of America 

AT THE SECOND SESSION 

Begun and held at the City of Washington on Tuesday, 

the twentieth day of January, two thousand and four 

An Act 

To amend the Small Business Investment Act of 1958 to allow certain premier 

certified lenders to elect to maintain an alternative loss reserve. 

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 ‘‘Premier Certified Lenders Program Improvement Act of 2004’’. 

SEC. 2. LOSS RESERVES OF PREMIER CERTIFIED LENDERS TEMPORARILY DETERMINED ON THE BASIS OF OUTSTANDING 

BALANCE OF DEBENTURES. 

Paragraph (6) of section 508(c) of the Small Business Investment Act of 1958 (15 U.S.C. 697e(c)) is amended— 

(1) by striking ‘‘The Administration’’ and inserting the following: 

‘‘(A) IN GENERAL.—The Administration’’; and 

(2) by adding at the end the following new subparagraph: 

‘‘(B) TEMPORARY REDUCTION BASED ON OUTSTANDING

BALANCE.—Notwithstanding subparagraph (A), during the 

2-year period beginning on the date that is 90 days after 

the date of the enactment of this subparagraph, the 

Administration shall allow the certified development company to withdraw from the loss reserve such amounts 

as are in excess of 1 percent of the aggregate outstanding 

balances of debentures to which such loss reserve relates. 

The preceding sentence shall not apply with respect to 

any debenture before 100 percent of the contribution 

described in paragraph (4) with respect to such debenture 

has been made.’’. 

SEC. 3. ALTERNATIVE LOSS RESERVE PILOT PROGRAM FOR CERTAIN 

PREMIER CERTIFIED LENDERS. 

(a) IN GENERAL.—Subsection (c) of section 508 of the Small 

Business Investment Act of 1958 (15 U.S.C. 697e) is amended 

by adding at the end the following new paragraphs: 

‘‘(7) ALTERNATIVE LOSS RESERVE.— 

‘‘(A) ELECTION.—With respect to any eligible calendar 

quarter, any qualified high loss reserve PCL may elect 

to have the requirements of this paragraph apply in lieu 

of the requirements of paragraphs (2) and (4) for such 

quarter. 

‘‘(B) CONTRIBUTIONS.— 
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‘‘(i) ORDINARY RULES INAPPLICABLE.—Except as 

provided under clause (ii) and paragraph (5), a qualified high loss reserve PCL that makes the election 

described in subparagraph (A) with respect to a calendar quarter shall not be required to make contributions to its loss reserve during such quarter. 

‘‘(ii) BASED ON LOSS.—A qualified high loss reserve 

PCL that makes the election described in subparagraph 

(A) with respect to any calendar quarter shall, before 

the last day of such quarter, make such contributions 

to its loss reserve as are necessary to ensure that 

the amount of the loss reserve of the PCL is— 

‘‘(I) not less than $100,000; and 

‘‘(II) sufficient, as determined by a qualified 

independent auditor, for the PCL to meet its 

obligations to protect the Federal Government 

from risk of loss. 

‘‘(iii) CERTIFICATION.—Before the end of any calendar quarter for which an election is in effect under 

subparagraph (A), the head of the PCL shall submit 

to the Administrator a certification that the loss 

reserve of the PCL is sufficient to meet such PCL’s 

obligation to protect the Federal Government from risk 

of loss. Such certification shall be in such form and 

submitted in such manner as the Administrator may 

require and shall be signed by the head of such PCL 

and the auditor making the determination under clause 

(ii)(II). 

‘‘(C) DISBURSEMENTS.— 

‘‘(i) ORDINARY RULE INAPPLICABLE.—Paragraph (6) 

shall not apply with respect to any qualified high loss 

reserve PCL for any calendar quarter for which an 

election is in effect under subparagraph (A). 

‘‘(ii) EXCESS FUNDS.—At the end of each calendar 

quarter for which an election is in effect under subparagraph (A), the Administration shall allow the qualified 

high loss reserve PCL to withdraw from its loss reserve 

the excess of— 

‘‘(I) the amount of the loss reserve, over 

‘‘(II) the greater of $100,000 or the amount 

which is determined under subparagraph (B)(ii) 

to be sufficient to meet the PCL’s obligation to 

protect the Federal Government from risk of loss. 

‘‘(D) RECONTRIBUTION.—If the requirements of this 

paragraph apply to a qualified high loss reserve PCL for 

any calendar quarter and cease to apply to such PCL 

for any subsequent calendar quarter, such PCL shall make 

a contribution to its loss reserve in such amount as the 

Administrator may determine provided that such amount 

does not exceed the amount which would result in the 

total amount in the loss reserve being equal to the amount 

which would have been in such loss reserve had this paragraph never applied to such PCL. The Administrator may 

require that such payment be made as a single payment 

or as a series of payments. 

‘‘(E) RISK MANAGEMENT.—If a qualified high loss 

reserve PCL fails to meet the requirement of subparagraph 
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(F)(iii) during any period for which an election is in effect 

under subparagraph (A) and such failure continues for 

180 days, the requirements of paragraphs (2), (4), and 

(6) shall apply to such PCL as of the end of such 180- 

day period and such PCL shall make the contribution to 

its loss reserve described in subparagraph (D). The 

Administrator may waive the requirements of this subparagraph. 

‘‘(F) QUALIFIED HIGH LOSS RESERVE PCL.—The term 

‘qualified high loss reserve PCL’ means, with respect to 

any calendar year, any premier certified lender designated 

by the Administrator as a qualified high loss reserve PCL 

for such year. The Administrator shall not designate a 

company under the preceding sentence unless the Administrator determines that— 

‘‘(i) the amount of the loss reserve of the company 

is not less than $100,000; 

‘‘(ii) the company has established and is utilizing 

an appropriate and effective process for analyzing the 

risk of loss associated with its portfolio of PCLP loans 

and for grading each PCLP loan made by the company 

on the basis of the risk of loss associated with such 

loan; and 

‘‘(iii) the company meets or exceeds 4 or more 

of the specified risk management benchmarks as of 

the most recent assessment by the Administration or 

the Administration has issued a waiver with respect 

to the requirement of this clause. 

‘‘(G) SPECIFIED RISK MANAGEMENT BENCHMARKS.—For 

purposes of this paragraph, the term ‘specified risk management benchmarks’ means the following rates, as determined by the Administrator: 

‘‘(i) Currency rate. 

‘‘(ii) Delinquency rate. 

‘‘(iii) Default rate. 

‘‘(iv) Liquidation rate. 

‘‘(v) Loss rate. 

‘‘(H) QUALIFIED INDEPENDENT AUDITOR.—For purposes 

of this paragraph, the term ‘qualified independent auditor’ 

means any auditor who— 

‘‘(i) is compensated by the qualified high loss 

reserve PCL; 

‘‘(ii) is independent of such PCL; and 

‘‘(iii) has been approved by the Administrator 

during the preceding year. 

‘‘(I) PCLP LOAN.—For purposes of this paragraph, the 

term ‘PCLP loan’ means any loan guaranteed under this 

section. 

‘‘(J) ELIGIBLE CALENDAR QUARTER.—For purposes of 

this paragraph, the term ‘eligible calendar quarter’ 

means— 

‘‘(i) the first calendar quarter that begins after 

the end of the 90-day period beginning with the date 

of the enactment of this paragraph; and 

‘‘(ii) the 7 succeeding calendar quarters. 

‘‘(K) CALENDAR QUARTER.—For purposes of this paragraph, the term ‘calendar quarter’ means— 
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‘‘(i) the period which begins on January 1 and 

ends on March 31 of each year; 

‘‘(ii) the period which begins on April 1 and ends 

on June 30 of each year; 

‘‘(iii) the period which begins on July 1 and ends 

on September 30 of each year; and 

‘‘(iv) the period which begins on October 1 and 

ends on December 31 of each year. 

‘‘(L) REGULATIONS.—Not later than 45 days after the 

date of the enactment of this paragraph, the Administrator 

shall publish in the Federal Register and transmit to the 

Congress regulations to carry out this paragraph. Such 

regulations shall include provisions relating to— 

‘‘(i) the approval of auditors under subparagraph 

(H); and 

‘‘(ii) the designation of qualified high loss reserve 

PCLs under subparagraph (F), including the determination of whether a process for analyzing risk of 

loss is appropriate and effective for purposes of 

subparagraph (F)(ii). 

‘‘(8) BUREAU OF PCLP OVERSIGHT.— 

‘‘(A) ESTABLISHMENT.—There is hereby established in 

the Small Business Administration a bureau to be known 

as the Bureau of PCLP Oversight. 

‘‘(B) PURPOSE.—The Bureau of PCLP Oversight shall 

carry out such functions of the Administration under this 

subsection as the Administrator may designate. 

‘‘(C) DEADLINE.—Not later than 90 days after the date 

of the enactment of this Act— 

‘‘(i) the Administrator shall ensure that the Bureau 

of PCLP Oversight is prepared to carry out any functions designated under subparagraph (B), and 

‘‘(ii) the Office of the Inspector General of the 

Administration shall report to the Congress on the 

preparedness of the Bureau of PCLP Oversight to carry 

out such functions.’’. 

(b) INCREASED REIMBURSEMENT FOR LOSSES RELATED TO

DEBENTURES ISSUED DURING ELECTION PERIOD.—Subparagraph (C) 

of section 508(b)(2) of the Small Business Investment Act of 1958 

(15 U.S.C. 697e(b)(2)) is amended by inserting ‘‘(15 percent in 

the case of any such loss attributable to a debenture issued by 

the company during any period for which an election is in effect 

under subsection (c)(7) for such company)’’ before ‘‘; and’’. 

(c) CONFORMING AMENDMENTS.— 

(1) Subparagraph (D) of section 508(b)(2) of the Small Business Investment Act of 1958 (15 U.S.C. 697e(b)(2)) is amended 

by striking ‘‘subsection (c)(2)’’ and inserting ‘‘subsection (c)’’. 

(2) Paragraph (5) of section 508(c) of the Small Business 

Investment Act of 1958 (15 U.S.C. 697e(c)) is amended by 

striking ‘‘10 percent’’. 

(d) STUDY AND REPORT.— 

(1) IN GENERAL.—The Administrator shall enter into a contract with a Federal agency experienced in community development lending and financial regulation or with a member of 

the Federal Financial Institutions Examinations Council to 

study and prepare a report regarding— 
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(A) the extent to which statutory requirements have 

caused overcapitalization in the loss reserves maintained 

by certified development companies participating in the 

Premier Certified Lenders Program established under section 508 of the Small Business Investment Act of 1958 

(15 U.S.C. 697e); and 

(B) alternatives for establishing and maintaining loss 

reserves that are sufficient to protect the Federal Government from the risk of loss associated with loans guaranteed 

under such Program. 

(2) TRANSMISSION OF REPORT.—The report described in 

paragraph (1) shall be transmitted to the Committee on Small 

Business of the House of Representatives and the Committee 

on Small Business and Entrepreneurship of the Senate not 

later than 90 days after the date of the enactment of this 

Act. 

(3) LIMITATION.—The amount of the contract described in 

paragraph (1) shall not exceed $75,000. 

Speaker of the House of Representatives. 

Vice President of the United States and

President of the Senate.