I

103D CONGRESS

1ST SESSION H. R. 2308

To assist in the development of microenterprises and microenterprise lending.

IN THE HOUSE OF REPRESENTATIVES

MAY 27, 1993

Mrs. COLLINS of Illinois introduced the following bill; which was referred

jointly to the Committees on Ways and Means and Banking, Finance and

Urban Affairs

A BILL

To assist in the development of microenterprises and

microenterprise lending.

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 ‘‘Microenterprise Oppor5 tunity Expansion Act’’.

6 SEC. 2. PUBLIC ASSISTANCE PROVISIONS.

7 (a) BUSINESS ASSETS EXCLUDED FROM RESOURCES

8 AND INCOME.—

9 (1) AFDC.—
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1 (A) EXCLUSION FROM RESOURCES.—Sec2 tion 402(a)(7)(B) of the Social Security Act

3 (42 U.S.C. 602(a)(8)(A)) is amended—

4 (i) by striking ‘‘or’’ at the end of

5 clause (iii); and

6 (ii) by inserting before the semicolon

7 the following: ‘‘, or (v) any asset of the

8 family which is primarily used for business

9 purposes in a business owned, in whole or

10 in part, by an individual eligible for aid

11 under any State plan approved under this

12 part; and’’.

13 (B) EXCLUSION FROM INCOME.—Section

14 402(a)(8)(A) of such Act (42 U.S.C.

15 602(a)(8)(A)) is amended—

16 (i) by striking ‘‘and’’ at the end of

17 clause (vii); and

18 (ii) by inserting after clause (viii) the

19 following:

20 ‘‘(ix) shall disregard from the income of

21 any child, relative, or other individual specified

22 in clause (ii) any asset which is primarily used

23 for business purposes in a business owned, in

24 whole or in part, by an individual eligible for
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1 aid under any State plan approved under this

2 part; and’’.

3 (2) SSI.—

4 (A) EXCLUSION FROM INCOME.—Section

5 1612(b) of such Act (42 U.S.C. 1382a(b)) is

6 amended—

7 (i) by striking ‘‘and’’ at the end of

8 paragraph (17);

9 (ii) in paragraph (18), by striking the

10 period and inserting ‘‘; and’’; and

11 (iii) by adding at the end the follow12 ing:

13 ‘‘(19) any asset of such individual (or such

14 spouse) which is primarily used for business pur15 poses in a business owned, in whole or in part, by

16 an individual eligible for aid under any State plan

17 approved under part A of title IV.’’.

18 (B) EXCLUSION FROM RESOURCES.—Sec19 tion 1613(a) of such Act (42 U.S.C. 1382b(a))

20 is amended—

21 (i) by striking ‘‘and’’ at the end of

22 paragraph (9);

23 (ii) in paragraph (10), by striking the

24 period and inserting ‘‘; and’’; and
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1 (iii) by inserting after paragraph (10)

2 the following:

3 ‘‘(11) any asset of (including any amount re4 ceived as a loan by) such individual (or such spouse)

5 which is primarily used for business purposes in a

6 business owned, in whole or in part, by an individual

7 eligible for aid under any State plan approved under

8 part A of title IV.’’.

9 (b) PUBLIC ASSISTANCE BENEFITS EXTENDED FOR

10 PERSONS WITH INCOME FROM OR RESOURCES IN A

11 MICROENTERPRISE.—

12 (1) AFDC AND MEDICAID.—Section 402(a) of

13 such Act (42 U.S.C. 602(a)) is amended by inserting

14 after paragraph (28) the following:

15 ‘‘(29) notwithstanding paragraphs (7) and (8),

16 provide that, during the 2-year period beginning on

17 the first day any member of a family eligible for

18 benefits under the State plan sells any good or serv19 ice as part of operating a commercial enterprise with

20 5 or fewer employees, which is owned in whole or in

21 part by such family member, all income of such fam22 ily member attributable to the enterprise and all re23 sources in which such family member has a bene24 ficial interest used primarily in the enterprise shall
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1 be disregarded in determining the amount of aid to

2 which the family is entitled under the State plan;’’.

3 (2) SSI AND MEDICAID.—

4 (A) EXCLUSION FROM INCOME.—Section

5 1612(b) of such Act (42 U.S.C. 1382a(b)), as

6 amended by subsection (a)(2)(A) of this section,

7 is amended—

8 (i) by striking ‘‘and’’ at the end of

9 paragraph (18);

10 (ii) in paragraph (19), by striking the

11 period and inserting ‘‘; and’’; and

12 (iii) by adding at the end the follow13 ing:

14 ‘‘(20) during the 2-year period beginning on the

15 first day such individual (or such spouse) sells any

16 good or service as part of operating a commercial

17 enterprise with 5 or fewer employees, which is owned

18 in whole or in part by such individual (or such

19 spouse), all income of such individual (or such

20 spouse) attributable to the enterprise.’’.

21 (B) EXCLUSION FROM RESOURCES.—Sec22 tion 1613(a) of such Act (42 U.S.C. 1382b(a)),

23 as amended by subsection (a)(2)(B) of this sec24 tion, is amended—
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1 (i) by striking ‘‘and’’ at the end of

2 paragraph (10);

3 (ii) in paragraph (11), by striking the

4 period and inserting ‘‘; and’’; and

5 (iii) by inserting after paragraph (11)

6 the following:

7 ‘‘(12) during the 2-year period beginning on the

8 first day such individual (or such spouse) sells any

9 good or service as part of operating a commercial

10 enterprise with 5 or fewer employees, which is owned

11 in whole or in part by such individual (or such

12 spouse), all resources of such individual (or such

13 spouse) that are used primarily in the enterprise.’’.

14 SEC. 3. UNEMPLOYMENT COMPENSATION FOR INDIVID15 UALS STARTING MICROENTERPRISES.

16 (a) STATE LAW REQUIREMENTS.—Subsection (a) of

17 section 3304 of the Internal Revenue Code of 1986 (relat18 ing to State law requirements) is amended by striking

19 ‘‘and’’ at the end of paragraph (17), by redesignating

20 paragraph (18) as paragraph (19), and by inserting after

21 paragraph (17) the following new paragraph:

22 ‘‘(18) compensation shall be payable to individ23 uals starting microenterprises as provided in section

24 3(b) of the Act for microenterprises; and’’.
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1 (b) PAYMENT OF COMPENSATION TO INDIVIDUALS

2 STARTING MICROENTERPRISES.—

3 (1) IN GENERAL.—For purposes of section

4 3304(a)(18) of the Internal Revenue Code of 1986,

5 a State law shall provide that—

6 (A) each individual who is an eligible indi7 vidual with respect to any benefit year shall be

8 entitled to receive regular or extended unem9 ployment compensation, as the case may be,

10 without regard to any State or Federal require11 ments relating to availability for work, active

12 search for work, or refusal to accept suitable

13 work, and

14 (B) such individual shall be considered to

15 be unemployed for purposes of the State and

16 Federal laws applicable to unemployment com17 pensation, as long as the individual is actively

18 involved in the ownership and operation of a

19 microenterprise or the preparation of a business

20 plan for the ownership and operation of a

21 microenterprise and is receiving guidance or

22 consultation in starting up or operating a

23 microenterprise from an experienced entre24 preneur or provider of technical business assist25 ance.
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1 (2) AUTHORIZATION FOR USING UNEMPLOY2 MENT FUNDS TO PROVIDE STARTUP ASSISTANCE.—

3 Nothing in section 3304(a)(4) or 3306(f) of the In4 ternal Revenue Code of 1986 or section 303(a)(5) of

5 the Social Security Act shall prevent amounts in a

6 State unemployment fund from being used to pro7 vide assistance to eligible individuals in starting

8 microenterprises. The amount of assistance so pro9 vided shall be in the form of a lump sum and shall

10 be in lieu of the periodic payments of compensation

11 to which the individual would otherwise have been

12 entitled and shall not exceed the aggregate amount

13 of compensation to which the individual would other14 wise have been so entitled.

15 (3) DEFINITIONS.—For purposes of this sec16 tion—

17 (A) ELIGIBLE INDIVIDUAL.—The term ‘‘el18 igible individual’’ means, with respect to any

19 benefit year, an individual who—

20 (i) is eligible to receive regular or ex21 tended compensation under the State law

22 during such benefit year,

23 (ii) is starting a microenterprise in

24 which the individual will have an ownership

25 interest, and
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1 (iii) submits a request to the State

2 agency for compensation under this sub3 section.

4 (B) MICROENTERPRISE.—The term

5 ‘‘microenterprise’’ means any unincorporated

6 trade or business with 5 or fewer employees, 1

7 or more of whom own the enterprise.

8 (C) OTHER TERMS.—The terms ‘‘com9 pensation’’, ‘‘extended compensation’’, ‘‘regular

10 compensation’’, ‘‘benefit year’’, ‘‘State’’, and

11 ‘‘State law’’ have the respective meanings given

12 to such terms under section 205 of the Federal13 State Extended Unemployment Compensation

14 Act of 1970.

15 SEC. 4. TREATMENT OF MICROENTERPRISE LOANS AND

16 GRANTS BY INSURED DEPOSITORY INSTITU17 TIONS AS COMMUNITY REINVESTMENT.

18 (a) IN GENERAL.—Section 804 of the Community

19 Reinvestment Act of 1977 (12 U.S.C. 2903) is amended—

20 (1) by striking ‘‘SEC. 804. In connection with’’

21 and inserting ‘‘(a) IN GENERAL.—In connection

22 with’’; and

23 (2) by adding at the end the following new sub24 sections:

25 ‘‘(b) MICROENTERPRISE LOANS.—
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1 ‘‘(1) TREATMENT OF LOANS AND GRANTS.—

2 The following amounts shall be treated as an invest3 ment in a regulated financial institution’s commu4 nity for purposes of subsection (a):

5 ‘‘(A) The amount of any loan described in

6 paragraph (2)(A) made by the regulated finan7 cial institution directly to a microenterprise, if

8 the loan is made in accordance with the require9 ments of subsection (c).

10 ‘‘(B) The amount of any grant or donation

11 made by the regulated financial institution to

12 any microenterprise intermediary to meet oper13 ating costs of the intermediary, including the

14 costs associated with training, technical assist15 ance, and other support services provided by

16 the intermediary to microenterprises.

17 ‘‘(C) The amount of any regulated finan18 cial institution’s investment in a revolving fund

19 established by the institution for loans to

20 microenterprise intermediaries for lending to

21 microenterprises if—

22 ‘‘(i) the amount of the investment in

23 the revolving fund is equal to or greater

24 than the amount which is equal to 0.05

25 percent of the assets of the institution;
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1 ‘‘(ii) the regulated financial institu2 tion—

3 ‘‘(I) makes grants or donations

4 described in subparagraph (B) to

5 microenterprise intermediaries the

6 total amount of which equals or ex7 ceeds the amount which is equal to 15

8 percent of the amount required to be

9 invested in the revolving fund under

10 clause (i); or

11 ‘‘(II) provides financial services,

12 including the establishment and main13 tenance of a transaction account, for

14 a microenterprise (or any individual

15 who controls the microenterprise) who

16 receives a microenterprise loan from a

17 microenterprise intermediary, at pref18 erential or reduced rates which are

19 at least as favorable to the

20 microenterprise as the rates offered

21 for such services to the institution’s

22 most preferred commercial customers;

23 and

24 ‘‘(iii) loans from the revolving fund

25 may be made only to microenterprise
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1 intermediaries who agree to use the pro2 ceeds of the loan to make microenterprise

3 loans in accordance with the requirements

4 of subsection (c).

5 ‘‘(2) MICROENTERPRISE LOAN.—For purposes

6 of this subsection and subsection (c), the term

7 ‘microenterprise loan’—

8 ‘‘(A) means a loan—

9 ‘‘(i) to a commercial enterprise with 5

10 or fewer employees, 1 or more of whom

11 own the enterprise;

12 ‘‘(ii) in amounts not less than $100

13 and not more than $10,000;

14 ‘‘(iii) the interest rate on which is

15 comparable to the interest rate charged on

16 secured commercial loans offered by the

17 regulated financial institution to the insti18 tution’s most preferred commercial cus19 tomers;

20 ‘‘(iv) which—

21 ‘‘(I) is not secured by collateral;

22 or

23 ‘‘(II) is secured by collateral the

24 value of which, as a percentage of the

25 amount of the loan, is substantially
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1 less than the percentage generally re2 quired by the institution for commer3 cial loans; and

4 ‘‘(v) the terms of which may permit

5 the deferral of principal or interest pay6 ments otherwise due under such terms;

7 and

8 ‘‘(B) includes a loan to a microenterprise

9 intermediary the proceeds of which will be used

10 by the intermediary for making loans described

11 in subparagraph (A).

12 ‘‘(c) CRITERIA FOR MICROENTERPRISE LOANS.—

13 ‘‘(1) IN GENERAL.—A microenterprise loan

14 meets the requirements of this subsection if the loan

15 is made in accordance with the following criteria:

16 ‘‘(A) In considering any loan to a

17 microenterprise, the lender takes into account—

18 ‘‘(i) the creditworthiness of any per19 son who controls the microenterprise in

20 lieu of the creditworthiness of the enter21 prise;

22 ‘‘(ii) in the case of a microenterprise

23 which is a startup business, whether the

24 microenterprise is soundly conceived; and
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1 ‘‘(iii) the need of the microenterprise

2 for expansion capital.

3 ‘‘(B) The lender accepts as collateral for

4 the loan a security interest in any personal

5 property of any person who controls the

6 microenterprise which consists of consumer or

7 household goods.

8 ‘‘(C) The lender does not require collateral

9 or a secured interest for more than 50 percent

10 of the face amount of the loan.

11 ‘‘(D) The loans are made in amounts not

12 less than $100 and not more than $10,000 to

13 persons who would not otherwise qualify for a

14 commercial loan.

15 ‘‘(E) The lender provides technical assist16 ance, training, and counseling in business prac17 tices, such as accounting, marketing, manage18 ment, sales, financial practices, and general

19 business practices, and closely monitors the

20 microenterprise during the period the loan is

21 outstanding, including the enterprise’s loan re22 payment performance.

23 ‘‘(2) LENDER DEFINED.—For purposes of

24 paragraph (1), the term ‘lender’ means—
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1 ‘‘(A) in the case of a microenterprise loan

2 by a regulated financial institution to a

3 microenterprise, the regulated financial institu4 tion; and

5 ‘‘(B) in the case of a microenterprise loan

6 by a microenterprise intermediary to a

7 microenterprise, the microenterprise inter8 mediary.’’.

9 (b) CLERICAL AMENDMENT.—Section 804 of the

10 Community Reinvestment Act of 1977 (12 U.S.C. 2903)

11 is amended by inserting before subsection (a) (as so des12 ignated by subsection (a)(1) of this section) the following

13 new heading:

14 ‘‘SEC. 804. ASSESSMENT OF RECORD OF MEETING COMMU15 NITY CREDIT NEEDS.’’.

16 SEC. 5. TREATMENT OF MICROENTERPRISE LOANS OF SAV17 INGS ASSOCIATIONS AS QUALIFIED THRIFT

18 INVESTMENTS.

19 (a) IN GENERAL.—Section 10(m)(4)(C)(ii) of the

20 Home Owners’ Loan Act (12 U.S.C. 1467a(m)(4)(C)(ii))

21 is amended by adding at the end the following new

22 subclause:

23 ‘‘(VII) The aggregate amount of

24 microenterprise loans held by the sav25 ings association.’’.
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1 (b) MICROENTERPRISE LOAN DEFINED.—Section

2 10(m)(4) of the Home Owners’ Loan Act (12 U.S.C.

3 1467a(m)(4)) is amended by adding at the end the follow4 ing new subparagraph:

5 ‘‘(D) MICROENTERPRISE LOAN.—For pur6 poses of this paragraph, the term

7 ‘microenterprise loan’—

8 ‘‘(i) means a loan—

9 ‘‘(I) to a commercial enterprise

10 with 5 or fewer employees, 1 or more

11 of whom own the enterprise;

12 ‘‘(II) in amounts not less than

13 $100 and not more than $10,000; and

14 ‘‘(III) the interest rate on which

15 is comparable to the interest rate

16 charged on secured commercial loans

17 offered by the savings association to

18 the association’s most preferred com19 mercial customers;

20 ‘‘(IV) which is not secured by

21 collateral or is secured by collateral

22 the value of which, as a percentage of

23 the amount of the loan, is substan24 tially less than the percentage gen-
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1 erally required by the institution for

2 commercial loans; and

3 ‘‘(V) the terms of which may per4 mit the deferral of principal or inter5 est payments otherwise due under

6 such terms;

7 ‘‘(ii) includes a loan to a

8 microenterprise intermediary the proceeds

9 of which will be used by the intermediary

10 for making loans described in clause (i);

11 and

12 ‘‘(iii) does not include—

13 ‘‘(I) any loan to a micro14 enterprise which does not meet the re15 quirements of paragraph (8); or

16 ‘‘(II) any loan to a micro17 enterprise intermediary which does

18 not agree to use the proceeds of the

19 loan to make microenterprise loans in

20 accordance with the requirements of

21 paragraph (8).’’.

22 (c) CRITERIA FOR MICROENTERPRISE LOANS.—Sec23 tion 10(m) of the Home Owners’ Loan Act (12 U.S.C.

24 1467a(m)) is amended by adding at the end the following

25 new paragraph:
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1 ‘‘(8) CRITERIA FOR MICROENTERPRISE

2 LOANS.—

3 ‘‘(A) IN GENERAL.—A microenterprise

4 loan meets the requirements of this paragraph

5 only if the savings association makes the

6 microenterprise loan, or the microenterprise

7 intermediary which receives a loan from the as8 sociation, agrees to use the proceeds of the loan

9 to make microenterprise loans in accordance

10 with the following criteria:

11 ‘‘(i) In considering any loan to a

12 microenterprise, the lender takes into ac13 count—

14 ‘‘(I) the creditworthiness of any

15 person who controls the

16 microenterprise in lieu of the credit17 worthiness of the enterprise;

18 ‘‘(II) in the case of a

19 microenterprise which is a startup

20 business, whether the microenterprise

21 is soundly conceived; and

22 ‘‘(III) the need of the

23 microenterprise for expansion capital.

24 ‘‘(ii) The lender accepts as collateral

25 for the loan a security interest in any per-
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1 sonal property of any person who controls

2 the microenterprise which consists of

3 consumer or household goods.

4 ‘‘(iii) The lender does not require col5 lateral or a secured interest for more than

6 50 percent of the face amount of the loan.

7 ‘‘(iv) The loans are made in amounts

8 not less than $100 and not more than

9 $10,000 to persons who would not other10 wise qualify for a commercial loan.

11 ‘‘(v) The lender provides technical as12 sistance, training, and counseling in busi13 ness practices, such as accounting, market14 ing, management, financial practices, and

15 general business practices and sales, to the

16 microenterprise in connection with the loan

17 and closely monitors the microenterprise,

18 including the enterprise’s loan repayment

19 performance.

20 ‘‘(B) LENDER DEFINED.—For purposes of

21 subparagraph (A), the term ‘lender’ means—

22 ‘‘(i) in the case of a microenterprise

23 loan by a savings association to a

24 microenterprise, the savings association;

25 and
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1 ‘‘(ii) in the case of a microenterprise

2 loan by a microenterprise intermediary to

3 a microenterprise, the microenterprise

4 intermediary.’’.

5 SEC. 6. USE OF CDBG ASSISTANCE FOR ADMINISTRATIVE

6 COSTS OF ENTITIES ASSISTING

7 MICROENTERPRISES.

8 Section 105(a)(23) of the Housing and Community

9 Development Act of 1974 (42 U.S.C. 5305(a)(23)) is

10 amended by adding at the end the following flush material:

11 ‘‘assistance provided to such entities under this

12 paragraph may be used for reasonable administra13 tive and operating costs of such entities related to

14 facilitating economic development through activities

15 under subparagraphs (A) through (C);’’.

16 SEC. 7. ESTABLISHMENT OF MICROENTERPRISE DIVISION

17 IN EACH FEDERAL BANKING AGENCY.

18 (a) IN GENERAL.—Each Federal banking agency (as

19 defined in section 3(z) of the Federal Deposit Insurance

20 Act) shall establish a division to be known as the

21 ‘‘Microenterprise Technical and Operations Office’’ to pro22 mote microenterprises by offering technical assistance,

23 training, outreach, and other support to groups and indi24 viduals engaged in, or desiring to establish, a
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1 microenterprise or an institution which offers credit or fi2 nancial services to microenterprises.

3 (b) DUTIES OF MICROENTERPRISE DIVISION.—The

4 Microenterprise Technical and Operations Office of each

5 Federal banking agency shall—

6 (1) facilitate the creation and financing of

7 microenterprises by—

8 (A) collecting information relating to

9 microenterprises, including the ownership char10 acteristics of microenterprises and the perform11 ance of microenterprises by industry;

12 (B) providing such information without

13 charge to interested persons; and

14 (C) generally serving as a clearinghouse

15 for information relating to microenterprises;

16 and

17 (2) monitor and provide assistance to the

18 microenterprise divisions established pursuant to

19 section 34 of the Federal Deposit Insurance Act.

20 (c) MICROENTERPRISE DEFINED.—As used in this

21 section, the term ‘‘microenterprise’’ means any commer22 cial enterprise with 5 or fewer employees, 1 or more of

23 whom own the enterprise.
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1 SEC. 8. STUDY.

2 (a) AVAILABILITY OF CREDIT FOR SMALL BUSI3 NESSES WHICH ARE LARGER THAN

4 MICROENTERPRISES.—The Financial Institutions Exam5 ination Council shall conduct a study before the end of

6 the 2-year period beginning on the date of the enactment

7 of this Act, based on the agency’s experience in admin8 istering the microenterprise loan provisions of this Act,

9 and the amendments made by this Act, on the best means

10 to make credit available for small businesses which—

11 (1) do not qualify for microenterprise loans or

12 need credit in larger amounts than is available

13 through microenterprise loans; and

14 (2) need credit in smaller amounts than is gen15 erally available from financial institutions or the

16 Small Business Administration.

17 (b) RECOMMENDATIONS AND REPORT.—The Finan18 cial Institutions Examination Council shall submit a re19 port to the Congress before the end of the 2-year period

20 referred to in subsection (a) containing the findings and

21 conclusions of the agency in connection with the study

22 conducted pursuant to subsection (a) and such rec23 ommendations for legislative and administrative action as

24 the agency may determine to be appropriate.

Æ