Premier Certified Lenders Program Improvement Act of 2004
PL 108-232 (H.R.923), enacted 05/28/2004

118 STAT. 649
PUBLIC LAW 108–232—MAY 28, 2004
Public Law 108–232
108th Congress
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 Pro-
gram Improvement Act of 2004’’.
SEC. 2. LOSS RESERVES OF PREMIER CERTIFIED LENDERS TEMPO-
RARILY DETERMINED ON THE BASIS OF OUTSTANDING
BALANCE OF DEBENTURES.
Paragraph (6) of section 508(c) of the Small Business Invest-
ment Act of 1958 (15 U.S.C. 697e(c)) is amended—
(1) by striking ‘‘The Administration’’ and inserting the fol-
lowing:
‘‘(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 com-
pany 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.—
Effective date.
15 USC 661 note.
Premier Certified
Lenders Program
Improvement Act
of 2004.
May 28, 2004
[H.R. 923]
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118 STAT. 650
PUBLIC LAW 108–232—MAY 28, 2004
‘‘(i) ORDINARY
RULES
INAPPLICABLE.—Except as
provided under clause (ii) and paragraph (5), a quali-
fied high loss reserve PCL that makes the election
described in subparagraph (A) with respect to a cal-
endar quarter shall not be required to make contribu-
tions 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 cal-
endar 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 subpara-
graph (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 para-
graph 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
Applicability.
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118 STAT. 651
PUBLIC LAW 108–232—MAY 28, 2004
(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 subpara-
graph.
‘‘(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 Adminis-
trator 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 manage-
ment benchmarks’ means the following rates, as deter-
mined 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 para-
graph, the term ‘calendar quarter’ means—
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118 STAT. 652
PUBLIC LAW 108–232—MAY 28, 2004
‘‘(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 deter-
mination 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 func-
tions 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 Busi-
ness 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 con-
tract with a Federal agency experienced in community develop-
ment lending and financial regulation or with a member of
the Federal Financial Institutions Examinations Council to
study and prepare a report regarding—
Contracts.
Reports.
Deadline.
Federal Register,
publication.
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118 STAT. 653
PUBLIC LAW 108–232—MAY 28, 2004
LEGISLATIVE HISTORY—H.R. 923:
HOUSE REPORTS: No. 108–153 (Comm. on Small Business).
CONGRESSIONAL RECORD:
Vol. 149 (2003): June 24, considered and passed House.
Vol. 150 (2004): May 18, considered and passed Senate.
(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 sec-
tion 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 Govern-
ment 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.
Approved May 28, 2004.
Deadline.
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