[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 2824 Introduced in Senate (IS)]

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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CDFI SMALL DOLLAR LOAN-LOSS GUARANTEE FUND.

    The Community Development Banking and Financial Institutions Act of 
1994 (12 U.S.C. 4701 et seq.) is amended by adding at the end the 
following:

``SEC. 122. CDFI SMALL DOLLAR LOAN-LOSS GUARANTEE FUND.

    ``(a) Purpose.--The purpose of this section are to establish a 
small dollar loan-loss guarantee fund to--
            ``(1) serve as a loss reserve for qualifying loans to 
        consumers offered by eligible financial institutions;
            ``(2) increase the number of qualifying loan products 
        offered to consumers by such institutions; and
            ``(3) increase consumer access to mainstream financial 
        institutions and provide consumers with alternative choices to 
        pay day loans.
    ``(b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Consumer reporting agency that compiles and maintains 
        files on consumers on a nationwide basis.--The term `consumer 
        reporting agency that compiles and maintains files on consumers 
        on a nationwide basis' has the same meaning given such term in 
        section 603(p) of the Fair Credit Reporting Act (15 U.S.C. 
        1681a(p)).
            ``(2) Eligible financial institution.--The term `eligible 
        financial institution' means--
                    ``(A) any community development financial 
                institution, provided that if such institution is 
                subject to examination under the Community Reinvestment 
                Act of 1977, that such institution received a 
                satisfactory or an outstanding rating in meeting the 
                needs of the community as part of its last examination 
                under such Act; and
                    ``(B) any other entity, organization, or 
                institution whose primary mission is to serve low- to 
                moderate-income individuals, as determined appropriate 
                by the Administrator.
            ``(3) Fund.--The term `Fund' means the CDFI Small Dollar 
        Loan-Loss Guarantee Fund established under subsection (c).
            ``(4) Qualifying loan.--The term `qualifying loan' means a 
        loan that satisfies the following requirements:
                    ``(A) The loan is made to a consumer by an eligible 
                financial institution.
                    ``(B) The loan is made in an amount not exceeding 
                $2,500.
                    ``(C) The loan--
                            ``(i) has a repayment period of at least 60 
                        days;
                            ``(ii) is repaid in installments, and such 
                        installment payments result in the reduction in 
                        the principle balance owed on the loan;
                            ``(iii) has an annual percentage rate that 
                        the Administrator determines to be acceptable 
                        through the application process for the 
                        purposes of this section, but in no event shall 
                        such annual percentage rate exceed 36 percent; 
                        and
                            ``(iv) has no pre-payment penalty.
                    ``(D) At the time of origination of the loan, the 
                eligible financial institution that made the loan 
                offered the consumer information.
                    ``(E) The eligible financial institution making the 
                loan reports payments regarding the loan to at least 1 
                of the consumer reporting agencies that compiles and 
                maintains files on consumers on a nationwide basis.
    ``(c) Establishment.--
            ``(1) In general.--There is established a CDFI Small Dollar 
        Loan-Loss Guarantee Fund, which shall be used by the 
        Administrator to defray the cost of losses on qualifying loans 
        to consumers made by eligible financial institutions.
            ``(2) Use of fund amounts.--
                    ``(A) Reimbursement.--From amounts available in the 
                Fund, the Administrator may provide reimbursement of a 
                qualifying loan loss that is up to 60 percent of the 
                loss on the qualifying loan to an eligible financial 
                institution that has submitted an application pursuant 
                to the requirements of subparagraph (B). The 
                Administrator shall take into consideration the overall 
                default rates of the qualifying loan portfolio in an 
                eligible financial institution when determining the 
                reimbursement rate of loan loss.
                    ``(B) Application.--In order to receive any amounts 
                from the Fund under this section, each eligible 
                financial institution shall submit an application at 
                such time, in, such form, and with such information and 
                assurances as the Administrator may require.
            ``(3) Deposits.--
                    ``(A) In general.--The Fund shall consist of--
                            ``(i) any amounts deposited pursuant to 
                        subsection (d)(4);
                            ``(ii) any amounts borrowed pursuant to 
                        subsection (e);
                            ``(iii) a portion, as determined by the 
                        Administrator, of the proceeds of fees 
                        collected by an eligible financial institution 
                        for the origination of the qualifying loans to 
                        consumers; and
                            ``(iv) any amounts transferred, credited, 
                        donated, or bequeathed to the Fund by any 
                        individual, foundation, corporation, or other 
                        legal entity.
                    ``(B) Solvency of fund.--In making the 
                determination required under subparagraph (A), the 
                Administrator shall give priority consideration to that 
                amount that would best protect and ensure the solvency 
                of the Fund.
                    ``(C) Investment authority.--Funds that are not 
                otherwise distributed by the Fund to eligible financial 
                institutions for reimbursement of qualifying loan 
                losses shall be invested in obligations of the United 
                States or in obligations guaranteed as principle and 
                interest by the United States.
    ``(d) Authorization of Appropriations.--
            ``(1) In general.--There are authorized to be appropriated 
        for each fiscal year such sums as are necessary to carry out 
        this section.
            ``(2) Administrative costs.--From amounts made available 
        under this section, the Administrator may reserve not more than 
        10 percent for administrative costs.
            ``(3) Technical assistance grants.--Amounts made available 
        under this section may be used to make technical assistance 
        grants to applicants to develop and support a small dollar loan 
        program. Any technical assistance grants made under this 
        paragraph shall be made in accordance with subsections (b), 
        (c), and (d) of section 108, provided that the Administrator 
        may waive the requirements of subsection (e) of such section 
        108 with respect to such grants.
            ``(4) Deposit into fund.--Amounts made available under this 
        section may be deposited into the CDFI Small Dollar Loan-Loss 
        Guarantee Fund established under this section.
    ``(e) Borrowing Authority.--The Administrator is authorized to 
borrow from the Treasury, and the Secretary of the Treasury is 
authorized and directed to loan to the Administrator on such terms as 
may be fixed by the Administrator and the Secretary, such funds as in 
the judgment of the Administrator are from time to time required to 
maintain the solvency of the Fund, not exceeding in the aggregate 
$75,000,000 outstanding at any one time, subject to the approval of the 
Secretary of the Treasury: Provided, That the rate of interest to be 
charged in connection with any loan made pursuant to this subsection 
shall not be less than an amount determined by the Secretary of the 
Treasury, taking into consideration current market yields on 
outstanding marketable obligations of the United States of comparable 
maturity. For such purpose the Secretary of the Treasury is authorized 
to use as a public-debt transaction the proceeds of the sale of any 
securities hereafter issued under the Second Liberty Bond Act, as 
amended, and the purposes for which securities may be issued under the 
Second Liberty Bond Act, as amended, are extended to include such 
loans. Any such loan shall be used by the Administrator solely in 
carrying out its functions with respect to the Fund. All loans and 
repayments under this subsection shall be treated as public-debt 
transactions of the United States. The Administrator may employ any 
amounts obtained under this subsection for purposes of the Fund and the 
borrowing shall become a liability of the Fund to the extent funds are 
employed therefor.
    ``(f) Report to Congress.--Not later than 1 year after the CDFI 
Small Dollar Loan-Loss Guarantee Fund makes its first reimbursement to 
an eligible financial institution, and every year thereafter, the 
Administrator shall submit to the Banking, Housing, and Urban Affairs 
Committee of the Senate, the Financial Services Committee of the House 
of Representatives, and the Committee on Appropriations of both the 
Senate and the House of Representatives a report describing--
            ``(1) the activities of the Fund, including the cumulative 
        volume and amounts of loan reimbursements that have been 
        distributed from the Fund during the prior 12 months;
            ``(2) the solvency of the Fund;
            ``(3) the default rate of qualifying loans; and
            ``(4) any measurable results, as appropriate and available, 
        related to the achievement of the purposes of this section as 
        such purposes are set forth under subsection (a).''.
                                 <all>