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:

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).