[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 2283 Introduced in Senate (IS)]

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115th CONGRESS
  2d Session
                                S. 2283

To amend the Small Business Act to strengthen the Office of Credit Risk 
  Management within the Small Business Administration, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 9, 2018

Mr. Risch (for himself and Mrs. Shaheen) introduced the following bill; 
 which was read twice and referred to the Committee on Small Business 
                          and Entrepreneurship

_______________________________________________________________________

                                 A BILL


 
To amend the Small Business Act to strengthen the Office of Credit Risk 
  Management within the Small Business Administration, 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. SHORT TITLE.

    This Act may be cited as the ``Small Business 7(a) Lending 
Oversight Reform Act of 2018''.

SEC. 2. DEFINITIONS.

    In this Act, the terms ``Administration'' and ``Administrator'' 
mean the Small Business Administration and the Administrator thereof, 
respectively.

SEC. 3. CODIFICATION OF THE OFFICE OF CREDIT RISK MANAGEMENT AND THE 
              LENDER OVERSIGHT COMMITTEE.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--
            (1) by redesignating section 47 as section 49; and
            (2) by inserting after section 46 the following:

``SEC. 47. OFFICE OF CREDIT RISK MANAGEMENT.

    ``(a) Establishment.--There is established within the 
Administration the Office of Credit Risk Management (in this section 
referred to as the `Office').
    ``(b) Duties.--The Office shall be responsible for supervising--
            ``(1) any lender making loans under section 7(a) (in this 
        section referred to as a `7(a) lender');
            ``(2) any participant in a lending program of the Office of 
        Capital Access of the Administration; and
            ``(3) any small business lending company or a non-Federally 
        regulated lender without regard to the requirements of section 
        23.
    ``(c) Director.--The Office is headed by the Director of the Office 
of Credit Risk Management (in this section referred to as the 
`Director'), who shall--
            ``(1) be a career appointee in a Senior Executive Service 
        position (as defined in section 3132 of title 5, United States 
        Code); and
            ``(2) be responsible for oversight of the lenders and 
        participants described in subsection (b), including by 
        conducting periodic reviews of the compliance and performance 
        of those lenders and participants.
    ``(d) Supervision Duties for 7(a) Lenders.--
            ``(1) Reviews.--With respect to 7(a) lenders, an employee 
        of the Office shall--
                    ``(A) be present for and supervise any review of a 
                7(a) lender that is conducted by a contractor of the 
                Office on the premises of the 7(a) lender; and
                    ``(B) supervise any review of a 7(a) lender that is 
                not conducted on the premises of the 7(a) lender.
            ``(2) Review report timeline.--Notwithstanding any other 
        requirements of the Office or the Administrator, the 
        Administrator shall develop and implement a review report 
        timeline which shall--
                    ``(A) require the Administrator to--
                            ``(i) deliver a written report of the 
                        review to the 7(a) lender not later than 60 
                        business days after the date on which the 
                        review is conducted; or
                            ``(ii) if the Administrator expects to 
                        submit the report after the end of the 60-
                        business-day period described in clause (i), 
                        notify the 7(a) lender in writing of the 
                        expected submission day of the report and the 
                        reason for the delay; and
                    ``(B) if a response by the 7(a) lender is requested 
                in a report submitted under subparagraph (A), require 
                the 7(a) lender to submit a response to the 
                Administrator not later than 45 business days after the 
                date on which the 7(a) lender receives the report.
    ``(e) Enforcement Authority Against 7(a) Lenders.--
            ``(1) Informal enforcement authority.--The Director may 
        take an informal enforcement action against a 7(a) lender if 
        the Director finds that the 7(a) lender has violated a 
        requirement under section 7(a) or any requirement in a Standard 
        Operating Procedures Manual or Policy Notice related to a 
        program or function of the Office of Capital Access.
            ``(2) Formal enforcement authority.--
                    ``(A) In general.--With the approval of the Lender 
                Oversight Committee established under section 48, the 
                Director may take a formal enforcement action against 
                any 7(a) lender if the Director finds that the 7(a) 
                lender has violated--
                            ``(i) a requirement under section 7(a), 
                        including a requirement relating to credit 
                        elsewhere, or any regulation implementing such 
                        section; or
                            ``(ii) any requirement described in a 
                        Standard Operating Procedures Manual or Policy 
                        Notice related to a program or function of the 
                        Office of Capital Access.
                    ``(B) Enforcement actions.--
                            ``(i) In general.--Any enforcement action 
                        taken with respect to a 7(a) lender by the 
                        Director under subparagraph (A)--
                                    ``(I) shall be based on the 
                                severity or frequency of the violation; 
                                and
                                    ``(II) may include assessing a 
                                civil monetary penalty against the 7(a) 
                                lender in an amount that is not greater 
                                than $250,000.
            ``(3) Appeal by lender.--A 7(a) lender may appeal an 
        enforcement action imposed by the Director described in 
        paragraph (2) to the Office of Hearings and Appeals established 
        under section 5(i) or to an appropriate district court of the 
        United States.
    ``(f) Regulations.--Not later than 1 year after the date of 
enactment of the Small Business 7(a) Lending Oversight Reform Act of 
2018, the Administrator shall issue regulations, after opportunity for 
notice and comment under section 553 of title 5, United States Code, to 
carry out subsection (e).
    ``(g) Servicing and Liquidation Responsibilities.--During any 
period during which a 7(a) lender is suspended from participating under 
section 7(a), or if a 7(a) lender is prohibited from making loans under 
section 7(a), the 7(a) lender shall remain obligated to maintain all 
servicing and liquidation activities delegated to the lender by the 
Administrator, unless otherwise specified by the Director.
    ``(h) Portfolio Risk Analysis of 7(a) Loans.--
            ``(1) In general.--The Director shall annually conduct a 
        risk analysis of the portfolio of the Administration with 
        respect to all loans guaranteed under section 7(a).
            ``(2) Report to congress.--On December 1, 2018, and every 
        December 1 thereafter, the Director shall submit to Congress an 
        annual report containing the results of each portfolio risk 
        analysis conducted under paragraph (1) during the fiscal year 
        preceding the submission of the report, which shall include--
                    ``(A) an analysis of the overall program risk of 
                loans guaranteed under section 7(a);
                    ``(B) an analysis of program risk, set forth 
                separately by industry concentration;
                    ``(C) without identifying individual 7(a) lenders 
                by name, a consolidated analysis of the risk created by 
                the individual 7(a) lenders responsible for not less 
                than 1 percent of the gross loan approvals by dollar 
                and amount of loans for the year covered by the report;
                    ``(D) steps taken by the Administrator to mitigate 
                the risks identified in subparagraphs (A), (B), and 
                (C);
                    ``(E) the number of 7(a) lenders, the gross and net 
                number of loans made, and the gross and net dollar 
                amount of loans made;
                    ``(F) the number and dollar amount of total 
                defaults and total repurchases, and the percentage and 
                total amount of recoveries;
                    ``(G) the number and type of enforcement actions 
                recommended by the Director;
                    ``(H) the number and type of enforcement actions 
                approved by the Lender Oversight Committee established 
                under section 48;
                    ``(I) the number and type of enforcement actions 
                disapproved by the Lender Oversight Committee; and
                    ``(J) the number and dollar amount of civil 
                monetary penalties assessed.
    ``(i) Budget Submission and Justification.--Effective for the first 
fiscal year occurring after the date of enactment of the Small Business 
7(a) Lending Oversight Reform Act of 2018, and each fiscal year 
thereafter, the Director shall provide, in writing a budget submission 
and justification for the submission to the Administrator, which 
shall--
            ``(1) include the salaries and expenses of the Office and 
        lender oversight fees;
            ``(2) be submitted at or about the time of the budget 
        submission by the President under section 1105(a) of title 31, 
        United States Code; and
            ``(3) be maintained in an indexed form and made available 
        for public review for a period of not less than 5 years 
        beginning on the date of submission.

``SEC. 48. LENDER OVERSIGHT COMMITTEE.

    ``(a) Establishment.--There is established within the 
Administration the Lender Oversight Committee (in this section referred 
to as the `Committee').
    ``(b) Membership.--The Committee shall consist of 11 members 
appointed by the Administrator, of whom--
            ``(1) 3 members shall be voting members, of whom 2 shall be 
        career appointees serving in a Senior Executive Service 
        position (as defined in section 3132 of title 5, United States 
        Code); and
            ``(2) 8 members shall be nonvoting members who shall serve 
        in an advisory capacity on the Committee.
    ``(c) Duties.--The Committee shall--
            ``(1) review reports on lender oversight activities;
            ``(2) review formal enforcement action recommendations of 
        the Director of the Office of Credit Risk Management with 
        respect to any lender making loans under section 7(a) and any 
        participant in a lending program of the Office of Capital 
        Access of the Administration;
            ``(3) in carrying out paragraph (2) with respect to a 
        formal enforcement action taken under subsection (d) or (e) of 
        section 23, vote to recommend the action or vote to not 
        recommend the action to the Administrator or a designee of the 
        Administrator;
            ``(4) in carrying out paragraph (2) with respect to any 
        other formal enforcement action not otherwise specified in 
        subsection (d) or (e) of section 23, vote to approve, 
        disapprove, or modify the action;
            ``(5) review in an advisory capacity any lender oversight, 
        portfolio risk management, or program integrity matters brought 
        by the Director of the Office of Credit Risk Management; and
            ``(6) take such other actions and perform such other 
        functions as may be delegated to the Committee by the 
        Administrator.
    ``(d) Meetings.--
            ``(1) In general.--The Committee shall meet as necessary, 
        but not less frequently than on a quarterly basis.
            ``(2) Reports.--The Committee shall submit to the 
        Administrator a report detailing each meeting of the Committee, 
        including if the Committee does or does not vote to recommend a 
        formal enforcement action of the Director of the Office of 
        Credit Risk Management with respect to a lender.''.
    (b) Transfer of Functions.--
            (1) Office of credit risk management.--All functions of the 
        Office of Credit Risk Management of the Administration, 
        including the personnel, assets, and obligations of the Office 
        of Credit Risk Management, as in existence on the day before 
        the date of enactment of this Act, shall be transferred to the 
        Office of Credit Risk Management established under section 47 
        of the Small Business Act, as added by subsection (a).
            (2) Lender oversight committee.--All functions of the 
        Lender Oversight Committee of the Administration, including the 
        personnel, assets, and obligations of the Lender Oversight 
        Committee, as in existence on the day before the date of 
        enactment of this Act, shall be transferred to the Lender 
        Oversight Committee established under section 48 of the Small 
        Business Act, as added by subsection (a).
    (c) Deeming of Name.--
            (1) Office of credit risk management.--Any reference in a 
        law, regulation, document, paper, or other record of the United 
        States to the Office of Credit Risk Management of the 
        Administration shall be deemed a reference to the Office of 
        Credit Risk Management of the Administration established under 
        section 47 of the Small Business Act, as added by subsection 
        (a).
            (2) Lender oversight committee.--Any reference in a law, 
        regulation, document, paper, or other record of the United 
        States to the Lender Oversight Committee of the Administration 
        shall be deemed a reference to the Lender Oversight Committee 
        of the Administration established under section 48 of the Small 
        Business Act, as added by subsection (a).
    (d) Technical and Conforming Amendments.--The Small Business Act 
(15 U.S.C. 631 et seq.) is amended--
            (1) in section 3(r)(2) (15 U.S.C. 632(r)(2))--
                    (A) in this paragraph heading, by striking ``SBA''; 
                and
                    (B) in the matter preceding subparagraph (A), by 
                striking ``SBA''; and
            (2) in section 18 (15 U.S.C. 647), by striking subsection 
        (b) and inserting the following:
    ``(b) As used in this Act, the term `agricultural enterprises' 
means those small business concerns engaged in the production of food 
and fiber, ranching, and raising of livestock, aquaculture, and all 
other farming and agricultural related industries.''.

SEC. 4. DEFINITION OF CREDIT ELSEWHERE.

    The Small Business Act (15 U.S.C. 631 et seq.) is amended--
            (1) in section 3 (15 U.S.C. 632), by striking subsection 
        (h) and inserting the following:
    ``(h) The term `credit elsewhere' means--
            ``(1) for the purposes of this Act (except as used in 
        section 7(b)), the availability of credit on reasonable terms 
        and conditions to the individual loan applicant from non-
        Federal, non-State, or non-local government sources, 
        considering factors associated with conventional lending 
        practices, including--
                    ``(A) the business industry in which the loan 
                applicant operates;
                    ``(B) whether the loan applicant is an enterprise 
                that has been in operation for a period of not more 
                than 2 years;
                    ``(C) the adequacy of the collateral available to 
                secure the requested loan;
                    ``(D) the loan term necessary to reasonably assure 
                the ability of the loan applicant to repay the debt 
                from the actual or projected cash flow of the business; 
                and
                    ``(E) any other factor relating to the particular 
                credit application, as documented in detail by the 
                lender, that cannot be overcome except through 
                obtaining a Federal loan guarantee under prudent 
                lending standards; and
            ``(2) for the purposes of section 7(b), the availability of 
        credit on reasonable terms and conditions from non-Federal 
        sources taking into consideration the prevailing rates and 
        terms in the community in or near where the applicant small 
        business concern transacts business, or the applicant homeowner 
        resides, for similar purposes and periods of time.''; and
            (2) in section 7(a)(1)(A)(i) (15 U.S.C. 636(a)(1)(A)(i)), 
        by inserting ``The Administrator has the authority to direct, 
        and conduct oversight for, the methods by which lenders 
        determine whether a borrower is able to obtain credit 
        elsewhere.'' before ``No financial assistance''.

SEC. 5. AUTHORITY FOR ADMINISTRATOR TO INCREASE AMOUNT FOR GENERAL 
              BUSINESS LOANS.

    Section 20 of the Small Business Act (15 U.S.C. 631 note) is 
amended--
            (1) by redesignating subsection (j) as subsection (f); and
            (2) by adding at the end the following:
    ``(g) Authority To Increase Amount of General Business Loans.--
            ``(1) In general.--With respect to fiscal year 2018 and 
        each fiscal year thereafter, if the Administrator determines 
        that the amount of commitments by the Administrator for general 
        business loans authorized under section 7(a) for a fiscal year 
        could exceed the limit on the total amount of commitments the 
        Administrator may make for those loans under this Act, an 
        appropriations Act, or any other provision of law, the 
        Administrator may make commitments for those loans for that 
        fiscal year in total amount equal to not more than 115 percent 
        of that limit.
            ``(2) Approval required before exercising authority.--
                    ``(A) In general.--Not later than 30 days before 
                the date on which the Administrator intends to exercise 
                the authority under paragraph (1), the Administrator 
                shall submit notice of the intent of the Administrator 
                to exercise the authority to--
                            ``(i) the Committee on Small Business and 
                        Entrepreneurship and the Subcommittee on 
                        Financial Services and General Government of 
                        the Committee on Appropriations of the Senate; 
                        and
                            ``(ii) the Committee on Small Business and 
                        the Subcommittee on Financial Services and 
                        General Government of the Committee on 
                        Appropriations of the House of Representatives.
                    ``(B) Approval.--The Administrator may not exercise 
                the authority under paragraph (1) unless the exercise 
                of authority has been approved, in writing, by the 
                Committee on Appropriations and the Committee on Small 
                Business and Entrepreneurship of the Senate and the 
                Committee on Appropriations and the Committee on Small 
                Business of the House of Representatives.
            ``(3) Limitation.--The Administrator shall not exercise the 
        authority under paragraph (1) more than once during any fiscal 
        year.''.

SEC. 6. DISCLOSURE OF WAIVERS.

    (a) In General.--If the Administrator exercises statutory or 
regulatory authority to waive a regulation related to a program or 
function of the Office of Capital Access of the Administration--
            (1) the waiver shall be in writing and shall specify the 
        grounds for approving the waiver; and
            (2) the Administrator shall notify the public of all 
        waivers of regulations approved by the Administration, which 
        notice shall--
                    (A) be published in the Federal Register not less 
                than annually;
                    (B) cover the period beginning on the date after 
                the last day covered by the previous notice;
                    (C) describe the nature of the requirement that has 
                been waived and specify the regulation involved;
                    (D) include a brief description of the grounds for 
                approval of the waiver; and
                    (E) state how more information about the waiver and 
                a copy of the request and the approval may be obtained.
    (b) No New Waiver Authority.--Nothing in subsection (a) shall be 
construed as creating new authority for the Administrator to waive 
regulations of the Administration.
    (c) GAO Study on Standard Operating Procedures Manual or Policy 
Notice Waiver Process.--Not later than 1 year after the date of 
enactment of this Act, the Comptroller General of the United States 
shall submit to the Committee on Small Business and Entrepreneurship of 
the Senate and the Committee on Small Business of the House of 
Representatives a report evaluating--
            (1) the methods and specific processes used by the 
        Administration to waive requirements in the Standard Operating 
        Procedures Manual or Policy Notices relating to loans made 
        under section 7(a) of the Small Business Act (15 U.S.C. 
        636(a)); and
            (2) the number of waivers described in paragraph (1) 
        granted during the period of 5 fiscal years preceding the date 
        of enactment of this Act.
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