[Congressional Record Volume 167, Number 192 (Tuesday, November 2, 2021)]
[House]
[Pages H6092-H6093]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
7(a) LOAN AGENT OVERSIGHT ACT
Ms. VELAZQUEZ. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 4531) to amend the Small Business Act to require a report on
7(a) agents, and for other purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 4531
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 ``7(a) Loan Agent Oversight
Act''.
SEC. 2. REPORT ON 7(A) AGENTS.
Section 47 of the Small Business Act (15 U.S.C. 657t) is
amended by adding at the end the following new subsection:
``(j) Annual Report.--
``(1) In general.--The Director shall submit to Congress,
in addition to the report required under subsection (h)(2),
an annual report including, for the calendar year covered by
the report--
``(A) the number of 7(a) agents assisting applicants for
loans under section 7(a), disaggregated by 7(a) agents who
are attorneys, accountants, consultants, packagers, and
lender service providers (as defined by section 103.1 of
title 13, Code of Federal Regulations);
``(B) the number of fraudulent loans made for which an
applicant used services of a 7(a) agent;
``(C) the purchase rate by the Administrator of loans for
which an applicant used services of a 7(a) agent;
``(D) the number and aggregate dollar value of referral
fees paid to 7(a) agents, disaggregated by whether the
applicant or 7(a) lender paid such fees;
``(E) without identifying individual 7(a) agents by name, a
consolidated analysis of the risk created by the individual
7(a) agents responsible for not less than 1 percent of--
``(i) the dollar value of loans made with the assistance of
7(a) agents; and
``(ii) the number of loans made with the assistance of 7(a)
agents;
``(F) an analysis of interest rates on loans for which an
applicant or 7(a) lender used services of an agent; and
``(G) a description of how the Administrator communicates
with 7(a) agents.
``(2) Definitions.--In this subsection:
``(A) 7(a) agent.--The term `7(a) agent' means a person who
provides covered services on behalf of a lender or applicant.
``(B) Covered services.--The term `covered services'
means--
``(i) assistance with completing an application for a loan
under section 7(a) (including preparing a business plan, cash
flow projections, financial statements, and related
documents); or
``(ii) consulting, broker, or referral services with
respect to a loan under section 7(a).''.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
New York (Ms. Velazquez) and the gentleman from Missouri (Mr.
Luetkemeyer) each will control 20 minutes.
The Chair recognizes the gentlewoman from New York.
General Leave
Ms. VELAZQUEZ. Mr. Speaker, I ask unanimous consent that all Members
may have 5 legislative days in which to revise and extend their remarks
and include extraneous material on the measure under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from New York?
There was no objection.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise in support of the bill before us today, H.R.
4531, the 7(a) Loan Agent Oversight Act, companion legislation to H.R.
4481, the Small Business 7(a) Loan Agent Transparency Act.
While H.R. 4481 would establish a registration system for 7(a) loan
agents, this bill requires SBA to submit a report to Congress assessing
and analyzing the performance of 7(a) loans generated through loan
agent activity.
This analysis will include SBA's purchase rate for loans generated
through loan agent activity, the aggregate dollar value of referral
fees paid to agents either by borrowers or lenders, and the interest
rates associated with these loans.
The report will also include an analysis--without naming individual
agents--of the risk created by individual agents responsible for
generating at least 1 percent of the 7(a) portfolio.
SBA's Office of Inspector General has repeatedly identified the
increased risks to the 7(a) loan portfolio created by loan agents as
the top agency management challenge and recommended the agency develop
a system to register loan agents and monitor their performance.
The IG's findings about loan agent activity are particularly
troubling. In one instance a loan agent fraudulently originated $90
million in 7(a) loans and received compensation from at least 19
different lenders.
Today's bills on 7(a) loan agent registration and oversight will go a
long way in providing transparency and are long overdue.
Once again, I want to sincerely thank Mr. Phillips and Mr. Meuser for
identifying this issue and collaborating on a sensible solution.
Mr. Speaker, I urge my colleagues to support this bill, and I reserve
the balance of my time.
Mr. LUETKEMEYER. Mr. Speaker, I yield myself such time as I may
consume and rise in support of H.R. 4531, the 7(a) Loan Agent Oversight
Act.
On October 15, 2021, the SBA's inspector general published a report
titled ``Top Management and Performance Challenges Facing the Small
Business Administration in Fiscal Year 2022.''
In this report, the inspector general listed increased risks
introduced by loan agents as one of the top issues the agency faces.
Specifically, the report outlines approximately $335 million in
documented and confirmed loan agent fraud within the program. This is
unacceptable, Mr. Speaker, and Members of Congress must have more
visibility into this program.
H.R. 4531, the 7(a) Loan Agent Oversight Act, requires the SBA to
perform a portfolio risk analysis on loans associated with agents. When
this risk analysis is completed, Members will have more visibility into
how loan agents interact with a government guaranteed loan program.
American tax dollars must be protected, and H.R. 4531 makes important
improvements to be able to do just that.
I thank the gentleman from Pennsylvania (Mr. Meuser) and the
gentleman from Minnesota (Mr. Phillips) for tackling this legislation
head on.
With my support and the Chair's support, H.R. 4531 was favorably
reported out of our committee, and I encourage all Members to support
this legislation.
Mr. Speaker, I reserve the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I reserve the balance of my time.
Mr. LUETKEMEYER. Mr. Speaker, I yield such time as he may consume to
the gentleman from Pennsylvania (Mr. Meuser).
Mr. MEUSER. Mr. Speaker, I rise in support of my bill, H.R. 4531, the
7(a) Loan Agent Oversight Act.
First, I would like to thank Chairwoman Velazquez and Ranking Member
Luetkemeyer for advancing this bill to the House floor. I would also
like to thank the gentleman from Minnesota (Mr. Phillips) for working
together on this important legislation.
The 7(a) loan program is considered the flagship program of the SBA.
It is an important tool for helping small firms gain access to capital.
Unfortunately, the SBA's Office of Inspector General has highlighted a
need for improved oversight of the 7(a) loan agents due to increased
risk of fraud associated with these agents.
To ensure that Congress can properly address these issues, we must
have the information necessary to determine how to mitigate these
risks. Without accurate information, we cannot perform the proper
oversight that is needed to safeguard and protect American taxpayer
dollars.
My bill will ensure that Congress receives the data it needs to
conduct proper oversight of the 7(a) loan program by requiring the SBA
to develop and publish an annual portfolio risk analysis for Congress
on loan agents that operate within the program. Specifically, the
analysis will examine the number of fraudulent loans that are
associated with the loan agents as well as the default rate of the
loans associated with these agents.
At the end of the day, these are government programs that were
developed to assist small businesses in gaining access to capital.
Given this important mission, Congress and the SBA must conduct the
appropriate level of oversight.
The information that will be provided to Congress under H.R. 4531
will be paramount as we measure the effectiveness of these programs and
whether the SBA has the correct oversight requirements in place to
administer such a significant program.
[[Page H6093]]
For that reason, I urge my colleagues to support H.R. 4531, the 7(a)
Loan Agent Oversight Act.
Ms. VELAZQUEZ. Mr. Speaker, I have no further speakers, and I am
prepared to close. I reserve the balance of my time.
Mr. LUETKEMEYER. Mr. Speaker, I yield myself the balance of my time
to close.
Continued and ongoing fraud within any government program is
unacceptable and must be addressed immediately. H.R. 4531 is a step in
the right direction and will provide crucial information for Members of
Congress as well as committee members as they continue to exercise
necessary oversight of programs directed at small businesses and
entrepreneurs.
Mr. Speaker, I urge my colleagues to support H.R. 4531, and I yield
back the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself the balance of my time.
The two bills we are considering today go hand in hand and will also
go a long way to enhance transparency in the 7(a) program.
Over the last year, our committee has focused on relief programs, but
we never lost sight of our traditional lending programs. Today, we turn
our attention to the core SBA loan programs and ensure they are working
as best as they can.
The report required under this bill will help Congress and the public
better understand the role loan agents play in the 7(a) program,
whether they improve access to capital for entrepreneurs, and the
impact of potential bad actors in this space, especially as it relates
to portfolio risk.
Though lenders bear primary responsibility for monitoring their
agents, only SBA is positioned to aggregate loan agent portfolios,
evaluate their performance, and inform lenders and policymakers about
concerning program risks or trends.
Once again, I want to salute the work of the gentleman from Minnesota
(Mr. Phillips) and the gentleman from Pennsylvania (Mr. Meuser). I
encourage all of my colleagues to vote ``yes,'' and I yield back the
balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from New York (Ms. Velazquez) that the House suspend the
rules and pass the bill, H.R. 4531.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. CLOUD. Mr. Speaker, on that I demand the yeas and nays.
The SPEAKER pro tempore. Pursuant to section 3(s) of House Resolution
8, the yeas and nays are ordered.
Pursuant to clause 8 of rule XX, further proceedings on this motion
are postponed.
____________________