[108th Congress Public Law 232]
[From the U.S. Government Printing Office]


[DOCID: f:publ232.108]

[[Page 118 STAT. 649]]

Public Law 108-232
108th Congress

                                 An Act


 
    To amend the Small <<NOTE: May 28, 2004 -  [H.R. 923]>> 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 <<NOTE: Premier Certified Lenders 
Program Improvement Act of 2004.>> assembled,

SECTION 1. <<NOTE: 15 USC 661 note.>> SHORT TITLE.

    This Act may be cited as the ``Premier Certified Lenders Program 
Improvement Act of 2004''.

SEC. 2. LOSS RESERVES OF PREMIER CERTIFIED LENDERS TEMPORARILY 
            DETERMINED ON THE BASIS OF OUTSTANDING BALANCE OF 
            DEBENTURES.

    Paragraph (6) of section 508(c) of the Small Business Investment Act 
of 1958 (15 U.S.C. 697e(c)) is amended--
            (1) by striking ``The Administration'' and inserting the 
        following:
                    ``(A) In general.--The Administration''; and
            (2) by adding at the end the following new subparagraph:
                    ``(B) <<NOTE: Effective date.>> 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 company 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.--

[[Page 118 STAT. 650]]

                          ``(i) Ordinary rules inapplicable.--Except as 
                      provided under clause (ii) and paragraph (5), a 
                      qualified high loss reserve PCL that makes the 
                      election described in subparagraph (A) with 
                      respect to a calendar quarter shall not be 
                      required to make contributions 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 
                      calendar 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 subparagraph (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 paragraph 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) <<NOTE: Applicability.>> Risk management.--If 
                a qualified high loss reserve PCL fails to meet the 
                requirement of subparagraph

[[Page 118 STAT. 651]]

                (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 
                subparagraph.
                    ``(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 Administrator 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 
                management benchmarks' means the following rates, as 
                determined 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 
                paragraph, the term `calendar quarter' means--

[[Page 118 STAT. 652]]

                          ``(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) <<NOTE: Deadline. Federal Register, 
                publication.>> 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 
                      determination 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 functions designated under subparagraph (B), 
                      and
                          ``(ii) <<NOTE: Reports.>> 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 
        Business 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) <<NOTE: Contracts.>> In general.--The Administrator 
        shall enter into a contract with a Federal agency experienced in 
        community development lending and financial regulation or with a 
        member of the Federal Financial Institutions Examinations 
        Council to study and prepare a report regarding--

[[Page 118 STAT. 653]]

                    (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 section 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 
                Government from the risk of loss associated with loans 
                guaranteed under such Program.
            (2) <<NOTE: Deadline.>> 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.

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.

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