    [United States Statutes at Large, Volume 132, 115th Congress, 2nd Session]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    Public Law 115-189
    115th Congress

    An Act

    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 new
    sections:
    ``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 Lending Partner or Intermediary participant of the
    Administration 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.--
    ``(1) In general.--The Office shall be headed by the
    Director of the Office of Credit Risk Management (in this
    section referred to as the `Director'), who shall be a career
    appointee in the Senior Executive Service (as defined in section
    3132 of title 5, United States Code).
    ``(2) Duties.--The Director shall be responsible for
    oversight of the lenders and participants described in
    subsection (b), including by conducting periodic reviews of the
    compliance and performance of such lenders and participants.

    [[Page 1493]]

    ``(d) Supervision Duties for 7(a) Lenders.--With respect to 7(a)
    lenders, an employee of the Office shall--
    ``(1) be present for and supervise any such review that is
    conducted by a contractor of the Office on the premise of the
    7(a) lender; and
    ``(2) supervise any such review that is not conducted on the
    premise of the 7(a) lender.

    ``(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 statutory or
    regulatory 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 statutory or regulatory requirement
    under section 7(a), including a requirement
    relating to credit elsewhere; 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.--An enforcement action
    imposed on a 7(a) lender by the Director under
    subparagraph (A) shall be based on the severity or
    frequency of the violation and 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 this
    subsection 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 the enactment of this section, the Administrator shall issue
    regulations, after opportunity for notice and comment, to carry out
    subsection (e).

    ``(g) Servicing and Liquidation Responsibilities.--During any period
    during which a 7(a) lender is suspended or otherwise 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 a 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--

    [[Page 1494]]

    ``(A) an analysis of the overall program risk of
    loans guaranteed under section 7(a);
    ``(B) an analysis of the 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 set forth separately
    for the year covered by the report by--
    ``(i) the dollar value of the loans made by
    such 7(a) lenders; and
    ``(ii) the number of loans made by such 7(a)
    lenders;
    ``(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 number of
    loans made, and the gross and net dollar amount of loans
    made;
    ``(F) the number and dollar amount of total losses,
    the number and dollar amount of total purchases, and the
    percentage and dollar amount of recoveries at the
    Administration;
    ``(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.--The Director shall
    annually provide, in writing, a fiscal year budget submission for the
    Office and a justification for such submission to the Administrator.
    Such submission and justification shall--
    ``(1) include salaries and expenses of the Office and the
    charge for the 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;
    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 and justification.
    ``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 at least 8 members
    selected by the Administrator, of which--
    ``(1) 3 members shall be voting members, 2 of whom shall be
    career appointees in the Senior Executive Service (as defined in
    section 3132 of title 5, United States Code); and
    ``(2) the remaining 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

    [[Page 1495]]

    any Lending Partner or Intermediary participant of the
    Administration in a lending program of the Office of Capital
    Access of the Administration;
    ``(3) <>  in carrying out
    paragraph (2) with respect to formal enforcement actions taken
    under subsection (d) or (e) of section 23, vote to recommend or
    not recommend action to the Administrator or a designee of the
    Administrator;
    ``(4) in carrying out paragraph (2) with respect to any
    formal enforcement action not specified under 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; 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 approve a
    formal enforcement action of the Director of the Office of
    Credit Risk Management with respect to a lender.''.

    (b) Supervision Duties for 7(a) Lenders.--Effective January 1, 2019,
    subsection (d) of section 47 (as added by subsection (a)) is
    amended <>  to read as follows:

    ``(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 such review
    that is conducted by a contractor of the Office on the
    premise of the 7(a) lender; and
    ``(B) supervise any such review that is not
    conducted on the premise of the 7(a) lender.
    ``(2) Review report timeline.--
    ``(A) In general.--Notwithstanding any other
    requirements of the Office or the Administrator, the
    Administrator shall develop and implement a review
    report timeline which shall--
    ``(i) 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 concluded; or
    ``(II) <>  if
    the Administrator expects to submit the
    report after the end of the 60-day
    period described in clause (i), notify
    the 7(a) lender of the expected date of
    submission of the report and the reason
    for the delay; and
    ``(ii) if a response by the 7(a) lender is
    requested in a report submitted under subparagraph
    (A), require the 7(a) lender to submit responses
    to the Administrator not later than 45 business
    days after the date on which the 7(a) lender
    receives the report.

    [[Page 1496]]

    ``(B) Extension.--The Administrator may extend the
    time frame described in subparagraph (A)(i)(II) with
    respect to a 7(a) lender as the Administrator determines
    necessary.''.

    (c) Transfer of Functions.--
    (1) <>  Office of credit risk
    management.--All functions of the Office of Credit Risk
    Management of the Small Business Administration, including the
    personnel, assets, and obligation of the Office of Credit Risk
    Management, as in existence on the day before the date of the
    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 Small Business Administration, including the personnel,
    assets, and obligations of the Lender Oversight Committee, as in
    existence on the day before the date of the 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).

    (d) Deeming of Name.--
    (1) <>  Office of credit risk
    management.--Any reference in a law, regulation, guidance,
    document, paper, or other record of the United States to the
    Office of Credit Risk Management of the Small Business
    Administration shall be deemed a reference 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.--Any reference in a law, regulation, guidance,
    document, paper, or other record of the United States to the
    Lender Oversight Committee of the Small Business Administration
    shall be deemed a reference to the Lender Oversight Committee,
    established under section 48 of the Small Business Act, as added
    by subsection (a).

    (e) Technical Amendment.--Section 3(r)(2) of the Small Business Act
    (15 U.S.C. 632(r)(2)) is amended by striking ``regulated SBA lender''
    each place it appears in heading and text and inserting ``regulated
    lender''.
    SEC. 4. DEFINITION OF CREDIT ELSEWHERE.

    (a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is
    amended--
    (1) by striking section 3(h) (15 U.S.C. 632(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;

    [[Page 1497]]

    ``(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 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''.

    (b) Technical Amendment.--Section 18(b) of the Small Business Act
    (15 U.S.C. 647(b)) is amended to read as follows:
    ``(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. 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 new subsection:

    ``(g) Authority To Increase Amount of General Business Loans.--
    ``(1) <>  In general.--Subject to
    paragraphs (2) and (3) and with respect to fiscal year 2019 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 an aggregate amount equal to not more than 115
    percent of that limit.
    ``(2) Notice required before exercising authority.--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 intent
    to exercise the authority to--
    ``(A) 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
    ``(B) the Committee on Small Business and the
    Subcommittee on Financial Services and General
    Government of the Committee on Appropriations of the
    House of Representatives.

    [[Page 1498]]

    ``(3) Limitation.--The Administrator shall not exercise the
    authority under paragraph (1) more than once during any fiscal
    year.''.
    SEC. 6. <>  ESTABLISHING A PROCESS FOR
    WAIVERS.

    (a) In General.--If the Administrator exercises statutory or
    regulatory authority to waive a regulation or a requirement in the
    Standard Operating Procedures Manual or Policy Notice related to a
    program or function of the Office of Capital Access of the
    Administration, the waiver shall be in writing and be maintained in an
    indexed form.
    (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.
    SEC. 7. REPEAL OF SMALL BUSINESS LOAN LOSS REPORT.

    Subsection (b) of section 10 of the Small Business Act (15 U.S.C.
    639(b)) is repealed.

    Approved June 21, 2018.

    LEGISLATIVE HISTORY--H.R. 4743 (S. 2283):
    ---------------------------------------------------------------------------

    HOUSE REPORTS: No. 115-655 (Comm. on Small Business).
    SENATE REPORTS: No. 115-265 (Comm. on Small Business and
    Entrepreneurship) accompanying S. 2283.
    CONGRESSIONAL RECORD, Vol. 164 (2018):
    May 8, considered and passed House.
    June 5, considered and passed Senate.