Sec. 206. Oversight of small business lending companies

1,239 words·~6 min read·/bill/118/s/2482/rs/section-206

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

Section 3(r) of the Small Business Act ( 15 U.S.C. 632(r) ) is amended, in the matter preceding paragraph (1), by striking As used in section 23 of this Act and inserting In this Act . Section 7(a)(1) of the Small Business Act ( 15 U.S.C. 636(a)(1) ), as amended by section 205(a) of this Act, is amended by adding at the end the following: Not more than 17 small business lending companies may be authorized to make loans under this subsection at any time. Except as provided in subclause (III), each of the 14 small business lending companies authorized to make loans under this subsection as of June 1, 2023 shall retain such authorization on and after the date of enactment of this subparagraph.

With respect to a lender that, as of the date of enactment of this subparagraph, is authorized as a Community Advantage small business lending company, that lender shall, beginning on that date of enactment— no longer have that authorization; and be designated as a lender under the Community Advantage Loan Program established under paragraph (38). The Administrator shall have the discretion to authorize the transfer or sale of a license of a small business lending company to make loans under this subsection to another small business lending company.

Notwithstanding paragraph (31), any small business lending company that the Administration authorizes after June 1, 2023 to make loans under this subsection shall be ineligible for delegated authority from the Administration to process, close, service, and liquidate certain loans made under this subsection for the 5-year period beginning on the date on which the Administration authorizes the small business lending company to make loans under this subsection. Item

(aa)shall not apply with respect to each of the 14 small business lending companies authorized to make loans under this subsection as of June 1, 2023. Except as provided in subclauses

(II)and (III), to be authorized to make loans under this subsection, a small business lending company shall comply with the minimum capital requirements in effect on January 3, 2021. Any small business lending company authorized by the Administration to make loans under this subsection on or after January 4, 2021, including in the event of a change of ownership or control, shall maintain, at a minimum, the greater of— unencumbered paid-in capital and paid-in surplus of not less than $5,000,000; or an amount equal to 10 percent of the aggregate of its share of all outstanding loans. On and after January 4, 2024, each small business lending company that makes or acquires a loan under this subsection shall maintain, at a minimum, the greater of— unencumbered paid-in capital and paid-in surplus of not less than $5,000,000; or an amount equal to 10 percent of the aggregate of its share of all outstanding loans. The Administrator shall use uniform terms for the licensing of business concerns as small business lending companies and the participation of those companies in the programs under this subsection. . Section 23(d) of the Small Business Act ( 15 U.S.C. 650(d) ) is amended— in paragraph (1), by inserting after In general .—

(1); in paragraph (2), by inserting after Hearing .—

(2); by redesignating paragraphs

(3)and

(4)as paragraphs

(4)and (5), respectively; by inserting after paragraph

(2)the following: The Director of the Office of Credit Risk Management (in this paragraph referred to as the Director )— may review and revoke the authority of a small business lending company to make, service, or liquidate business loans under section 7(a) for performance, excessive losses, or predatory lending; shall review and may revoke the authority of a small business lending company to make, service, or liquidate business loans under section 7(a) if— the early default rate for the small business lending company exceeds the average default rate for all small business lending companies participating in the loan program under section 7(a); the small business lending company fails to comply with the requirements under subparagraph (B); or the Director finds in an audit conducted under subparagraph (C)(ii) that the small business lending company is not in compliance with 1 or more of the requirements described in subparagraph (C); and shall revoke the authority of a small business lending company to make, service, or liquidate business loans under section 7(a) if the Director has determined the small business lending company has failed to comply with the requirements in subclause

(II)or

(III)of subparagraph (B)(ii) for 2 or more years in a row. If the Director revokes the authority of a small business lending company to make, service, or liquidate business loans under section 7(a), the Director shall report the revocation, along with details and information describing why that decision was made, to the Office of the Inspector General of the Administration. Each small business lending company shall— conduct an annual stress test of the portfolio of the small business lending company under section 7(a) in accordance with the requirements under clause (ii); and report to the Director the findings of each annual stress test conducted under subclause (I). Each stress test conducted under clause

(i)shall comply with the following requirements: The small business lending company shall use financial data as of December 31 of the calendar year prior to the reporting year. The small business lending company shall use the scenarios provided by the Director, which shall reflect a minimum of 2 sets of economic and financial conditions, including baseline and severely adverse scenarios that incorporate consideration of interest rate risk. The Director shall provide a description of the scenarios required to be used by each small business lending company not later than February 15 of the reporting year. The board of directors and senior management of each small business lending company shall consider the results of the stress tests conducted under this subsection in the normal course of business, including capital planning, assessment of capital adequacy, and risk management practices of the small business lending company. In this subparagraph, the term Bank Secrecy Act means— section 21 of the Federal Deposit Insurance Act ( 12 U.S.C. 1829b ); chapter 2 of title I of Public Law 91–508 ( 12 U.S.C. 1951 et seq. ); and subchapter II of chapter 53 of title 31, United States Code. The Director— shall conduct annual reviews to ensure that small business lending companies are in compliance with the requirements contained in the regulations issued under clause (iii); and in conducting a review under subclause (I), may not rely on self-certification by a small business lending company that the small business lending company is in compliance with those requirements. Not later than 1 year after the date of enactment of the Modernizing SBA's Business Loan Programs Act of 2023 , the Administrator shall, in consultation with other appropriate Federal agencies, issue regulations to provide a framework to ensure that small business lending companies are in compliance with the requirements under the Bank Secrecy Act, including Know Your Customer and anti-money laundering requirements, and any applicable consumer protection laws, including the Truth in Lending Act ( 15 U.S.C. 1601 et seq. ), the Equal Credit Opportunity Act ( 15 U.S.C. 1691 et seq. ), and the Gramm-Leach-Bliley Act ( Public Law 106–102 ; 113 Stat. 1338). ; in paragraph (4), as so redesignated, by inserting after Notification .—

(4); and in paragraph (5), as so redesignated, by inserting after Delegation .—

(5).

Connectionstraces to 7

Traces to 7 documents

U.S. Code