Overview
Title
To amend the Small Business Act to enhance the Office of Credit Risk Management, to require the Administrator of the Small Business Administration to issue rules relating to environmental obligations of certified development companies, and for other purposes.
ELI5 AI
H.R. 10247 is about making sure small business helpers follow rules by checking what they do and making them pay a bit of money if they don't. It also wants to make sure these helpers think about the environment when they work.
Summary AI
H.R. 10247 aims to amend the Small Business Act to improve the Office of Credit Risk Management's oversight and enforcement capabilities regarding certified development companies involved in the 504 loan program. It imposes duties like conducting random file reviews, developing supervision timelines, and enforcing compliance, which can include penalties. Additionally, the bill mandates the Administrator of the Small Business Administration to issue rules clarifying environmental obligations for these companies under the National Environmental Policy Act and extends the sunset for certain lender authority from 2023 to 2025.
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AnalysisAI
General Summary
The bill, titled the "504 Credit Risk Management Improvement Act of 2024," aims to make amendments to the Small Business Act, specifically enhancing the Office of Credit Risk Management within the Small Business Administration (SBA). The legislation intends to strengthen oversight and administration of certified development companies (CDCs) engaged in the 504 loan program. Key aspects include responsibilities for loan reviews, enforcement actions, fee assessments, and a requirement for the SBA to issue environmental compliance rules. Additionally, the bill extends the delegated authority of accredited lenders until 2025.
Summary of Significant Issues
One primary concern is the broad authority given to the Office of Credit Risk Management, particularly the Director's power to impose significant penalties of up to $250,000 on CDCs for violations. This level of punishment might lead to disputes and possibly litigation. Additionally, the bill grants the Office authority to collect fees from CDCs based on their portfolio size, yet the exact methodology for calculation is vague, which could lead to misunderstandings and possible unfair treatment. The bill also sets a tight timeline for the SBA to issue environmental compliance rules, which might not be practical given the intricate nature of environmental regulations. Lastly, the extension of lender authority from 2023 to 2025 lacks context or reasoning, creating potential ambiguity about its implications.
Impact on the Public
Broadly speaking, the bill reflects a push toward increased oversight and management within the SBA's 504 program, aiming to ensure more stringent compliance and accountability. This could enhance the integrity of the program, benefiting small businesses relying on these loans by potentially ensuring more reliable lending practices. However, the increased regulatory burden on CDCs might translate into higher costs for these entities, which could ultimately be passed down to small businesses in the form of higher fees or stricter lending terms.
Impact on Specific Stakeholders
Certified Development Companies
CDCs might experience a significant impact due to the enforcement and fee assessment provisions. The potential for hefty penalties and additional annual fees could financially strain smaller CDCs, possibly discouraging their participation in the 504 program. These financial burdens may also compel CDCs to reallocate resources toward compliance rather than business development.
Small Businesses
For small businesses, particularly those seeking loans through the 504 program, the bill's increased oversight could result in more stability and reliability in loan availability. However, if CDCs pass on their added costs through increased fees or stricter vetting processes, it could limit access to these essential financial resources.
Small Business Administration
The SBA will need to adapt to potentially more complex administrative processes due to the expanded oversight responsibilities and the necessity to develop environmental compliance rules. This could demand increased staffing or resource allocation to meet these new mandates effectively, impacting the agency's efficiency in other areas.
Environmental Compliance
The bill introduces a requirement for the SBA to clarify procedures related to the National Environmental Policy Act. While ensuring compliance could lead to environmentally responsible lending practices, the tight deadline for this undertaking might not provide sufficient time to create comprehensive and clear guidelines, potentially leading to challenges in implementation.
Overall, the bill envisages a positive shift towards accountability in the 504 loan program but carries several challenges that need careful consideration to prevent negative repercussions for smaller stakeholders involved.
Financial Assessment
The bill H.R. 10247 discusses several financial aspects related to the enhancement of oversight and management of certified development companies under the Small Business Act. These aspects are crucial for understanding the bill's implications on financial practices within the legislative framework.
Civil Monetary Penalties
A key financial element of the bill is the authority for formal enforcement actions against certified development companies, which includes the possibility of assessing a civil monetary penalty up to $250,000. This financial penalty is significant and introduces a potential financial burden on these companies. The imposition of such penalties is intended to serve as a deterrent against violations but could lead to disputes or litigation regarding what constitutes the severity or frequency of a violation. Smaller development companies might especially feel the financial impact of such penalties, raising concerns about their sustainability in the face of substantial fines.
Fees and Charges
Another financial reference in the bill authorizes the Office of Credit Risk Management to collect fees from certified development companies. The amount of the fee is to be determined based on a "graduated scale" that reflects the size of the company's portfolio, capped at 1 basis point of the portfolio's value. This structure of fee collection can lead to variations in charges based on company size, potentially leading to confusion or perceptions of unfair application if the methodology is not clearly communicated.
Additionally, certified development companies are required to pay these fees from the servicing fees they collect. However, there is an assumption here that such servicing fees are consistently sufficient to cover the required payments. If not, it might strain these companies financially, thus affecting their operations and their ability to provide competitive services to small businesses.
Accountability and Transparency
The bill requires an annual report that includes details about the fees charged and their use. While this requirement aims to enhance accountability and transparency, the lack of a detailed methodology for fee determination could lead to difficulties in understanding how fees are allocated and used. Stakeholders may seek more clarity on how these financial decisions are made to ensure fairness and efficient use of resources.
Compliance Costs
Finally, the requirements for issuing environmental compliance rules within 180 days highlight potential financial implications. The process of establishing and complying with these rules could incur costs for development companies, depending on the complexity and scope of the environmental policies. If these rules are inadequately developed due to time constraints, they may result in additional expenses for companies attempting to bridge any compliance gaps.
In summary, H.R. 10247 involves several financial considerations that impact certified development companies. From significant penalties to fee structures, these elements demand careful implementation and clear communication to avoid undue financial burdens on these entities and ensure the intended oversight and compliance objectives are met effectively.
Issues
The authority given to the Director in Section 2, subsection (e)(2), for formal enforcement actions includes assessing penalties up to $250,000, which is significant and might lead to disputes or litigation over the severity or frequency of violations. This could financially impact smaller certified development companies, affecting their sustainability.
The provision of fee authority in Section 2, subsection (f), might lead to increased costs for certified development companies, which could affect their operations and the fees they charge small businesses. The methodology for determining these fees is not clearly outlined beyond a 'graduated scale,' potentially leading to confusion or unfair application.
The requirement for certified development companies to pay fees 'from the servicing fees collected by the development company pursuant to regulation' in Section 2, subsection (f)(2), assumes that such fees are sufficient, which might not be consistently the case and could impact the development companies' operations.
Section 3's requirement to issue rules for environmental compliance within 180 days might be considered insufficient, given the complexity of environmental policy compliance, or it might not align with realistic administrative capabilities. This could lead to inadequate guidance and compliance issues.
The lack of a detailed methodology for fee determination and transparency measures in Section 511, subsection (f)(3), could result in issues with accountability and fair application, as stakeholders might find it challenging to understand how fees are determined and used.
The broad discretion given to the Office for conducting file reviews in Section 2, subsection (c)(1), could lead to inconsistent oversight and enforcement actions, potentially causing operational uncertainty for certified development companies.
The amendment involving changing a date from '2023' to '2025' in Section 4 does not provide context or justification for why the extension is necessary or what the implications might be, potentially leading to ambiguity regarding the scope and impact of the amendment.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the Act states that it can be referred to as the “504 Credit Risk Management Improvement Act of 2024.”
2. Enhancements to the Office of Credit Risk Management Read Opens in new tab
Summary AI
The amendment to the Small Business Investment Act of 1958 establishes the Office of Credit Risk Management's oversight duties for certified development companies involved in the 504 program. It includes conducting loan file reviews, supervising companies, taking enforcement actions if rules are broken, charging fees based on company size, and ensuring timely report submissions.
Money References
- “(B) ENFORCEMENT ACTIONS.—The decision to take an enforcement action against a certified development company under subparagraph (A) shall be based on the severity or frequency of the violation and may include assessing a civil monetary penalty against the company in an amount that is not greater than $250,000.
- “(3) FAILURE TO SUBMIT ANNUAL REPORT.—With respect to a certified development company that, as of the date that is 60 days after the date on which the company is required to submit any report, fails to submit that report, the Director may— “(A) suspend the company from participating in the program established under this title for a period that is not longer than 30 days; or “(B) impose a penalty on the company in an amount to be determined by the Director, except that the amount of the penalty shall be not more than $10,000.
511. Office of Credit Risk Management oversight Read Opens in new tab
Summary AI
The section establishes the Office of Credit Risk Management's responsibilities, including overseeing, reviewing, and enforcing rules for certified development companies under the Small Business Act. It grants the Office authority to conduct loan reviews, take enforcement actions, charge fees, and oversee compliance, ensuring proper management and accountability within the 504 loan program.
Money References
- — (A) IN GENERAL.—With the approval of the Lender Oversight Committee established under section 48 of the Small Business Act (15 U.S.C. 657u), the Director may take a formal enforcement action against any certified development company if the Director finds that the company has violated— (i) a statutory or regulatory requirement; or (ii) any requirement described in a Standard Operating Procedures Manual or Policy Notice relating to a program or function of the Office of Capital Access. (B) ENFORCEMENT ACTIONS.—The decision to take an enforcement action against a certified development company under subparagraph (A) shall be based on the severity or frequency of the violation and may include assessing a civil monetary penalty against the company in an amount that is not greater than $250,000. (3) FAILURE TO SUBMIT ANNUAL REPORT.—With respect to a certified development company that, as of the date that is 60 days after the date on which the company is required to submit any report, fails to submit that report, the Director may— (A) suspend the company from participating in the program established under this title for a period that is not longer than 30 days; or (B) impose a penalty on the company in an amount to be determined by the Director, except that the amount of the penalty shall be not more than $10,000.
3. Rules relating to obligations of certified development companies under the National Environmental Policy Act Read Opens in new tab
Summary AI
The section outlines rules for certified development companies to comply with the National Environmental Policy Act. It defines an "eligible certified development company" and mandates the Small Business Administration to issue guidelines within 180 days, ensuring the new rules do not alter the existing requirements of the Act.
4. Extension of sunset for delegated authority for accredited lenders Read Opens in new tab
Summary AI
The section modifies a part of the law from the Consolidated Appropriations Act, 2021, by changing the expiration date for certain lender authorities from 2023 to 2025.