[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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