Small Business 7(a) Loan Agent Transparency Act

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4531) to amend the Small Business Act to require a report on 7(a) agents, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the measure under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of the bill before us today, H.R. 4531, the 7(a) Loan Agent Oversight Act, companion legislation to H.R. 4481, the Small Business 7(a) Loan Agent Transparency Act.

While H.R. 4481 would establish a registration system for 7(a) loan agents, this bill requires SBA to submit a report to Congress assessing and analyzing the performance of 7(a) loans generated through loan agent activity.

This analysis will include SBA's purchase rate for loans generated through loan agent activity, the aggregate dollar value of referral fees paid to agents either by borrowers or lenders, and the interest rates associated with these loans.

The report will also include an analysis--without naming individual agents--of the risk created by individual agents responsible for generating at least 1 percent of the 7(a) portfolio.

SBA's Office of Inspector General has repeatedly identified the increased risks to the 7(a) loan portfolio created by loan agents as the top agency management challenge and recommended the agency develop a system to register loan agents and monitor their performance.

The IG's findings about loan agent activity are particularly troubling. In one instance a loan agent fraudulently originated $90 million in 7(a) loans and received compensation from at least 19 different lenders.

Today's bills on 7(a) loan agent registration and oversight will go a long way in providing transparency and are long overdue.

Once again, I want to sincerely thank Mr. Phillips and Mr. Meuser for identifying this issue and collaborating on a sensible solution.

Mr. Speaker, I urge my colleagues to support this bill, and I reserve the balance of my time.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no further speakers, and I am prepared to close. I reserve the balance of my time.

Mr. Speaker, I yield myself the balance of my time.

The two bills we are considering today go hand in hand and will also go a long way to enhance transparency in the 7(a) program.

Over the last year, our committee has focused on relief programs, but we never lost sight of our traditional lending programs. Today, we turn our attention to the core SBA loan programs and ensure they are working as best as they can.

The report required under this bill will help Congress and the public better understand the role loan agents play in the 7(a) program, whether they improve access to capital for entrepreneurs, and the impact of potential bad actors in this space, especially as it relates to portfolio risk.

Though lenders bear primary responsibility for monitoring their agents, only SBA is positioned to aggregate loan agent portfolios, evaluate their performance, and inform lenders and policymakers about concerning program risks or trends.

Once again, I want to salute the work of the gentleman from Minnesota (Mr. Phillips) and the gentleman from Pennsylvania (Mr. Meuser). I encourage all of my colleagues to vote ``yes,'' and I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 4481, the Small Business 7(a) Loan Agent Transparency Act.

I want to congratulate you, Mr. Speaker. Not many people can pronounce my last name, Luetkemeyer, but you did a great job today. Thank you very much.

While small businesses across the Nation are bearing the burden of rising costs, supply chain issues, and labor shortages, they also continue to be challenged when accessing capital to build and grow their businesses.

This committee remains committed to examining issues surrounding access to capital.

The SBA's largest government guaranteed loan tool is the 7(a) loan program, which serves small businesses of all types throughout the Nation.

Over the years, the role of loan agents within this program has ebbed and flowed. However, along the way, the SBA has not had a firm grasp on how these middlemen operate in the program.

H.R. 4481 corrects this program by requiring more transparency within the program about loan agents who often connect small businesses to lenders and vice versa.

I commend the gentleman from Minnesota (Mr. Phillips) and the gentleman from Pennsylvania (Mr. Meuser) for working in tandem to bring this issue to the forefront, as well as Ms. Tenney. I also would like to thank the Chair for working on this issue as well.

H.R. 4481 will reinforce the integrity of the program and ensure that it continues to be a useful tool for small businesses moving forward.

H.R. 4481 passed out of committee via voice vote. I urge all Members to support this legislation, Mr. Speaker, and I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from Pennsylvania (Mr. Meuser).

Mr. Speaker, I yield such time as she may consume to the gentlewoman from New York (Ms. Tenney).

Mr. Speaker, I yield myself the balance of my time to close.

Mr. Speaker, we have an oversight duty to ensure programs are operating effectively and efficiently. Congress must also ensure taxpayer dollars are protected and safeguarded against waste, fraud and abuse.

Loan agents within the 7(a) program require more transparency, and this bill delivers on this important topic.

I can assure you that as a result of IG reports, this is a necessary part of our process, and we must continue to provide the kind of oversight that is necessary. Loan agents can be very helpful, but there are always a few bad apples. We need this transparency to be able to protect the integrity of this program and taxpayer dollars.

Mr. Speaker, I urge my colleagues to support H.R. 4481, and I yield back the balance of my time.

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4481) to amend the Small Business Act to establish requirements for 7(a) agents, and for other purposes.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the measure under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of the bill before us today, H.R. 4481, the Small Business 7(a) Loan Agent Transparency Act.

This bill would establish a registration system for 7(a) loan agents that assigns each a unique identifier and collects data to help SBA track and evaluate loan performance for loans generated through agent activity.

Our committee has consistently heard from agency watchdogs about the increased risk associated with loans originated through loan agents.

In October 2021, SBA's Office of Inspector General identified increased risk introduced by loan agents as one of the agency's top management and performance challenges facing the agency this fiscal year.

H.R. 4481 addresses the IG's finding by establishing a registry and including loan agents as entities against which SBA's Office of Credit Risk Management may issue formal or informal enforcement actions.

Earlier this Congress, our committee approved this bipartisan bill on a unanimous basis, and I am proud to support it again today.

I applaud my colleagues, Mr. Phillips and Mr. Meuser, for identifying this issue and working together on a commonsense solution. I ask all of my colleagues to support this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no further speakers at this time, and I reserve the balance of my time.

Mr. Speaker, I yield myself the balance of my time.

As the small business economy continues its recovery, we have an opportunity to optimize SBA's flagship capital access program.

Today's legislation improves SBA's ability to oversee the loan agents in the 7(a) program and empowers the agency to hold noncompliant agents accountable.

Currently SBA's Office of Credit Risk Management conducts loan agent oversight as part of its periodic lender reviews, not directly through the agents themselves.

The registry established under this bill will improve SBA's ability to conduct more targeted oversight over the 7(a) loan agents.

I applaud the gentleman from Minnesota (Mr. Phillips) and the gentleman from Pennsylvania (Mr. Meuser) for their bipartisan work to improve the 7(a) program. I urge my colleagues to vote ``yes,'' and I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume and rise in support of H.R. 4531, the 7(a) Loan Agent Oversight Act.

On October 15, 2021, the SBA's inspector general published a report titled ``Top Management and Performance Challenges Facing the Small Business Administration in Fiscal Year 2022.''

In this report, the inspector general listed increased risks introduced by loan agents as one of the top issues the agency faces. Specifically, the report outlines approximately $335 million in documented and confirmed loan agent fraud within the program. This is unacceptable, Mr. Speaker, and Members of Congress must have more visibility into this program.

H.R. 4531, the 7(a) Loan Agent Oversight Act, requires the SBA to perform a portfolio risk analysis on loans associated with agents. When this risk analysis is completed, Members will have more visibility into how loan agents interact with a government guaranteed loan program. American tax dollars must be protected, and H.R. 4531 makes important improvements to be able to do just that.

I thank the gentleman from Pennsylvania (Mr. Meuser) and the gentleman from Minnesota (Mr. Phillips) for tackling this legislation head on.

With my support and the Chair's support, H.R. 4531 was favorably reported out of our committee, and I encourage all Members to support this legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield such time as he may consume to the gentleman from Pennsylvania (Mr. Meuser).

Mr. Speaker, I yield myself the balance of my time to close.

Continued and ongoing fraud within any government program is unacceptable and must be addressed immediately. H.R. 4531 is a step in the right direction and will provide crucial information for Members of Congress as well as committee members as they continue to exercise necessary oversight of programs directed at small businesses and entrepreneurs.

Mr. Speaker, I urge my colleagues to support H.R. 4531, and I yield back the balance of my time.

Mr. Speaker, I rise in support of my bill, H.R. 4531, the 7(a) Loan Agent Oversight Act.

First, I would like to thank Chairwoman Velazquez and Ranking Member Luetkemeyer for advancing this bill to the House floor. I would also like to thank the gentleman from Minnesota (Mr. Phillips) for working together on this important legislation.

The 7(a) loan program is considered the flagship program of the SBA. It is an important tool for helping small firms gain access to capital. Unfortunately, the SBA's Office of Inspector General has highlighted a need for improved oversight of the 7(a) loan agents due to increased risk of fraud associated with these agents.

To ensure that Congress can properly address these issues, we must have the information necessary to determine how to mitigate these risks. Without accurate information, we cannot perform the proper oversight that is needed to safeguard and protect American taxpayer dollars.

My bill will ensure that Congress receives the data it needs to conduct proper oversight of the 7(a) loan program by requiring the SBA to develop and publish an annual portfolio risk analysis for Congress on loan agents that operate within the program. Specifically, the analysis will examine the number of fraudulent loans that are associated with the loan agents as well as the default rate of the loans associated with these agents.

At the end of the day, these are government programs that were developed to assist small businesses in gaining access to capital. Given this important mission, Congress and the SBA must conduct the appropriate level of oversight.

The information that will be provided to Congress under H.R. 4531 will be paramount as we measure the effectiveness of these programs and whether the SBA has the correct oversight requirements in place to administer such a significant program.

For that reason, I urge my colleagues to support H.R. 4531, the 7(a) Loan Agent Oversight Act.