Senate Committee Eyes Ways to Combat SBA's 7(a) Final Rule, CU Trades Support Effort
Six financial trade groups tell lawmakers the SBA’s changes “threaten the integrity of the program.”
Ahead of Wednesday’s Senate Small Business Committee markup of the Community Advantage Loan Program Act, NAFCU, CUNA and four other financial lobbying groups filed a joint letter supporting the committee’s efforts to use the legislation to help possibly offset the negative impacts from recent final rules issued by the U.S. Small Business Administration (SBA).
The final rules issued by the SBA in April, which went into effect on May 11, changed the regulations surrounding the SBA’s 7(a) and 504 loan programs as it relates to loan conditions and lending criteria, as well as expanding the ranks of SBA lenders by increasing the number of Small Business Lending Company (SBLC) licenses.
The letter, signed by CUNA, NAFCU, the American Bankers Association, Consumer Bankers Association, Independent Community Bankers of America and National Association of Government Guaranteed Lenders stated, “We support the mission of the 7(a) program to encourage lenders to provide loans to underserved small businesses. We remain concerned that SBA’s decision to lift the moratorium on the number of non-Federally regulated lenders in the 7(a) program while simultaneously loosening underwriting standards may negatively impact the performance of 7(a) loans, threaten the integrity of the program, and lead to increased borrower and lender fees.
“Collectively, we support the efforts of the Committee to bring the legislation to this point, as well as support moving the process forward in the Committee so that we may continue the dialogue on these important issues. Our trade associations look forward to working with Congress through the legislative process, and we will continue to give voice to the lending industry’s concerns regarding how best to maintain 7(a) loan program integrity,” the letter stated.
According to the group statement, the organizations support advancing the Community Advantage Loan Program Act as a legislative response to the SBA’s final rulemaking. The legislation the Senate Committee will discuss could achieve the following:
- Provide permanency to the piloted Community Advantage program.
- Cap the number of SBLCs.
- Provide additional guardrails and authority for the Office of Credit Risk Management at SBA to enhance oversight of non-federally regulated 7(a) lenders for which SBA serves as the primary regulator.
- Reinstate the SBA Franchise Directory.
- Reinstate the loan authorization.