House bill would increase transparency about small business lending program risks

Proposed legislation supported by the American Bankers Association would require the Small Business Administration to provide and publish more details about the risks of the 7(a) lending program.

The SBA is currently required to conduct an annual risk analysis of its flagship small business loan program and report the results to Congress. 7(a) Program Risk Oversight Act, sponsored by Rep. Nydia Velázquez (DN.Y.), would require the SBA to break down program risk by loan size, how long the loan has been on the books, the age of the borrower’s business and the type of lender that originated the loan, according to the summary.

The bill would also add new reporting on foreclosure actions and civil penalties related to fraud, on loans the agency determines were made fraudulently, and on delinquent loans. In addition, the SBA would be required to make the report public within seven days of its submission to Congress.

“Although the SBA is currently required to send Congress an annual risk report on the 7(a) program, our committee’s investigation into the loan repayment rate makes clear that Congress and the public need more detailed information about the program’s performance to protect both the program and the small businesses that depend on it,” said Velázquez, who is the ranking member of the House Small Business Committee.

In a statement, ABA President and CEO Rob Nichols praised Velázquez for introducing the legislation, “which will strengthen the program by providing greater transparency in the outcome of 7(a) loans.”