[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Proposed Rules]
[Pages 57980-57982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28447]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 103
Policies of General Application
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: In response to President Clinton's regulatory review
directive, the Small Business Administration has completed a page-by-
page and line-by-line review of its regulations. As a result, SBA is
proposing to streamline its regulations by eliminating many rules and
simplifying and improving those that remain. This proposed rule would
reorganize and streamline the entire Part 103, which covers the
standards one must meet to conduct business with SBA. It makes the
standards clearer and more understandable to those who are regulated,
and easier for SBA to enforce.
DATES: Written comments must be submitted on or before December 26,
1995.
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ADDRESSES: Written comments may be sent to David Kohler, Regulatory
Reform Team Leader (103), Small Business Administration, 409 3rd Street
SW., Suite 13, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT: Michael Dowd, Director, Office of Loan
Programs, at (202) 205-6490.
SUPPLEMENTARY INFORMATION: 13 CFR Part 103 contains SBA's policies
governing the standards for suspending or revoking the privileges of
persons who conduct business with SBA on behalf of applicants or
lenders. This proposed rule reorganizes and streamlines Part 103,
making it easier to understand and enforce. It changes the title of the
Part to ``Standards for Conducting Business with SBA'' to describe more
clearly the scope of the regulations. The sections stating the
statutory provisions underlying the Part and its purpose--103.13 and
103.13-1--are eliminated as unnecessary. The proposed rule renumbers
the sections that remain: present Secs. 103.13-2 through 103.13-6 would
become Secs. 103.1-103.5. The proposed rule clarifies the existing
definitions of agents who appear before SBA on behalf of applicants for
assistance, adds definitions for ``packagers'' and ``lender service
providers,'' and provides that these two categories of agents are
specifically covered by SBA's requirements governing conduct of
business. It also amends, in certain respects, and adds greater
specificity to the definition of ``good cause'' for which the
Administrator may revoke or suspend the privilege for conducting
business with SBA. It adds provisions prescribing the use and form of
lender service provider agreements which must contain certain
provisions regarding services to be provided and compensation,
including a prohibition on secondary market premium sharing. In
addition to these substantive changes, the proposed rule is written in
clearer, more straightforward language than the present Part.
It is SBA's intention to require all packagers, lender service
providers, and agents to register with SBA for purposes of keeping
track of who is performing such activities on behalf of applicants for
assistance or lenders. SBA also intends to develop a code of ethical
and professional responsibility based upon the substance of the
proposed regulations which it will enforce with respect to all agents.
Finally, SBA will provide training for anyone or any entity that wishes
to represent applicants for SBA assistance or provide services to
lenders. The development of these initiatives will take place over the
next fiscal year, in consultation with representatives of the affected
industries. To the extent that they require modifications of these
proposed regulations, such modifications will ensue in later
rulemakings.
Compliance With Executive Orders 12612, 12778, and 12866, the
Regulatory Flexibility Act (5 U.S.C. Sec. 601, et seq.), and the
Paperwork Reduction Act (44 U.S.C. Ch. 35)
SBA certifies that this proposed rule involves internal
administrative procedures and would not be considered a significant
rule within the meaning of Executive Order 12866 and would not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act, 5 U.S.C.
Sec. 601, et seq. It is not likely to have an annual economic effect of
$100 million or more, result in a major increase in costs or prices, or
have a significant adverse effect on competition or the United States
economy.
For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA
certifies that this proposed rule, if adopted in final form, would
contain no new reporting or record keeping requirements.
For purposes of Executive Order 12612, SBA certifies that this rule
would not have any federalism implications warranting the preparation
of a Federalism Assessment.
For purposes of Executive Order 12778, SBA certifies that this rule
is drafted, to the extent practicable, in accordance with the standards
set forth in Section 2 of that Order.
List of Subjects in 13 CFR Part 103
Standards for conducting business with SBA, procedures for
suspension or revocation of privileges, compensation allowed to agents.
Accordingly, pursuant to the authority set forth in sections 5 and
13 of the Small Business Act, 15 U.S.C. Secs. 634 and 642, SBA hereby
proposes to revise part 103 of Title 13, Code of Federal Regulations
(CFR), as follows:
Part 103 would be revised to read as follows:
PART 103--STANDARDS FOR CONDUCTING BUSINESS WITH SBA
103.1 Key Definitions.
103.2 Who may conduct business with SBA?
103.3 May SBA suspend or revoke an agent's privilege?
103.4 What is ``good cause'' for suspension or revocation?
103.5 How does SBA regulate an agent's fees and provision of
service?
Authority: Secs. 5, 13, 72 Stat. 385, 394 (15 U.S.C. 634, 642).
Sec. 103.1 Key Definitions.
(a) Agent means an authorized representative, including an
attorney, accountant, consultant, manufacturer's representative,
packager, lender service provider or any other person representing an
applicant or participant.
(b) The term conduct business with SBA means:
(1) preparing or submitting on behalf of an applicant an
application for financial assistance of any kind, assistance from the
Investment Division of SBA, or assistance in procurement and technical
matters;
(2) preparing or processing on behalf of a lender or a participant
in any of SBA's programs an application for federal financial
assistance;
(3) participating with or communicating in any way with officers or
employees of SBA on an applicant's, participant's, or lender's behalf;
and
(4) such other activity as SBA reasonably shall determine.
(c) Applicant means any person, firm, concern, corporation,
partnership, cooperative or other business enterprise applying for any
type of assistance from SBA.
(d) Lender Service Provider means an agent who carries out lender
functions in originating, disbursing, servicing, or liquidating a
specific SBA business loan or loan portfolio for compensation from the
lender. SBA determines whether or not one is a ``lender service
provider'' on a loan-by-loan basis.
(e) Packager means an agent who is employed and compensated by an
applicant or lender to prepare the applicant's application for
financial assistance from SBA. SBA determines whether or not one is a
``packager'' on a loan-by-loan basis.
(f) Participant means an entity that is participating in any of the
financial, investment, or business development programs authorized by
the Small Business Act or Small Business Investment Act of 1958.
Sec. 103.2 Who may conduct business with SBA?
(a) If you are an applicant, a participant, a partner of an
applicant or participant partnership, or serve as an officer of an
applicant, participant corporation, or limited liability company, you
may conduct business with SBA without a representative.
(b) If you are an agent, you may conduct business with SBA on
behalf of an applicant, participant or lender, unless representation is
otherwise prohibited by law or the regulations in
[[Page 57982]]
this or any other part of Title 13. For example, persons debarred under
the SBA or Government-wide debarment regulations may not conduct
business with SBA. SBA may request that any agent supply written
evidence of his or her authority to act on behalf of an applicant,
participant, or lender as a condition of revealing any information
about the applicant's, participant's, or lender's current or prior
dealings with SBA.
Sec. 103.3 May SBA suspend or revoke an agent's privilege?
The Administrator of SBA or designee may, for good cause, suspend
or revoke the privilege of any agent to conduct business with SBA. Part
134 of this chapter states the procedures for appealing the decision to
suspend or revoke the privilege. The suspension or revocation remains
in effect during the pendency of any administrative proceedings under
Part 134 of this chapter.
Sec. 103.4 What is ``good cause'' for suspension or revocation?
Any unlawful or unethical activity is good cause for suspension or
revocation of the privilege to conduct business. This includes:
(a) Attempting to influence any employee of SBA or a lender, by
gifts, bribes or other unlawful or unethical activity, with respect to
any matter involving SBA assistance.
(b) Soliciting for the provision of services to an applicant by
another entity when there is an undisclosed business relationship
between the two parties.
(c) Violating ethical guidelines which govern the profession or
business of the agent or which are published at any time by SBA.
(d) Implying or stating that the work to be performed for an
applicant will include use of political or other special influence with
SBA. Examples include indicating that the entity is affiliated with or
paid, endorsed or employed by SBA, and advertising using the words
Small Business Administration or SBA or its seal or symbol, and giving
a ``guaranty'' to an applicant that the application will be approved.
(e) Charging or proposing to charge any fee that does not bear a
necessary and reasonable relationship to the services actually rendered
or expenses actually incurred in connection with a matter before SBA or
which is materially inconsistent with the provisions of an applicable
compensation agreement or lender service provider agreement. A fee
based solely on a percentage of a loan or guarantee amount can be
reasonable, depending on the circumstances of a case and the services
actually rendered.
(f) Engaging in any conduct indicating a lack of business integrity
or business honesty, including debarment, criminal conviction, or civil
judgment within the last seven years for fraud, embezzlement, theft,
forgery, bribery, falsification or destruction of records, false
statements, receiving stolen property, false claims, or obstruction of
justice.
(g) Acting as both a lender service provider and a packager for an
applicant on the same SBA business loan. A limited exception to this
``two master'' prohibition exists in the following circumstances:
(1) The lender service provider: is asked by the lender to perform
packaging services on a loan, will be compensated solely by the lender,
and provides a written disclosure to the applicant; or
(2) The packager: is first asked to package the loan by the lender,
and is first asked to package the loan only after the lender has
decided to make the loan and the terms of the loan have been
established.
(h) Violating materially the terms of any compensation agreement or
lender service provider agreement provided for in section 103.5.
(i) Violating or assisting in the violation of any SBA regulations,
policies, or procedures of which the applicant has been made aware.
Sec. 103.5 How does SBA regulate an agent's fees and provision of
service?
(a) Any applicant, agent, packager, or lender service provider must
execute and provide to SBA a compensation agreement or lender service
provider agreement governing the compensation charged for services
rendered or to be rendered to the applicant or lender in any matter
involving SBA assistance. SBA provides the form of compensation
agreement and a suggested form of lender service provider agreement to
be used by agents.
(b) Compensation agreements must provide that in cases where SBA
deems the compensation unreasonable, the agent, packager or lender
service provider must: reduce the charge to an amount SBA deems
reasonable, refund any sum in excess of the amount SBA deems reasonable
to the applicant, and refrain from charging or collecting, directly or
indirectly, from the applicant an amount in excess of the amount SBA
deems reasonable.
(c) Each lender service provider must enter into a written
agreement with each lender for whom it acts in that capacity. SBA will
review all such agreements. Such agreements need not contain each and
every provision found in the SBA's suggested form of agreement.
However, each agreement must indicate that both parties agree not to
engage in any sharing of secondary market premiums, that the services
to be provided are accurately described, and that the agreement is
otherwise consistent with SBA requirements. Subject to the prohibition
on splitting premiums, lenders have reasonable discretion in setting
compensation for lender service providers. Such compensation will
generally be considered reasonable unless:
(1) The compensation is clearly excessive in light of industry
standards and the services to be performed; and
(2) The excess compensation is adversely affecting the loan terms
provided to applicants.
Dated: November 13, 1995.
Philip Lader,
Administrator.
[FR Doc. 95-28447 Filed 11-22-95; 8:45 am]
BILLING CODE 8025-01-P
