A bill authored by U.S. Rep. Dan Meuser (R-PA) that seeks to strengthen accountability and combat fraud within the Small Business Administration’s 7(a) Loan Program was passed in the U.S. House of Representatives.
Meuser’s bill, the 7(a) Loan Agent Oversight Act (H.R. 1804), requires the Office of Credit Risk Management to submit an annual report to Congress regarding the performance of and risk associated with loans generated through loan agent activity.
“Access to capital remains one of the greatest barriers to growth for entrepreneurs, and the SBA’s 7(a) Loan Program must be efficient, stable, and well-managed,” Meuser said. “Unfortunately, the SBA’s Office of Inspector General has highlighted a growing need for stronger oversight of 7(a) loan agents due to increased fraud risks, with over $335 million in documented loan agent fraud having been identified.”
The SBA’s Inspector General noted that nearly 15 percent of all Small Business Administration (SBA) 7(a) loans include a loan agent. However, the OIG has also reported that there has been more than $335 million in documented loan agent fraud.
“My bill ensures that both Congress and the SBA have the necessary data to provide proper oversight by requiring the SBA’s Office of Credit Risk Management to collect and report on fraudulent loans, default rates, and risk analysis of loan agents operating within the program,” Meuser added. “Strengthening transparency and accountability will protect taxpayer dollars, ensure the 7(a) Loan Program remains a successful public-private partnership, and help small businesses continue to access the capital they need to grow. I look forward to working with SBA Administrator Loeffler to uphold this program’s record of success and to restore the prudent underwriting standards that were removed under the Biden administration.”
The bill also ensures that Congress receives the necessary data to provide proper oversight of the SBA’s flagship loan program. In addition, it mandates reporting on the number of loans processed with the assistance of loan agents, default rates associated with those loans and requires the SBA to conduct a risk analysis on agents participating in the program.
The SBA’s 7(a) loan program serves as the SBA’s primary lending tool for small businesses that cannot obtain credit elsewhere. Rather than issuing direct loans, the SBA provides loan guarantees to private lenders to support small business growth. The SBA facilitated approximately 47,700 loans totaling $25.7 billion in Fiscal Year 2023.