15 U.S.C. § 650 : US Code - Section 650: Supervisory and enforcement authority for small business lending companies

Search 15 U.S.C. § 650 : US Code - Section 650: Supervisory and enforcement authority for small business lending companies

(a) In general
The Administrator is authorized -
(1) to supervise the safety and soundness of small business
lending companies and non-Federally regulated lenders;
(2) with respect to small business lending companies to set
capital standards to regulate, to examine, and to enforce laws
governing such companies, in accordance with the purposes of this
chapter; and
(3) with respect to non-Federally regulated lenders to
regulate, to examine, and to enforce laws governing the lending
activities of such lenders under section 636(a) of this title in
accordance with the purposes of this chapter.
(b) Capital directive
(1) In general
If the Administrator determines that a small business lending
company is being operated in an imprudent manner, the
Administrator may, in addition to any other action authorized by
law, issue a directive to such company to increase capital to
such level as the Administrator determines will result in the
safe and sound operation of such company.
(2) Delegation
The Administrator may not delegate the authority granted under
paragraph (1) except to an Associate Deputy Administrator.
(3) Regulations
The Administrator shall issue regulations outlining the
conditions under which the Administrator may determine the level
of capital pursuant to paragraph (1).
(c) Civil action
If a small business lending company violates this chapter, the
Administrator may institute a civil action in an appropriate
district court to terminate the rights, privileges, and franchises
of the company under this chapter.
(d) Revocation or suspension of loan authority
(1) The Administrator may revoke or suspend the authority of a
small business lending company or a non-Federally regulated lender
to make, service or liquidate business loans authorized by section
636(a) of this title -
(A) for false statements knowingly made in any written
submission required under this chapter;
(B) for omission of a material fact from any written submission
required under this chapter;
(C) for willful or repeated violation of this chapter;
(D) for willful or repeated violation of any condition imposed
by the Administrator with respect to any application, request, or
agreement under this chapter; or
(E) for violation of any cease and desist order of the
Administrator under this section.
(2) The Administrator may revoke or suspend authority under
paragraph (1) only after a hearing under subsection (f) of this
section. The Administrator may delegate power to revoke or suspend
authority under paragraph (1) only to the Deputy Administrator and
only if the Administrator is unavailable to take such action.
(A) The Administrator, after finding extraordinary
circumstances and in order to protect the financial or legal
position of the United States, may issue a suspension order
without conducting a hearing pursuant to subsection (f) of this
section. If the Administrator issues a suspension under the
preceding sentence, the Administrator shall within two business
days follow the procedures set forth in subsection (f) of this
section.
(B) Any suspension under paragraph (1) shall remain in effect
until the Administrator makes a decision pursuant to subparagraph
(4) to permanently revoke the authority of the small business
lending company or non-Federally regulated lender, suspend the
authority for a time certain, or terminate the suspension.
(3) The small business lending company or non-Federally regulated
lender must notify borrowers of a revocation and that a new entity
has been appointed to service their loans. The Administrator or an
employee of the Administration designated by the Administrator may
provide such notice to the borrower.
(4) Any revocation or suspension under paragraph (1) shall be
made by the Administrator except that the Administrator shall
delegate to an administrative law judge as that term is used in
section 3105 of title 5 the authority to conduct any hearing
required under subsection (f) of this section. The Administrator
shall base the decision to revoke on the record of the hearing.
(e) Cease and desist order
(1) Where a small business lending company, a non-Federally
regulated lender, or other person violates this chapter or is
engaging or is about to engage in any acts or practices which
constitute or will constitute a violation of this chapter, the
Administrator may order, after the opportunity for hearing pursuant
to subsection (f) of this section, the company, lender, or other
person to cease and desist from such action or failure to act. The
Administrator may delegate the authority under the preceding
sentence only to the Deputy Administrator and only if the
Administrator is unavailable to take such action.
(2) The Administrator, after finding extraordinary circumstances
and in order to protect the financial or legal position of the
United States, may issue a cease and desist order without
conducting a hearing pursuant to subsection (f) of this section. If
the Administrator issues a cease and desist order under the
preceding sentence, the Administrator shall within two business
days follow the procedures set forth in subsection (f) of this
section.
(3) The Administrator may further order such small business
lending company or non-Federally regulated lender or other person
to take such action or to refrain from such action as the
Administrator deems necessary to insure compliance with this
chapter.
(4) A cease and desist order under this subsection may also
provide for the suspension of authority to lend in subsection (d)
of this section.
(f) Procedure for revocation or suspension of loan authority and
for cease and desist order
(1) Before revoking or suspending authority under subsection (d)
of this section or issuing a cease and desist order under
subsection (e) of this section, the Administrator shall serve an
order to show cause upon the small business lending company, non-
Federally regulated lender, or other person why an order revoking
or suspending the authority or a cease and desist order should not
be issued. The order to show cause shall contain a statement of the
matters of fact and law asserted by the Administrator and the legal
authority and jurisdiction under which a hearing is to be held, and
shall set forth that a hearing will be held before an
administrative law judge at a time and place stated in the order.
Such hearing shall be conducted pursuant to the provisions of
sections 554, 556, and 557 of title 5. If after hearing, or a
waiver thereof, the Administrator determines that an order revoking
or suspending the authority or a cease and desist order should be
issued, the Administrator shall promptly issue such order, which
shall include a statement of the findings of the Administrator and
the grounds and reasons therefor and specify the effective date of
the order, and shall cause the order to be served on the small
business lending company, non-Federally regulated lender, or other
person involved.
(2) Witnesses summoned before the Administrator shall be paid by
the party at whose instance they were called the same fees and
mileage that are paid witnesses in the courts of the United States.
(3) A cease and desist order, suspension or revocation issued by
the Administrator, after the hearing under this subsection is final
agency action for purposes of chapter 7 of title 5. An adversely
aggrieved party shall have 20 days from the date of issuance of the
cease and desist order, suspension or revocation, to seek judicial
review in an appropriate district court.
(g) Removal or suspension of management official
(1) Definition
In this section, the term "management official" means, with
respect to a small business lending company or a non-Federally
regulated lender, an officer, director, general partner, manager,
employee, agent, or other participant in the management of the
affairs of the company's or lender's activities under section
636(a) of this title.
(2) Removal of management official
(A) Notice
The Administrator may serve upon any management official a
written notice of its intention to remove that management
official if, in the opinion of the Administrator, the
management official -
(i) willfully and knowingly commits a substantial violation
of -
(I) this chapter;
(II) any regulation issued under this chapter;
(III) a final cease-and-desist order under this chapter;
or
(IV) any agreement by the management official, the small
business lending company or non-Federally regulated lender
under this chapter; or
(ii) willfully and knowingly commits a substantial breach
of a fiduciary duty of that person as a management official
and the violation or breach of fiduciary duty is one
involving personal dishonesty on the part of such management
official.
(B) Contents of notice
A notice under subparagraph (A) shall contain a statement of
the facts constituting grounds therefor and shall fix a time
and place at which a hearing, conducted pursuant to sections
554, 556, and 557 of title 5, will be held thereon.
(C) Hearing
(i) Timing
A hearing under subparagraph (B) shall be held not earlier
than 30 days and later than 60 days after the date of service
of notice of the hearing, unless an earlier or a later date
is set by the Administrator at the request of -
(I) the management official, and for good cause shown; or
(II) the Attorney General.
(ii) Consent
Unless the management official appears at a hearing under
this paragraph in person or by a duly authorized
representative, the management official shall be deemed to
have consented to the issuance of an order of removal under
subparagraph (A).
(D) Order of removal
(i) In general
In the event of consent under subparagraph (C)(ii), or if
upon the record made at a hearing under this subsection, the
Administrator finds that any of the grounds specified in the
notice of removal has been established, the Administrator may
issue such orders of removal from office as the Administrator
deems appropriate.
(ii) Effectiveness
An order under clause (i) shall -
(I) take effect 30 days after the date of service upon
the subject small business lending company or non-Federally
regulated lender and the management official concerned
(except in the case of an order issued upon consent as
described in subparagraph (C)(ii), which shall become
effective at the time specified in such order); and
(II) remain effective and enforceable, except to such
extent as it is stayed, modified, terminated, or set aside
by action of the Administrator or a reviewing court in
accordance with this section.
(3) Authority to suspend or prohibit participation
(A) In general
In order to protect a small business lending company, a non-
Federally regulated lender or the interests of the
Administration or the United States, the Administrator may
suspend from office or prohibit from further participation in
any manner in the management or conduct of the affairs of a
small business lending company or a non-Federally regulated
lender a management official by written notice to such effect
served upon the management official. Such suspension or
prohibition may prohibit the management official from making,
servicing, reviewing, approving, or liquidating any loan under
section 636(a) of this title.
(B) Effectiveness
A suspension or prohibition under subparagraph (A) -
(i) shall take effect upon service of notice under
paragraph (2); and
(ii) unless stayed by a court in proceedings authorized by
subparagraph (C), shall remain in effect -
(I) pending the completion of the administrative
proceedings pursuant to a notice of intention to remove
served under paragraph (2); and
(II) until such time as the Administrator dismisses the
charges specified in the notice, or, if an order of removal
or prohibition is issued against the management official,
until the effective date of any such order.
(C) Judicial review of suspension prior to hearing
Not later than 10 days after a management official is
suspended or prohibited from participation under subparagraph
(A), the management official may apply to an appropriate
district court for a stay of the suspension or prohibition
pending the completion of the administrative proceedings
pursuant to a notice of intent to remove served upon the
management official under paragraph (2).
(4) Authority to suspend on criminal charges
(A) In general
If a management official is charged in any information,
indictment, or complaint authorized by a United States
attorney, with a felony involving dishonesty or breach of
trust, the Administrator may, by written notice served upon the
management official, suspend the management official from
office or prohibit the management official from further
participation in any manner in the management or conduct of the
affairs of the small business lending company or non-Federally
regulated lender.
(B) Effectiveness
A suspension or prohibition under subparagraph (A) shall
remain in effect until the information, indictment, or
complaint is finally disposed of, or until terminated by the
Administrator or upon an order of a district court.
(C) Authority upon conviction
If a judgment of conviction with respect to an offense
described in subparagraph (A) is entered against a management
official, then at such time as the judgment is not subject to
further judicial review (and for purposes of this subparagraph
shall not include any petition for a writ of habeas corpus),
the Administrator may issue and serve upon the management
official an order removing the management official, effective
upon service of a copy of the order upon the small business
lending company or non-Federally regulated lender.
(D) Authority upon dismissal or other disposition
A finding of not guilty or other disposition of charges
described in subparagraph (A) shall not preclude the
Administrator from instituting proceedings under subsection (e)
or (f) of this section.
(5) Notification to small business lending company or a non-
Federally regulated lender
Copies of each notice required to be served on a management
official under this section shall also be served upon the small
business lending company or non-Federally regulated lender
involved.
(6) Final agency action and judicial review
(A) Issuance of orders
After a hearing under this subsection, and not later than 30
days after the Administrator notifies the parties that the case
has been submitted for final decision, the Administrator shall
render a decision in the matter (which shall include findings
of fact upon which its decision is predicated), and shall issue
and cause to be served upon each party to the proceeding an
order or orders consistent with this section. The decision of
the Administrator shall constitute final agency action for
purposes of chapter 7 of title 5.
(B) Judicial review
An adversely aggrieved party shall have 20 days from the date
of issuance of the order to seek judicial review in an
appropriate district court.
(h) Appointment of receiver
(1) In any proceeding under subsection (f)(4) of this section or
subsection (g)(6)(C) of this section, the court may take exclusive
jurisdiction of a small business lending company or a non-Federally
regulated lender and appoint a receiver to hold and administer the
assets of the company or lender.
(2) Upon request of the Administrator, the court may appoint the
Administrator as a receiver under paragraph (1).
(i) Possession of assets
(1) If a small business lending company or a non-Federally
regulated lender is not in compliance with capital requirements or
is insolvent, the Administrator may take possession of the
portfolio of loans guaranteed by the Administrator and sell such
loans to a third party by means of a receiver appointed under
subsection (h) of this section.
(2) If a small business lending company or a non-Federally
regulated lender is not in compliance with capital requirements or
is insolvent or otherwise operating in an unsafe and unsound
condition, the Administrator may take possession of servicing
activities of loans that are guaranteed by the Administrator and
sell such servicing rights to a third party by means of a receiver
appointed under subsection (h) of this section.
(j) Penalties and forfeitures
(1) Except as provided in paragraph (2), a small business lending
company or a non-Federally regulated lender which violates any
regulation or written directive issued by the Administrator
regarding the filing of any regular or special report shall pay to
the United States a civil penalty of not more than $5,000 for each
day of the continuance of the failure to file such report, unless
it is shown that such failure is due to reasonable cause and not
due to willful neglect. The civil penalties under this subsection
may be enforced in a civil action brought by the Administrator. The
penalties under this subsection shall not apply to any affiliate of
a small business lending company that procures at least 10 percent
of its annual purchasing requirements from small manufacturers.
(2) The Administrator may by rules and regulations that shall be
codified in the Code of Federal Regulations, after an opportunity
for notice and comment, or upon application of an interested party,
at any time previous to such failure, by order, after notice and
opportunity for hearing which shall be conducted pursuant to
sections 554, 556, and 557 of title 5, exempt in whole or in part,
any small business lending company or non-Federally regulated
lender from paragraph (1), upon such terms and conditions and for
such period of time as it deems necessary and appropriate, if the
Administrator finds that such action is not inconsistent with the
public interest or the protection of the Administration. The
Administrator may for the purposes of this section make any
alternative requirements appropriate to the situation.