Express Loan Programs; Affiliation Standards-Rescission, 80581-80589 [2020-26450]
Download as PDF
<![CDATA[
80581
Rules and Regulations
Federal Register
Vol. 85, No. 240
Monday, December 14, 2020
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 103, 120, and 121
RIN 3245–AG74
Express Loan Programs; Affiliation
Standards—Rescission
U.S. Small Business
Administration.
ACTION: Final rule; rescission.
AGENCY:
The Small Business
Administration (SBA) is publishing this
rule to rescind the regulations published
on February 10, 2020, in the interim
final rule (IFR) titled, ‘‘Express Loan
Programs; Affiliation Standards’’
(Express IFR). This action is necessary
to implement section 1102 of the
Coronavirus Aid, Relief, and Economic
Security Act (CARES Act), which
permanently rescinded the interim final
rule effective March 27, 2020. As a
result of the rescission, SBA is removing
the amended regulations added by the
Express IFR and reinstating the
regulations that were in effect before the
rule became effective on March 11,
2020.
SUMMARY:
This rule is effective on March
27, 2020, as authorized by Public Law
116–136, sec. 1102(e).
FOR FURTHER INFORMATION CONTACT:
Rosemarie Drake, Chief, 7(a) Program,
Office of Financial Assistance, Office of
Capital Access, Small Business
Administration, 409 Third Street SW,
Washington, DC 20416; telephone: (202)
619–1674; email: Rosemarie.Drake@
sba.gov.
DATES:
SUPPLEMENTARY INFORMATION:
jbell on DSKJLSW7X2PROD with RULES
I. Background Information
The SBA programs affected by the
rescission of the Express IFR are:
1. The 7(a) Loan Program authorized
pursuant to section 7(a) of the Small
Business Act (the Act) (15 U.S.C.
636(a));
2. The Business Disaster Loan
Programs (collectively, Economic Injury
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
Disaster Loans, Military Reservist
Economic Injury Disaster Loans, and
Physical Disaster Business Loans)
authorized pursuant to section 7(b) of
the Act (15 U.S.C. 636(b));
3. The Microloan Program authorized
pursuant to section 7(m) of the Act (15
U.S.C. 636(m));
4. The Intermediary Lending Pilot
(ILP) Program authorized pursuant to
section 7(l) of the Act (15 U.S.C. 636(l));
5. The Surety Bond Guarantee
Program authorized pursuant to part B
of title IV of the Small Business
Investment Act of 1958 (15 U.S.C. 694b
et seq.); and
6. The Development Company
Program (the 504 Loan Program)
authorized pursuant to title V of the
Small Business Investment Act of 1958
(15 U.S.C. 695 et seq.).
(In this final rule, the 7(a), Microloan,
ILP, and 504 Loan Programs are
collectively referred to as the Business
Loan Programs.)
On September 28, 2018, SBA
published a proposed rule with request
for comments in the Federal Register to
incorporate the requirements related to
the SBA Express and Export Express
Loan Programs; add a regulation
pertaining to the 7(a) and Development
Company (504) loan programs regarding
when the owners of a small business
Applicant are required to inject excess
liquid assets into the project; amend
certain regulations setting forth the
affiliation principles applicable to SBA
financial assistance programs; limit
certain fees payable by loan Applicants
to amounts deemed reasonable by SBA;
clarify the responsibility of a Lender for
the contingent liabilities associated with
7(a) loans purchased from the Federal
Deposit Insurance Corporation; and,
finally, amend certain regulations
governing the use of microloan grant
funds by Microloan Intermediaries and
the maximum maturity of a microloan.
(83 FR 49001) The original comment
period was scheduled to end November
27, 2018. On November 16, 2018, SBA
announced an extension of the public
comment period for an additional 15
business days to December 18, 2018. (83
FR 57693)
On February 10, 2020, SBA published
the Express IFR with a request for
comment to provide the public with an
additional opportunity to comment on
the modifications to the rule. (85 FR
7622). The interim final rule became
PO 00000
Frm 00001
Fmt 4700
Sfmt 4700
effective on March 11, 2020, except that
compliance with two of the regulatory
provisions, 13 CFR 103.5(b) (Fees an
Agent may charge a Borrower) and 13
CFR 120.221(a) (Fees a Lender may
charge a Borrower) was delayed until
October 1, 2020.
On March 27, 2020, President Trump
signed into law, the Coronavirus Aid,
Relief, and Economic Security Act
(CARES Act) (Pub. L. 116–136, 134 Stat
281). Section 1102(e) of that Act
permanently rescinded the Express IFR
effective March 27, 2020. In light of this
rescission, SBA is issuing the
amendments identified below to remove
all of the regulations that were added by
the interim final rule and restore the
regulations that were in effect prior to
the effective date of the Express IFR. For
loans made between March 11, 2020,
and March 27, 2020, SBA Lenders
should have complied with the
regulations in effect during that period.
II. Waiver of Notice and Comment and
Delayed Effective Date
Agencies ordinarily publish a notice
of proposed rulemaking in the Federal
Register to provide a period for public
comment before the rule takes effect in
accordance with the Administrative
Procedure Act (APA) (5 U.S.C. 553(b)).
However, an agency can waive this
notice and comment procedure if it
finds, for good cause, that the notice and
comment process is impracticable,
unnecessary, or contrary to the public
interest and incorporates a statement of
its findings and reasons in the notice. 5
U.S.C. 553(b)(B).
This rule is rescinding an interim
final rule that was developed using the
APA notice and comment procedures.
Because Congress has rescinded those
regulations, they no longer have any
legal effect, and their continued
inclusion in the Code of Federal
Regulations would not only be in
violation of a statutory mandate, it
would lead to public confusion as well.
It is also unnecessary and contrary to
the public interest to subject the
regulations that will be reinstated to
APA notice and comment procedures,
since they too were already subject to
public scrutiny when they were initially
codified in the Code of Federal
Regulations. Therefore, SBA finds that
good cause exists to forgo public notice
and comment procedures because they
E:\FR\FM\14DER1.SGM
14DER1
80582
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
would be unnecessary and contrary to
the public interest.
In addition, section 553(d) of the APA
generally requires a 30-day delay in the
effective date of a final rule after the
date of its publication in the Federal
Register. This 30-day delay in effective
date can also be waived as provided by
the agency for good cause found and
published with the rule. 5 U.S.C.
553(d)(3). Based on the language in
section 1102(e) of the CARES Act, the
rescission of the Express IFR was
effective as of March 27, 2020. Thus, the
rule cannot be delayed for 30 days; to
do so would be an unauthorized
extension of the rescission date. This
statutorily determined effective date
provides the good cause to waive the 30day delay in effective date.
Compliance With Executive Orders
12866, 12988, 13132, and 13771, the
Paperwork Reduction Act (44 U.S.C. Ch.
35), and the Regulatory Flexibility Act (5
U.S.C. 601–612)
Executive Order 12866
OMB determined that the interim
final rule, entitled Express Loan
Programs; Affiliation Standards, was a
significant rule for purposes of this
Executive order. Accordingly, SBA
prepared the requisite regulatory impact
analysis, which was published with the
rule. OMB has determined that this
rescission of the interim final rule is
also a ‘‘significant’’ rulemaking.
Accordingly, the next section contains
SBA’s Regulatory Impact Analysis.
However, this is not a major rule under
the Congressional Review Act, 5 U.S.C.
800.
Regulatory Impact Analysis
The rescission of the interim final rule
removes the regulations that were added
by the interim final rule, including
those pertaining to the SBA Express and
Export Express Loan Programs, in
compliance with section 1102(e) of the
CARES Act, which permanently
rescinded the interim final rule effective
March 27, 2020.
The primary objective of the interim
final rule was to incorporate into the
regulations governing the 7(a) Loan
Program the requirements specifically
applicable to the SBA Express and
Export Express Loan Programs in order
to provide additional clarity for SBA
Express and Export Express Lenders.
The interim final rule provided a brightline test for SBA Lenders on how to
adequately determine whether a small
business had access to credit elsewhere
based on personal liquid assets. It
modified regulatory provisions related
to allowable fees that a Lender or an
Agent may collect from an Applicant for
financial assistance. The interim final
rule also revised affiliation principles
for the financial assistance programs.
SBA expected that the additional
detailed clarity on the requirements for
program delivery in the subject areas of
the interim final rule would have
increased understanding for program
users, decreased time spent evaluating
small business Applicants, and resulted
in a reduction of overall cost to
participants. SBA did not expect,
however, that the interim final rule
would affect loan volume significantly.
The interim final rule changes for
affiliation determinations provided
detailed guidance for the SBA Lender
charged with determining the size of a
small business Applicant, with an
expected benefit for the SBA Lender
from the time savings in making the
eligibility determination. These changes
are rescinded with this rule.
This rescission rule transforms the
benefits of the interim final rule into
forgone benefits and the costs of the
interim final rule into forgone costs.
Forgone Benefits to SBA Lenders,
Applicants, and Agents
The greatest benefit from the interim
final rule to all program participants,
including SBA Lenders, Applicants, and
Agents, was clear regulatory guidance
and bright-line tests to increase
efficiency, including bright-line tests for
making certain determinations about
eligibility which would have eliminated
the ambiguity and uncertainty that had
hindered some SBA Lenders in recent
years. SBA estimated that the
reinstatement of the personal resources
test at § 120.102 would have saved SBA
Lenders a total of approximately 67,000
hours annually, monetized to
$2,456,890 per year. This estimated
annual benefit is forgone with the
rescission of the interim final rule.
TABLE 1—ESTIMATED ANNUAL BENEFIT TO SBA LENDERS FROM PERSONAL RESOURCES TEST IN THE INTERIM FINAL
RULE, FORGONE WITH RESCISSION
Number of
expected
occurrences
per year
Outcomes
Increased efficiency in determining credit elsewhere ......
Average time
saved per
occurrence
(hours)
67,000
1–2
Estimated Forgone Annual Benefit ...................................................................................
jbell on DSKJLSW7X2PROD with RULES
The interim final rule set clear
limitations on fees that an Agent or
1 SBA arrived at this estimate by inquiring with
various SBA Lenders as to the average time required
to determine an Applicant’s access to credit
elsewhere. SBA calculated the average of the
timeframes provided to estimate the range of time
the personal resources test would have saved SBA
Lenders, on average, in their analysis. Since each
loan is required to address an Applicant’s access to
credit elsewhere, the number of expected
occurrences per year was estimated by using the
average number of 7(a) and 504 loans guaranteed in
the most recent five fiscal years (2014–2018),
according to SBA’s 7(a) and 504 loan data reports.
The number of expected occurrences per year was
multiplied by the average time saved per
occurrence to estimate the total hourly benefit. The
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
Total forgone benefit
67,000–134,000 hours, $2,456,890–$4,913,780.
67,000–134,000 hours, $2,456,890–$4,913,780.1
cost benefit was estimated by multiplying the hours
saved by the mean hourly wage for a loan officer,
as reported by the U.S. Department of Labor’s
Bureau of Labor Statistics as of May 2018 ($36.67).
2 SBA arrived at this estimate by inquiring with
various SBA Lenders as to the average time required
to determine the reasonableness and permissibility
of all fees charged to an Applicant for assistance
with obtaining an SBA-guaranteed loan. SBA
calculated the average of the timeframes provided
to estimate the range of time SBA Lenders would
have saved, on average, in determining permissible
and reasonable fees with the bright-line tests
included in the interim final rule, which SBA
estimated would be the same for an Agent. The
number of expected occurrences per year for SBA
Lenders was estimated based on the average
number of 7(a) and 504 loans guaranteed in the
most recent five fiscal years (2014–2018), according
PO 00000
Frm 00002
Fmt 4700
Sfmt 4700
to SBA’s 7(a) and 504 loan data reports. The total
number of guaranteed loans was used, versus the
number of loans identified to have charged fees as
discussed in the preamble of the interim final rule,
because SBA Lenders must review every loan
application to determine whether any fees were
charged to an Applicant and, if so, whether the fees
are permissible and reasonable. Because Agents are
not involved in every SBA-guaranteed loan, the
number of expected occurrences per year for Agents
was estimated based on averaging the total number
of loans identified to have used an Agent (other
than the participating Lender) in fiscal years 2013–
2017. The number of expected occurrences per year
for 7(a) Lenders no longer being required to itemize
fees was based on the average number of 7(a) loans
guaranteed over the most recent five fiscal years.
The number of expected occurrences per year for
each outcome was multiplied by the average time
E:\FR\FM\14DER1.SGM
14DER1
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
may have performed for compensation
by the Applicant or the SBA Lender.
This would have saved SBA Lenders
and Agents time in making these
determinations for each loan. In
addition, the rule changed requirements
for 7(a) Lenders to itemize fees and
submit the itemization to SBA, which
also would have saved these Lenders
Lender could have charged an
Applicant and left no question as to
what fees SBA considered to be
reasonable. Further, the interim final
rule’s revisions to the definitions of
Agents and Associates of Lenders and
CDCs provided clarity for SBA’s
determination of an Agent and what
services the different types of Agents
80583
time. Applicants would have benefitted
from protection against impermissible
or unreasonable costs for assistance
with obtaining an SBA-guaranteed loan.
Benefits from these changes are forgone
with the rescission of the interim final
rule.
TABLE 2—ESTIMATED ANNUAL BENEFIT TO SBA LENDERS AND AGENTS FROM FEE LIMITS IN THE INTERIM FINAL RULE,
FORGONE WITH RESCISSION
Number of
expected
occurrences
per year
Outcomes
Increased efficiency for SBA Lenders when determining
permissibility and reasonableness of fees.
Increased efficiency for Agents when determining permissibility and reasonableness of fees.
Increased efficiency for 7(a) Lenders no longer required
to itemize fees.
Average time
saved per
occurrence
(hours)
67,000
0.5–1
33,500–67,000 hours, $1,228,445–$2,456,890.
1,605
0.5–1
803–1,605 hours, $29,446–$58,855.
60,951
0.5–1
30,476–60,951 hours, $1,117,555–$2,235,073.
Estimated Forgone Annual Benefit ...................................................................................
The interim final rule modified
principles of affiliation for the financial
assistance programs, increasing
Total benefit
64,779–129,556 hours, $2,375,446–$4,750,818.2
efficiency for the Agency and SBA
Lenders in providing financial
assistance only to businesses
determined to be small. The benefits
from this modification are forgone with
rescission of the interim final rule.
TABLE 3—ESTIMATED ANNUAL BENEFIT TO SBA LENDERS AND SURETIES FROM MODIFIED PRINCIPLES OF AFFILIATION IN
THE INTERIM FINAL RULE, FORGONE WITH RESCISSION
Number of
expected
occurrences
per year
Outcomes
Increased efficiency in determining affiliation ...........
Average time
saved per
occurrence
(hours)
77,000
2–4
jbell on DSKJLSW7X2PROD with RULES
Estimated Forgone Annual Benefit ...................................................................................
Total forgone benefit
154,000–308,000 hours, $5,647,180–$11,294,360.
154,000–308,000 hours, $5,647,180–$11,294,360.3
SBAexpected these benefits to have
been realized upon enactment of the
interim final rule and to have remained
the same each year thereafter, subject to
changes in number of loans and hourly
rates. These benefits are forgone with
rescission of the interim final rule.
Like the program participants, SBA
would have benefitted from the clear
regulatory guidance and bright-line tests
included in the interim final rule,
especially when performing lender
oversight activities. Specifically, the
Office of Credit Risk Management
(OCRM) would have realized increased
efficiencies in conducting loan file
reviews of SBA Lenders. With the
reinstatement of the personal resources
test, clear limitations on fees an Agent
or Lender could have charged an
Applicant, revised definitions of Agents
and Associates of Lenders and CDCs,
and revised affiliation principles, SBA
had removed the subjectivity of a
Lender’s assessment of these issues in
the interim final rule, which would
have improved SBA Lenders’
compliance and allowed OCRM to
develop more efficient methods of
testing SBA Lenders’ compliance. In
addition, the removal of the requirement
that a Lender itemize fees charged to an
Applicant when the fee is over $2,500
would have reduced the burden on
OCRM of reviewing these additional
documents.
saved per occurrence to estimate the total hourly
benefit. The cost benefit was estimated by
multiplying the hours saved by the mean hourly
wage for a loan officer, as reported by the U.S.
Department of Labor’s Bureau of Labor Statistics as
of May 2018 ($36.67).
3 SBA arrived at this estimate by inquiring with
various Lenders as to the average time required to
determine affiliation. SBA calculated the average of
the timeframes provided to estimate the range of
time SBA Lenders will save, on average, in
determining affiliation based on the guidance
provided in the interim final rule. Since an
affiliation determination must be made for each
application for SBA financial assistance, the
number of expected occurrences per year for SBA
Lenders and Sureties was estimated by using the
average number of 7(a) and 504 loans and the
average number of Bid and Final Bonds guaranteed
during the most recent five fiscal years (2014–2018),
according to SBA’s 7(a) and 504 loan data reports
and information on surety bonds entered into SBA’s
Capital Access Finance System. The total number
of expected occurrences for loans and surety bonds
per year was multiplied by the average time saved
per occurrence to estimate the total hourly benefit.
The cost benefit was estimated by multiplying the
hours saved by the mean hourly wage for a loan
officer, as reported by the U.S. Department of
Labor’s Bureau of Labor Statistics as of May 2018
($36.67).
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
PO 00000
Frm 00003
Fmt 4700
Sfmt 4700
E:\FR\FM\14DER1.SGM
14DER1
80584
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
TABLE 4—ESTIMATED ANNUAL BENEFIT TO SBA FROM THE INTERIM FINAL RULE, FORGONE WITH RESCISSION
Number of
expected
occurrences
per year
Outcomes
Increased efficiency in reviewing credit elsewhere assessment.
Increased efficiency in reviewing fees charged to Applicants.
Increased efficiency in reviewing Lender’s affiliation determination.
Average time
saved per
occurrence
(hours)
2,000
0.25–0.5
500–1,000 hours, $18,375–$36,750.
1,300
0.5–1
650–1,300 hours, $23,888–$47,775.
2,000
0.25–0.5
500–1,000 hours, $18,375–$36,750.
Estimated Forgone Annual Benefit ...................................................................................
SBA expected these benefits to be
realized immediately upon enactment of
the rule and to have remained the same
each year thereafter, subject to changes
in the number of loan files reviewed and
hourly rates. These benefits are forgone
with rescission of the interim final rule.
Costs to SBA Lenders, Applicants, and
Agents
For purposes of the Regulatory Impact
Analysis (RIA), the only costs to
Total forgone benefit
1,650–3,300 hours, $60,638–$121,275.4
Loan Program Requirements, as required
by 13 CFR 120.180, and to remain in
good standing with SBA as defined in
13 CFR 120.420(f). The Table below
shows the estimated administrative
costs attributable to the interim final
rule, which were expected to occur
mainly in the first year of
implementation, decrease by half in the
second year, and be eliminated by the
third year. These costs are forgone with
rescission of the interim final rule.
program participants and relevant
stakeholders necessary to comply with
the interim final rule were
administrative costs. Administrative
costs considered included estimations
on reading and interpreting the
regulation, developing and revising
internal policies and procedures, and
training. It is noted that program
participants are presumed to incur such
administrative costs continuously in
order to maintain familiarity with SBA
TABLE 5—ESTIMATES OF ADMINISTRATIVE COMPLIANCE COSTS TO SBA LENDERS AND AGENTS IN THE INTERIM FINAL
RULE, FORGONE WITH RESCISSION
Amount
of time
required
(hours)
Frequency
for first
year
Value of
time
Number of
SBA lenders/
agents
affected
Read and interpret the regulation ..........
2–3
$36.67
5–7
3,500
Develop or Revise Internal Policies and
Procedures.
Training ...................................................
5–7
$36.67
5–6
3,500
5–8
$36.67
10–12
3,500
Estimated First Year Forgone Administrative Costs ......................................................................................
Total forgone cost
35,000–73,500
hours,
$1,283,450–$2,695,245.
87,500–147,000
hours,
$3,208,625–$5,390,490.
175,000–336,000
hours,
$6,417,250–$12,321,120.
297,500–556,500
hours,
$10,909,325–$20,406,855.5
Costs to SBA
jbell on DSKJLSW7X2PROD with RULES
There were no expected additional
costs to the Agency required to achieve
4 SBA developed this estimated annual benefit
based on an estimate from OCRM on the range of
time that the guidance and bright-line tests
included in the interim final rule would have saved
a Financial Analyst, on average, in reviewing each
relevant element of an SBA Lender’s analysis
during OCRM-conducted loan file reviews. The
number of expected occurrences per year was based
on the approximately 2,000 loan files reviewed by
OCRM annually. The SBA Lender is required to
address credit elsewhere and affiliation on every
loan, but fees are not charged in connection with
every loan. OCRM estimates that in approximately
65 percent of the 2,000 loans reviewed annually,
OCRM identifies an issue related to fees charged to
Applicants by SBA Lenders and/or Agents,
including underreporting, inaccurate reporting, or
impermissible fees. The number of expected
occurrences per year for each outcome was
multiplied by the average time saved per
occurrence to estimate the total hourly benefit. The
cost estimate was obtained by multiplying the
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
hourly rate of a GS–13, Step 1 ($36.75 per hour) by
the number of expected occurrences per year and
the average time saved per occurrence.
5 SBA developed the estimate for the
administrative costs in the first year of the final rule
based on the approximate number of active SBA
Lenders and Agents. Although approximately 4,500
Lenders have executed agreements to participate as
a 7(a) Lender, over the past two fiscal years, the
average number of active Lenders has totaled only
1,958. (A 7(a) Lender is considered to be ‘‘active’’
if it has approved at least one 7(a) loan in that fiscal
year.) SBA estimated that only those Lenders
actively participating in the program would have
been affected by the costs of the interim final rule
since the estimated costs are strictly administrative.
The number of SBA Lenders and Agents affected
included approximately 2,474 active SBA Lenders
(including approximately 2,061 active 7(a) Lenders,
213 CDCs, 135 Microloan Intermediaries, 33 ILP
Intermediaries, and 32 Sureties), plus
approximately 1,018 Agents identified as having
PO 00000
Frm 00004
Fmt 4700
Sfmt 4700
conducted business with SBA during fiscal years
2013–2017, rounded up to the next hundred to
account for trade associations, and other resource
partners. SBA estimated that on average between 5–
7 employees at each SBA Lending institution or
Agent entity may have spent between 2–3 hours
each reading and interpreting the rule in the first
year and that these employees are compensated at
the mean hourly wage for a loan officer, as reported
by the U.S. Department of Labor’s Bureau of Labor
Statistics ($36.67). SBA also estimated that 5–6
employees on average may have been involved in
developing or revising the internal policies of the
respective program participant and would likely
have spent between 5–7 hours updating policies
specifically related to the interim final rule. Finally,
SBA estimated that between 10–12 employees on
average for each program participant would have
spent between 5–8 hours on training related to
updates and modifications made by the interim
final rule. Applicants were not included as an
E:\FR\FM\14DER1.SGM
14DER1
80585
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
the outcomes of the interim final rule.
The administrative costs considered for
the loan program participants, including
reading and interpreting the regulation,
developing and revising internal
policies and procedures, and training
are already inherent requirements of
SBA employees and therefore, the
publication of this interim final rule had
no additional bearing on the
responsibilities of relevant SBA
employees involved in the Agency’s
loan programs. SBA determines that the
Agency bears no costs from rescission of
the interim final rule.
changes in the interim final rule would
have provided a cost savings to
Applicants; however, the Agency
acknowledged that this savings to the
Applicant would have resulted in a cost
(‘‘transfer’’) to the small number of
Agents and Lenders that reported
charging fees in excess of the limits
imposed by the interim final rule. This
transfer is forgone with the rescission of
the interim final rule.
Transfers
SBA identified a transfer of costs, due
to the limits on permissible fees charged
to an Applicant by Agents and Lenders,
as well as the prohibition against Agents
providing services to both an Applicant
and an SBA Lender in connection with
the same SBA loan application. These
TABLE 6—ESTIMATED TRANSFERS OF COSTS IN THE INTERIM FINAL RULE, FORGONE WITH RESCISSION
Number of
expected
occurrences
per year
Outcomes
Elimination of fees exceeding set limits ................................................................................
Average
money
saved per
occurrence
$2,380.75
$1,776,042.63
Estimated Forgone Annual Transfer ......................................................................................................................................
1,776,042.63 6
Below is a table showing an
estimation of the total forgone costs and
746
Total forgone
transfer
forgone benefits of the interim rule over
three years.
TABLE 7—ESTIMATED UNDISCOUNTED BENEFITS AND COSTS SCHEDULE IN THE INTERIM FINAL RULE, FORGONE WITH
RESCISSION
Forgone benefits
Forgone costs
Low estimate
High estimate
Low estimate
High estimate
267,429 hours, $9,806,754 .............
534,856 hours, $19,613,433 ........
297,500 hours, $10,909,325 ........
556,500 hours, $20,406,855.
534,856 hours, $19,613,433 ........
148,750 hours, $5,454,662.50 .....
278,250 hours, $10,203,427.50.
534,856 hours, $19,613,433 ........
0 hours, $0 ...................................
0 hours, $0.
Year 1
Year 2
267,429 hours, $9,806,754 .............
Year 3
267,429 hours, $9,806,754 .............
Below is a table showing the
annualized values of the forgone
estimated costs and cost savings, as of
2016, over an infinite horizon, based on
the interim final rule’s estimates of
these annualized values.
TABLE 8—ANNUALIZED VALUES AS OF 2016 OVER AN INFINITE HORIZON
Primary estimate
3% discount rate
jbell on DSKJLSW7X2PROD with RULES
Low
estimate
7% discount rate
High
estimate
Low
estimate
High
estimate
Forgone Annualized Cost Savings ..................................................................
Forgone Annualized Costs ..............................................................................
$9,806,751
485,479
$19,613,433
908,132
$9,806,754
1,077,116
$19,613,433
2,014,841
Forgone Annualized Net Cost Savings ....................................................
9,321,272
18,705,301
8,729,638
17,598,592
entity affected by the administrative costs of the
rule, as the Applicant relies on the SBA Lender or
third-party Agent to inform them of SBA policy and
procedure.
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
6 SBA arrived at this estimate based on the total
number of loans guaranteed between FY2013 and
FY2017 that reported fees charged to an Applicant
by an Agent or Lender over the limits imposed in
PO 00000
Frm 00005
Fmt 4700
Sfmt 4700
the interim final rule and the total amount that
those fees on those loans exceeded the imposed
limit for each threshold.
E:\FR\FM\14DER1.SGM
14DER1
80586
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
Executive Order 12988
This rule meets applicable standards
set forth in sections 3(a) and 3(b)(2) of
Executive Order 12988, Civil Justice
Reform, to minimize litigation,
eliminate ambiguity, and reduce
burden. The rule has no preemptive
effect but consistent with section
1102(e) of the CARES Act, which made
the rescission of the regulations
effective on March 27, 2020, the rule
necessarily has retroactive effect.
Executive Order 13132
SBA has determined that this rule
will not have substantial, direct effects
on the States, on the relationship
between the National Government and
the States, or on the distribution of
power and responsibilities among the
various levels of government. Therefore,
for the purposes of Executive Order
13132, SBA has determined that this
rule has no federalism implications
warranting preparation of a federalism
assessment.
jbell on DSKJLSW7X2PROD with RULES
Executive Order 13771
This rescission is considered an E.O.
13771 regulatory action. SBA
determines that the estimated
$12,633,634 in annualized savings from
the interim final rule using a 7%
discount rate in perpetuity in 2016
dollars is forgone with this rescission. In
addition, SBA determines that the
estimated present value of savings in
perpetuity from the interim final rule of
$180,480,486 is forgone with this
rescission. Details on the breakdown of
the estimated cost savings of this
interim final rule can be found in the
rule’s economic analysis.
Paperwork Reduction Act, 44 U.S.C.
3501–3521
The Express IFR required
modification to reporting or
recordkeeping requirements contained
in several SBA forms: Form 1920,
Lender’s Application for Guaranty
(OMB Control number 3245–0348);
Form 2450, Eligibility Information
Required for 504 Submission (NonPCLP) (OMB Control number 3245–
0071); Form 2234 (Part C), Eligibility
Information Required for 504
Submission (PCLP) (OMB Control
number 3245–0346); and Form 159, Fee
Disclosure and Compensation
Agreement (OMB Control number 3245–
0201).
Since publication of the Express IFR,
SBA has cancelled Form 2234 and Form
2450. With respect to Form 1920 and
Form 159, none of the proposed changes
had been finalized and submitted to
OMB for approval prior to enactment of
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
the CARES Act; therefore, no action is
required as a result of the rescission of
the Express IFR. In addition, the Express
IFR codified an existing requirement for
Small Business Lending Companies
(SBLCs) to annually submit to SBA the
validation of any credit scoring model
they use in connection with SBA
Express and Export Express loans. Since
the reporting requirement was already
included in an approved information
collection, SBA Lender Reporting
Requirements (OMB Control Number
3245–0365), no amendment was
required. As a result, the rescission of
the rule does not impact SBLCs’ duty to
report.
Regulatory Flexibility Act, 5 U.S.C. 601–
612
When an agency issues a rule, the
Regulatory Flexibility Act (RFA), 5
U.S.C. 601–612, requires the agency to
‘‘prepare and make available for public
comment a final regulatory analysis’’
which will ‘‘describe the impact of the
proposed rule on small entities.’’
Section 605 of the RFA allows the head
of an agency to certify a rule will not,
if promulgated, have a significant
economic impact on a substantial
number of small entities, in lieu of
preparing an analysis.
Small entities likely to be affected by
the rescission of the interim final rule
include small SBA Lenders and small
Agents who assist small business
Applicants with obtaining SBAguaranteed financing. Other entities that
provide services to an Applicant for
obtaining SBA-guaranteed financing
include individuals who may assist
with packaging a loan application or
assisting the Applicant with finding an
SBA Lender, entities formed for the
purpose of providing such assistance,
attorneys, and Certified Public
Accountants. The RIA of the interim
final rule estimated that approximately
3,207 small entities would be affected.
The rescission of the interim final rule
also affects these 3,207 small entities.
As described more fully in the RIA,
SBA determined that the only costs to
program participants and relevant
stakeholders necessary to comply with
the interim final rule were
administrative costs, which are forgone
with the rescission. Administrative
costs considered include estimations on
reading and interpreting the regulation,
developing and revising internal
policies and procedures, and training.
Although these costs were estimated for
the purposes of the Regulatory
Flexibility Act for the interim final rule,
it is important to note that, regardless of
any new rulemaking, program
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
participants are presumed to incur
administrative costs related to reading
and interpreting SBA Loan Program
Requirements, revising and updating
internal policies, and training staff
continuously in order to maintain
familiarity with SBA Loan Program
Requirements, as required by 13 CFR
120.180, and to remain in good standing
with SBA as defined in 13 CFR
120.420(f). SBA determines that the
rescission of the interim final rule
causes these costs to be forgone.
The RIA for the interim final rule
identified an estimated transfer of costs
due to the limits on permissible fees
charged to an Applicant by Agents and
Lenders, as well as the prohibition
against an Agent providing services to
both an Applicant and an SBA Lender
in connection with the same SBA loan
application. The Agency acknowledged
that any savings to the Applicant from
these limitations in the interim final
rule would have resulted in a potential
loss of revenue to the small number of
Agents and Lenders that reported
charging fees in excess of the limits.
With the rescission of the interim final
rule, these transfers are forgone.
To estimate the average annualized
forgone cost per small entity in the
interim final rule, SBA annualized the
sum of all administrative costs plus the
estimated potential loss of revenue (e.g.,
the total transfer amount of
$1,776,042.63) identified in the RIA (see
Table 6 in the RIA). The estimated total
annualized costs, which are forgone
with the rescission, over 10 years at a
7 percent discount rate range from a low
estimate of $2,773,295.70 to a high
estimate of $4,331,035. Dividing the
total estimated annualized costs by the
3,207 estimated small entities affected,
the forgone annualized cost per entity
with the rescission is estimated to be
between approximately $864.76 and
$1,350.49. Although SBA was unable to
ascertain the NAICS codes of all types
of entities considered to be Agents for
estimation purposes in the interim final
rule, SBA used data from the 2012 U.S.
Census Bureau’s SUSB for NAICS code
522310 for Mortgage and Nonmortgage
Loan Brokers as an example to examine
the annualized compliance cost as a
percentage of annual receipts for small
entities classified by this NAICS code.
For the purposes of this estimation in
the interim final rule, SBA averaged the
high and low estimates of the
annualized cost for a mid-point total of
$388 per entity. This annualized cost
per entity is forgone with the rescission
of the interim final rule.
E:\FR\FM\14DER1.SGM
14DER1
80587
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
MORTGAGE AND NONMORTGAGE LOAN BROKERS (NAICS 522310)—$7.5 MILLION SIZE STANDARD
Average
annual
receipts
Firm size
(by receipts)
All Firms ...............................................................................
Small Firms ..........................................................................
<$100K .................................................................................
100K–499,999 ......................................................................
500,000–999,999 .................................................................
1,000,000–2,499,999 ...........................................................
2,500,000–4,999,999 ...........................................................
5,000,000–7,499,999 ...........................................................
Annualized
forgone cost
per firm
1,005,967
549,802
48,038
250,730
693,276
1,482,997
3,244,231
5,157,764
% of
small
firms
# of
firms
388
388
388
388
388
388
388
388
7,007
6,817
1,533
3,233
1,042
721
216
72
Revenue
test *
(%)
N/A
100
22
47
15
12
3
1
0.0
0.1
0.8
0.2
0.1
0.0
0.0
0.0
jbell on DSKJLSW7X2PROD with RULES
* Annualized compliance costs as a percentage of annual receipts.
SBA has determined that forgoing the
annualized cost per entity of the interim
final rule by its rescission will not have
a significant economic impact on a
substantial number of small entities.
The average annualized cost in the
example above is not a significant
percentage of each entity’s average
annual revenue for any size firm
considered to be small. It is also noted
that these forgone annualized costs are
set against forgone annualized benefits
ranging from a low estimate of
$9,806,754 to a high estimate of
$19,613,433 (or approximately $3,056–
$6,116 per entity). Also, the number of
small entities affected is not substantial.
SBA estimated that from FY2013
through FY2017, 213 small entities (83
small Lenders and 130 small Agents)
reported charging fees in excess of the
limits imposed in the interim final rule.
SBA does not consider 83 small Lenders
to be a substantial number when
compared to the overall number of small
Lenders, which is approximately 2,000.
With respect to small Agents, SBA does
not consider 130 Agents to be a
substantial number when compared to
the overall number of small Agents.
SBA believes the number of small
entities acting as Agents in connection
with the SBA loan programs is most
likely much larger when taking into
consideration the attorneys,
accountants, business consultants and
others that act as Agents. As SBA noted
above, the NAICS Code for Mortgage
and Nonmortgage Loan Brokers is only
one of numerous NAICS codes under
which Agents may be classified. Many
different types of individuals and
entities, including attorneys,
accountants, and business consultants,
act as Agents and assist Applicants in
obtaining SBA-guaranteed loans. Thus,
SBA believes that the actual universe of
small Agents may be considerably larger
than 602. When all of the potentially
relevant NAICS codes are considered,
SBA believes that the number of small
entities affected by the rescission of the
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
interim final rule would be even smaller
than the 8% noted above.
SBA determined that the interim final
rule did not have a significant impact on
a substantial number of small entities.
The Administrator of SBA likewise
certifies that the rescission of the
interim final rule has no significant
impact on a substantial number of small
entities.
List of Subjects
13 CFR Part 103
Administrative practice and
procedure.
13 CFR Part 120
Community development,
Environmental protection, Equal
employment opportunity, Exports, Loan
programs—business, Reporting and
recordkeeping requirements, Small
businesses.
13 CFR Part 121
Loan programs—business, Reporting
and recordkeeping requirements, Small
businesses.
For the reasons stated in the
preamble, SBA is amending 13 CFR
parts 103, 120, and 121 as follows:
PART 103—STANDARDS FOR
CONDUCTING BUSINESS WITH SBA
1. The authority citation for part 103
continues to read as follows:
■
Authority: 15 U.S.C. 634, 642.
2. Amend § 103.1 by:
a. Revising paragraph (a);
b. Redesignating paragraph (d) as
paragraph (g); and
■ c. Adding a new paragraph (d) and
paragraphs (e) and (f).
The revision and additions read as
follows:
■
■
■
§ 103.1
Key definitions.
(a) Agent means an authorized
representative, including an attorney,
accountant, consultant, packager, lender
service provider, or any other person
PO 00000
Frm 00007
Fmt 4700
Sfmt 4700
representing an Applicant or Participant
by conducting business with 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) Referral Agent means a person or
entity who identifies and refers an
Applicant to a lender or a lender to an
Applicant. The Referral Agent may be
employed and compensated by either an
Applicant or a lender.
*
*
*
*
*
■ 3. Amend § 103.4 by revising
paragraph (g) to read as follows:
§ 103.4 What is ‘‘good cause’’ for
suspension or revocation?
*
*
*
*
*
(g) Acting as both a Lender Service
Provider or Referral Agent and a
Packager for an Applicant on the same
SBA business loan and receiving
compensation for such activity from
both the Applicant and lender. A
limited exception to the ‘‘two master’’
prohibition in this paragraph (g) exists
when an Agent acts as a Packager and
is compensated by the Applicant for
packaging services; also acts as a
Referral Agent and is compensated by
the lender for those activities; discloses
the referral activities to the Applicant;
and discloses the packaging activities to
the lender.
*
*
*
*
*
■ 4. Amend § 103.5 by revising
paragraph (b) and the last sentence of
paragraph (c) to read as follows:
E:\FR\FM\14DER1.SGM
14DER1
80588
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
§ 103.5 How does SBA regulate an
Agent’s fees and provision of service?
*
*
*
*
*
(b) Compensation agreements must
provide that in cases where SBA deems
the compensation unreasonable, the
Agent or Packager 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) * * * However, such
compensation may not be directly
charged to an Applicant or Borrower.
PART 120—BUSINESS LOANS
§ 120.222
5. The authority citation for part 120
continues to read as follows:
[Amended]
10. Amend § 120.222 by adding the
word ‘‘in’’ before the words ‘‘any
premium received’’.
■ 11. Revise § 120.344(b) to read as
follows:
■
§ 120.344
EWCP.
■
Unique requirements of the
6. Amend § 120.10 by revising
paragraph (1)(i) of the defined term
‘‘Associate’’ to read as follows:
■
*
*
*
*
(b) SBA does not limit the amount of
extraordinary servicing fees, as
referenced in § 120.221(b), under the
EWCP.
*
*
*
*
*
■ 12. Revise § 120.350 to read as
follows:
§ 120.350
Policy.
*
*
*
*
Associate. (1) * * *
(i) An officer, director, key employee,
or holder of 20 percent or more of the
value of the Lender’s or CDC’s stock or
debt instruments, or an agent involved
in the loan process; or
*
*
*
*
*
Section 7(a)(15) of the Act authorizes
SBA to guarantee a loan to a qualified
employee trust (‘‘ESOP’’) to:
(a) Help finance the growth of its
employer’s small business; or
(b) Purchase ownership or voting
control of the employer.
■ 13. Revise § 120.352 to read as
follows:
§ 120.102
§ 120.352
§ 120.10
Definitions.
*
[Removed and Reserved]
7. Remove and reserve § 120.102.
■ 8. Amend § 120.130 by revising
paragraph (c) to read as follows:
§ 120.130 Restrictions on uses of
proceeds.
*
*
*
*
*
(c) Floor plan financing or other
revolving line of credit, except under
§ 120.340 or § 120.390;
*
*
*
*
*
■ 9. Amend § 120.221 by:
■ a. Revising the section heading and
paragraph (a); and
■ b. Removing the last sentence of
paragraph (b).
The revisions read as follows:
§ 120.432
*
*
*
*
*
(a) Service and packaging fees. The
Lender may charge an applicant
reasonable fees (customary for similar
Lenders in the geographic area where
the loan is being made) for packaging
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
[Amended]
14. Amend § 120.432(a) by removing
the last sentence.
■ 15. Amend § 120.440 by revising
paragraph (c) to read as follows:
■
§ 120.221 Fees and expenses that the
Lender may collect from a loan applicant or
Borrower.
§ 120.440 How does a 7(a) Lender obtain
delegated authority?
*
*
*
*
*
(c) If delegated authority is approved
or renewed, Lender must execute a
PO 00000
§ § 120.441 through 120.447 [Removed
and Reserved]
17. Remove and reserve §§ 120.441
through 120.447.
■
§ 120.707
[Amended]
18. Amend § 120.707(b) by removing
the word ‘‘seven’’ and adding in its
place the word ‘‘six.’’
■ 19. Amend § 120.712 by:
■ a. Revising paragraph (b)(1); and
■ b. In paragraph (d), removing the
number ‘‘30’’ and adding in its place the
number ‘‘25.’’
The revision reads as follows:
§ 120.712 How does an Intermediary get a
grant to assist Microloan borrowers?
*
*
*
*
*
(b) * * *
(1) Up to 25 percent of the grant funds
may be used to provide information and
technical assistance to prospective
Microloan borrowers; and
*
*
*
*
*
■ 20. Amend § 120.840 by revising
paragraph (b) to read as follows:
Use of proceeds.
Loan proceeds may be used for two
purposes.
(a) Qualified employer securities. A
qualified employee trust may relend
loan proceeds to the employer by
purchasing qualified employer
securities. The small business concern
may use these funds for any general
purpose under section 7(a) of the Act.
(b) Control of employer. A qualified
employee trust may use loan proceeds
to purchase a controlling interest (51
percent) in the employer. Ownership
and control must vest in the trust by the
time the loan is repaid.
■
Supplemental Guarantee Agreement,
which will specify a term not to exceed
two years. SBA may grant shortened
renewals based on risk or any of the
other delegated authority criteria.
Lenders with less than 3 years of SBA
lending experience will be limited to a
term of 1 year or less.
■ 16. Remove the undesignated center
heading ‘‘SBA Express and Export
Express Loan Programs’’ that appears
before § 120.441.
■
*
Authority: 15 U.S.C. 634(b) (6), (b) (7), (b)
(14), (h), and note, 636(a), (h) and (m), and
note, 650, 657t, and note, 657u, and note,
687(f), 696(3) and (7), and note, and 697(a)
and (e), and note.
jbell on DSKJLSW7X2PROD with RULES
and other services. The Lender must
advise the applicant in writing that the
applicant is not required to obtain or
pay for unwanted services. The
applicant is responsible for deciding
whether fees are reasonable. SBA may
review these fees at any time. Lender
must refund any such fee considered
unreasonable by SBA.
*
*
*
*
*
Frm 00008
Fmt 4700
Sfmt 4700
§ 120.840
(ALP).
Accredited Lenders Program
*
*
*
*
*
(b) Application. A CDC must apply for
ALP status to the Lead SBA Office. The
Lead SBA Office will send its
recommendation and the application to
the D/FA for final decision.
*
*
*
*
*
PART 121—SMALL BUSINESS SIZE
REGULATIONS
21. The authority citation for part 121
continues to read as follows:
■
Authority: 15 U.S.C. 632, 634(b)(6),
636(a)(36), 662, and 694a(9); Public Law 116–
136, Section 1114.
22. Amend § 121.301 by:
a. Revising paragraph (f)(4);
b. Removing paragraphs (f)(5) and (6);
c. Redesignating paragraphs (f)(7)
through (9) as paragraphs (f)(5) through
(7), respectively; and
■ d. Revising newly redesignated
paragraph (f)(5).
The revisions to read as follows:
■
■
■
■
E:\FR\FM\14DER1.SGM
14DER1
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Rules and Regulations
§ 121.301 What size standards and
affiliation principles are applicable to
financial assistance programs?
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
*
*
*
*
*
(f) * * *
(4) Affiliation based on identity of
interest. Affiliation arises when there is
an identity of interest between close
relatives, as defined in 13 CFR 120.10,
with identical or substantially identical
business or economic interests (such as
where the close relatives operate
concerns in the same or similar industry
in the same geographic area). Where
SBA determines that interests should be
aggregated, an individual or firm may
rebut that determination with evidence
showing that the interests deemed to be
one are in fact separate.
(5) Affiliation based on franchise and
license agreements. The restraints
imposed on a franchisee or licensee by
its franchise or license agreement
generally will not be considered in
determining whether the franchisor or
licensor is affiliated with an applicant
franchisee or licensee provided the
applicant franchisee or licensee has the
right to profit from its efforts and bears
the risk of loss commensurate with
ownership. SBA will only consider the
franchise or license agreements of the
applicant concern.
*
*
*
*
*
23. Amend § 121.302 by revising
paragraphs (a) and (b) to read as follows:
■
§ 121.302 When does SBA determine the
size status of an applicant?
(a) The size status of an applicant for
SBA financial assistance is determined
as of the date the application for
financial assistance is accepted for
processing by SBA, except for
applications under the Preferred
Lenders Program (PLP), the Disaster
Loan program, the SBIC program, and
the New Markets Venture Capital
(NMCV) program.
(b) For the Preferred Lenders Program,
size is determined as of the date of
approval of the loan by the Preferred
Lender.
*
*
*
*
*
Jovita Carranza,
Administrator.
jbell on DSKJLSW7X2PROD with RULES
[FR Doc. 2020–26450 Filed 12–11–20; 8:45 am]
BILLING CODE 8026–03–P
VerDate Sep<11>2014
16:47 Dec 11, 2020
Jkt 253001
14 CFR Part 39
[Docket No. FAA–2020–1031; Project
Identifier AD–2020–00846–T; Amendment
39–21334; AD 2020–24–04]
RIN 2120–AA64
Airworthiness Directives; The Boeing
Company Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule; correction.
AGENCY:
80589
Model 787–8, 787–9, and 787–10
airplanes.
As published, the regulatory text
included errors in certain references to
the AFM that is required to be revised.
The location of the AFM text to be
revised is incorrectly identified as the
‘‘Limitations section’’; the correct
location is the ‘‘Operating Procedures
chapter.’’ In addition, the figure
incorrectly identified the heading of the
AFM text as ‘‘Operating Instructions’’;
the correct heading is ‘‘Autopilot Flight
Director System—Operating
Instructions.’’
Correction of Publication
SUMMARY:
The FAA is correcting an
airworthiness directive (AD) that
published in the Federal Register. That
AD applies to all The Boeing Company
Model 787–8, 787–9, and 787–10
airplanes. As published, the regulatory
text of the AD included errors in certain
references to the airplane flight manual
(AFM) that is required to be revised.
This document corrects those errors. In
all other respects, the original document
remains the same.
DATES: This correction is effective
December 18, 2020. The effective date of
AD 2020–24–04 remains December 18,
2020.
This document corrects an error and
correctly adds the AD as an amendment
to 14 CFR 39.13. Although no other part
of the preamble or regulatory
information has been corrected, the
FAA is publishing the entire rule in the
Federal Register.
The effective date of this AD remains
December 18, 2020.
Since this action only corrects errors
in certain AFM references, it has no
adverse economic impact and imposes
no additional burden on any person.
Therefore, the FAA has determined that
notice and public comment procedures
are unnecessary.
You may examine the AD
docket at https://www.regulations.gov;
or in person at the Docket Management
Facility between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The AD docket contains this
final rule, any comments received, and
other information. The address for
Docket Operations is U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
Frank Carreras, Aerospace Engineer,
Systems and Equipment Section, FAA,
Seattle ACO Branch, 2200 South 216th
St., Des Moines, WA 98198; phone and
fax: 206–231–3539; email:
frank.carreras@faa.gov.
SUPPLEMENTARY INFORMATION: As
published, Airworthiness Directive
2020–24–04, Amendment 39–21334 (85
FR 77991, December 3, 2020), requires
revising the existing AFM to incorporate
procedures for conducting an approach
with a localizer-based navigation aid,
monitoring localizer raw data, calling
out any significant deviations, and
performing an immediate go around if
the airplane has not intercepted the
final approach course as shown by the
localizer deviation. AD 2020–24–04
applies to all The Boeing Company
List of Subjects in 14 CFR Part 39
ADDRESSES:
PO 00000
Frm 00009
Fmt 4700
Sfmt 4700
Air transportation, Aircraft, Aviation
safety, Incorporation by reference,
Safety.
Adoption of the Correction
Accordingly, pursuant to the
authority delegated to me by the
Administrator, the Federal Aviation
Administration amends part 39 of the
Federal Aviation Regulations (14 CFR
part 39) as follows:
PART 39—AIRWORTHINESS
DIRECTIVES
1. The authority citation for part 39
continues to read as follows:
■
Authority: 49 U.S.C. 106(g), 40113, 44701.
§ 39.13
[Corrected]
2. The FAA amends § 39.13 by adding
the following new airworthiness
directive (AD):
■
2020–24–04 The Boeing Company:
Amendment 39–21334; Docket No.
FAA–2020–1031; Project Identifier AD–
2020–00846–T.
(a) Effective Date
This AD is effective December 18, 2020.
(b) Affected ADs
None.
E:\FR\FM\14DER1.SGM
14DER1
]]>Agencies
[Federal Register Volume 85, Number 240 (Monday, December 14, 2020)]
[Rules and Regulations]
[Pages 80581-80589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26450]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 /
Rules and Regulations
[[Page 80581]]
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 103, 120, and 121
RIN 3245-AG74
Express Loan Programs; Affiliation Standards--Rescission
AGENCY: U.S. Small Business Administration.
ACTION: Final rule; rescission.
-----------------------------------------------------------------------
SUMMARY: The Small Business Administration (SBA) is publishing this
rule to rescind the regulations published on February 10, 2020, in the
interim final rule (IFR) titled, ``Express Loan Programs; Affiliation
Standards'' (Express IFR). This action is necessary to implement
section 1102 of the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act), which permanently rescinded the interim final rule
effective March 27, 2020. As a result of the rescission, SBA is
removing the amended regulations added by the Express IFR and
reinstating the regulations that were in effect before the rule became
effective on March 11, 2020.
DATES: This rule is effective on March 27, 2020, as authorized by
Public Law 116-136, sec. 1102(e).
FOR FURTHER INFORMATION CONTACT: Rosemarie Drake, Chief, 7(a) Program,
Office of Financial Assistance, Office of Capital Access, Small
Business Administration, 409 Third Street SW, Washington, DC 20416;
telephone: (202) 619-1674; email: [email protected].
SUPPLEMENTARY INFORMATION:
I. Background Information
The SBA programs affected by the rescission of the Express IFR are:
1. The 7(a) Loan Program authorized pursuant to section 7(a) of the
Small Business Act (the Act) (15 U.S.C. 636(a));
2. The Business Disaster Loan Programs (collectively, Economic
Injury Disaster Loans, Military Reservist Economic Injury Disaster
Loans, and Physical Disaster Business Loans) authorized pursuant to
section 7(b) of the Act (15 U.S.C. 636(b));
3. The Microloan Program authorized pursuant to section 7(m) of the
Act (15 U.S.C. 636(m));
4. The Intermediary Lending Pilot (ILP) Program authorized pursuant
to section 7(l) of the Act (15 U.S.C. 636(l));
5. The Surety Bond Guarantee Program authorized pursuant to part B
of title IV of the Small Business Investment Act of 1958 (15 U.S.C.
694b et seq.); and
6. The Development Company Program (the 504 Loan Program)
authorized pursuant to title V of the Small Business Investment Act of
1958 (15 U.S.C. 695 et seq.).
(In this final rule, the 7(a), Microloan, ILP, and 504 Loan
Programs are collectively referred to as the Business Loan Programs.)
On September 28, 2018, SBA published a proposed rule with request
for comments in the Federal Register to incorporate the requirements
related to the SBA Express and Export Express Loan Programs; add a
regulation pertaining to the 7(a) and Development Company (504) loan
programs regarding when the owners of a small business Applicant are
required to inject excess liquid assets into the project; amend certain
regulations setting forth the affiliation principles applicable to SBA
financial assistance programs; limit certain fees payable by loan
Applicants to amounts deemed reasonable by SBA; clarify the
responsibility of a Lender for the contingent liabilities associated
with 7(a) loans purchased from the Federal Deposit Insurance
Corporation; and, finally, amend certain regulations governing the use
of microloan grant funds by Microloan Intermediaries and the maximum
maturity of a microloan. (83 FR 49001) The original comment period was
scheduled to end November 27, 2018. On November 16, 2018, SBA announced
an extension of the public comment period for an additional 15 business
days to December 18, 2018. (83 FR 57693)
On February 10, 2020, SBA published the Express IFR with a request
for comment to provide the public with an additional opportunity to
comment on the modifications to the rule. (85 FR 7622). The interim
final rule became effective on March 11, 2020, except that compliance
with two of the regulatory provisions, 13 CFR 103.5(b) (Fees an Agent
may charge a Borrower) and 13 CFR 120.221(a) (Fees a Lender may charge
a Borrower) was delayed until October 1, 2020.
On March 27, 2020, President Trump signed into law, the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136,
134 Stat 281). Section 1102(e) of that Act permanently rescinded the
Express IFR effective March 27, 2020. In light of this rescission, SBA
is issuing the amendments identified below to remove all of the
regulations that were added by the interim final rule and restore the
regulations that were in effect prior to the effective date of the
Express IFR. For loans made between March 11, 2020, and March 27, 2020,
SBA Lenders should have complied with the regulations in effect during
that period.
II. Waiver of Notice and Comment and Delayed Effective Date
Agencies ordinarily publish a notice of proposed rulemaking in the
Federal Register to provide a period for public comment before the rule
takes effect in accordance with the Administrative Procedure Act (APA)
(5 U.S.C. 553(b)). However, an agency can waive this notice and comment
procedure if it finds, for good cause, that the notice and comment
process is impracticable, unnecessary, or contrary to the public
interest and incorporates a statement of its findings and reasons in
the notice. 5 U.S.C. 553(b)(B).
This rule is rescinding an interim final rule that was developed
using the APA notice and comment procedures. Because Congress has
rescinded those regulations, they no longer have any legal effect, and
their continued inclusion in the Code of Federal Regulations would not
only be in violation of a statutory mandate, it would lead to public
confusion as well. It is also unnecessary and contrary to the public
interest to subject the regulations that will be reinstated to APA
notice and comment procedures, since they too were already subject to
public scrutiny when they were initially codified in the Code of
Federal Regulations. Therefore, SBA finds that good cause exists to
forgo public notice and comment procedures because they
[[Page 80582]]
would be unnecessary and contrary to the public interest.
In addition, section 553(d) of the APA generally requires a 30-day
delay in the effective date of a final rule after the date of its
publication in the Federal Register. This 30-day delay in effective
date can also be waived as provided by the agency for good cause found
and published with the rule. 5 U.S.C. 553(d)(3). Based on the language
in section 1102(e) of the CARES Act, the rescission of the Express IFR
was effective as of March 27, 2020. Thus, the rule cannot be delayed
for 30 days; to do so would be an unauthorized extension of the
rescission date. This statutorily determined effective date provides
the good cause to waive the 30-day delay in effective date.
Compliance With Executive Orders 12866, 12988, 13132, and 13771, the
Paperwork Reduction Act (44 U.S.C. Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Order 12866
OMB determined that the interim final rule, entitled Express Loan
Programs; Affiliation Standards, was a significant rule for purposes of
this Executive order. Accordingly, SBA prepared the requisite
regulatory impact analysis, which was published with the rule. OMB has
determined that this rescission of the interim final rule is also a
``significant'' rulemaking. Accordingly, the next section contains
SBA's Regulatory Impact Analysis. However, this is not a major rule
under the Congressional Review Act, 5 U.S.C. 800.
Regulatory Impact Analysis
The rescission of the interim final rule removes the regulations
that were added by the interim final rule, including those pertaining
to the SBA Express and Export Express Loan Programs, in compliance with
section 1102(e) of the CARES Act, which permanently rescinded the
interim final rule effective March 27, 2020.
The primary objective of the interim final rule was to incorporate
into the regulations governing the 7(a) Loan Program the requirements
specifically applicable to the SBA Express and Export Express Loan
Programs in order to provide additional clarity for SBA Express and
Export Express Lenders. The interim final rule provided a bright-line
test for SBA Lenders on how to adequately determine whether a small
business had access to credit elsewhere based on personal liquid
assets. It modified regulatory provisions related to allowable fees
that a Lender or an Agent may collect from an Applicant for financial
assistance. The interim final rule also revised affiliation principles
for the financial assistance programs. SBA expected that the additional
detailed clarity on the requirements for program delivery in the
subject areas of the interim final rule would have increased
understanding for program users, decreased time spent evaluating small
business Applicants, and resulted in a reduction of overall cost to
participants. SBA did not expect, however, that the interim final rule
would affect loan volume significantly. The interim final rule changes
for affiliation determinations provided detailed guidance for the SBA
Lender charged with determining the size of a small business Applicant,
with an expected benefit for the SBA Lender from the time savings in
making the eligibility determination. These changes are rescinded with
this rule.
This rescission rule transforms the benefits of the interim final
rule into forgone benefits and the costs of the interim final rule into
forgone costs.
Forgone Benefits to SBA Lenders, Applicants, and Agents
The greatest benefit from the interim final rule to all program
participants, including SBA Lenders, Applicants, and Agents, was clear
regulatory guidance and bright-line tests to increase efficiency,
including bright-line tests for making certain determinations about
eligibility which would have eliminated the ambiguity and uncertainty
that had hindered some SBA Lenders in recent years. SBA estimated that
the reinstatement of the personal resources test at Sec. 120.102 would
have saved SBA Lenders a total of approximately 67,000 hours annually,
monetized to $2,456,890 per year. This estimated annual benefit is
forgone with the rescission of the interim final rule.
Table 1--Estimated Annual Benefit to SBA Lenders From Personal Resources Test in the Interim Final Rule, Forgone
With Rescission
----------------------------------------------------------------------------------------------------------------
Number of Average time
expected saved per
Outcomes occurrences occurrence Total forgone benefit
per year (hours)
----------------------------------------------------------------------------------------------------------------
Increased efficiency in determining credit 67,000 1-2 67,000-134,000 hours, $2,456,890-
elsewhere. $4,913,780.
---------------------------------------------------------------------
Estimated Forgone Annual Benefit...................................... 67,000-134,000 hours, $2,456,890-
$4,913,780.\1\
----------------------------------------------------------------------------------------------------------------
The interim final rule set clear limitations on fees that an Agent
or
[[Page 80583]]
Lender could have charged an Applicant and left no question as to what
fees SBA considered to be reasonable. Further, the interim final rule's
revisions to the definitions of Agents and Associates of Lenders and
CDCs provided clarity for SBA's determination of an Agent and what
services the different types of Agents may have performed for
compensation by the Applicant or the SBA Lender. This would have saved
SBA Lenders and Agents time in making these determinations for each
loan. In addition, the rule changed requirements for 7(a) Lenders to
itemize fees and submit the itemization to SBA, which also would have
saved these Lenders time. Applicants would have benefitted from
protection against impermissible or unreasonable costs for assistance
with obtaining an SBA-guaranteed loan. Benefits from these changes are
forgone with the rescission of the interim final rule.
---------------------------------------------------------------------------
\1\ SBA arrived at this estimate by inquiring with various SBA
Lenders as to the average time required to determine an Applicant's
access to credit elsewhere. SBA calculated the average of the
timeframes provided to estimate the range of time the personal
resources test would have saved SBA Lenders, on average, in their
analysis. Since each loan is required to address an Applicant's
access to credit elsewhere, the number of expected occurrences per
year was estimated by using the average number of 7(a) and 504 loans
guaranteed in the most recent five fiscal years (2014-2018),
according to SBA's 7(a) and 504 loan data reports. The number of
expected occurrences per year was multiplied by the average time
saved per occurrence to estimate the total hourly benefit. The cost
benefit was estimated by multiplying the hours saved by the mean
hourly wage for a loan officer, as reported by the U.S. Department
of Labor's Bureau of Labor Statistics as of May 2018 ($36.67).
\2\ SBA arrived at this estimate by inquiring with various SBA
Lenders as to the average time required to determine the
reasonableness and permissibility of all fees charged to an
Applicant for assistance with obtaining an SBA-guaranteed loan. SBA
calculated the average of the timeframes provided to estimate the
range of time SBA Lenders would have saved, on average, in
determining permissible and reasonable fees with the bright-line
tests included in the interim final rule, which SBA estimated would
be the same for an Agent. The number of expected occurrences per
year for SBA Lenders was estimated based on the average number of
7(a) and 504 loans guaranteed in the most recent five fiscal years
(2014-2018), according to SBA's 7(a) and 504 loan data reports. The
total number of guaranteed loans was used, versus the number of
loans identified to have charged fees as discussed in the preamble
of the interim final rule, because SBA Lenders must review every
loan application to determine whether any fees were charged to an
Applicant and, if so, whether the fees are permissible and
reasonable. Because Agents are not involved in every SBA-guaranteed
loan, the number of expected occurrences per year for Agents was
estimated based on averaging the total number of loans identified to
have used an Agent (other than the participating Lender) in fiscal
years 2013-2017. The number of expected occurrences per year for
7(a) Lenders no longer being required to itemize fees was based on
the average number of 7(a) loans guaranteed over the most recent
five fiscal years. The number of expected occurrences per year for
each outcome was multiplied by the average time saved per occurrence
to estimate the total hourly benefit. The cost benefit was estimated
by multiplying the hours saved by the mean hourly wage for a loan
officer, as reported by the U.S. Department of Labor's Bureau of
Labor Statistics as of May 2018 ($36.67).
Table 2--Estimated Annual Benefit to SBA Lenders and Agents From Fee Limits in the Interim Final Rule, Forgone
With Rescission
----------------------------------------------------------------------------------------------------------------
Number of Average time
expected saved per
Outcomes occurrences occurrence Total benefit
per year (hours)
----------------------------------------------------------------------------------------------------------------
Increased efficiency for SBA Lenders when 67,000 0.5-1 33,500-67,000 hours, $1,228,445-
determining permissibility and $2,456,890.
reasonableness of fees.
Increased efficiency for Agents when 1,605 0.5-1 803-1,605 hours, $29,446-$58,855.
determining permissibility and
reasonableness of fees.
Increased efficiency for 7(a) Lenders no 60,951 0.5-1 30,476-60,951 hours, $1,117,555-
longer required to itemize fees. $2,235,073.
---------------------------------------------------------------------
Estimated Forgone Annual Benefit...................................... 64,779-129,556 hours, $2,375,446-
$4,750,818.\2\
----------------------------------------------------------------------------------------------------------------
The interim final rule modified principles of affiliation for the
financial assistance programs, increasing efficiency for the Agency and
SBA Lenders in providing financial assistance only to businesses
determined to be small. The benefits from this modification are forgone
with rescission of the interim final rule.
Table 3--Estimated Annual Benefit to SBA Lenders and Sureties From Modified Principles of Affiliation in the
Interim Final Rule, Forgone With Rescission
----------------------------------------------------------------------------------------------------------------
Number of Average time
expected saved per
Outcomes occurrences occurrence Total forgone benefit
per year (hours)
----------------------------------------------------------------------------------------------------------------
Increased efficiency in determining 77,000 2-4 154,000-308,000 hours, $5,647,180-
affiliation. $11,294,360.
---------------------------------------------------------------------
Estimated Forgone Annual Benefit...................................... 154,000-308,000 hours, $5,647,180-
$11,294,360.\3\
----------------------------------------------------------------------------------------------------------------
SBA expected these benefits to have been realized upon enactment of
the interim final rule and to have remained the same each year
thereafter, subject to changes in number of loans and hourly rates.
These benefits are forgone with rescission of the interim final rule.
---------------------------------------------------------------------------
\3\ SBA arrived at this estimate by inquiring with various
Lenders as to the average time required to determine affiliation.
SBA calculated the average of the timeframes provided to estimate
the range of time SBA Lenders will save, on average, in determining
affiliation based on the guidance provided in the interim final
rule. Since an affiliation determination must be made for each
application for SBA financial assistance, the number of expected
occurrences per year for SBA Lenders and Sureties was estimated by
using the average number of 7(a) and 504 loans and the average
number of Bid and Final Bonds guaranteed during the most recent five
fiscal years (2014-2018), according to SBA's 7(a) and 504 loan data
reports and information on surety bonds entered into SBA's Capital
Access Finance System. The total number of expected occurrences for
loans and surety bonds per year was multiplied by the average time
saved per occurrence to estimate the total hourly benefit. The cost
benefit was estimated by multiplying the hours saved by the mean
hourly wage for a loan officer, as reported by the U.S. Department
of Labor's Bureau of Labor Statistics as of May 2018 ($36.67).
---------------------------------------------------------------------------
Like the program participants, SBA would have benefitted from the
clear regulatory guidance and bright-line tests included in the interim
final rule, especially when performing lender oversight activities.
Specifically, the Office of Credit Risk Management (OCRM) would have
realized increased efficiencies in conducting loan file reviews of SBA
Lenders. With the reinstatement of the personal resources test, clear
limitations on fees an Agent or Lender could have charged an Applicant,
revised definitions of Agents and Associates of Lenders and CDCs, and
revised affiliation principles, SBA had removed the subjectivity of a
Lender's assessment of these issues in the interim final rule, which
would have improved SBA Lenders' compliance and allowed OCRM to develop
more efficient methods of testing SBA Lenders' compliance. In addition,
the removal of the requirement that a Lender itemize fees charged to an
Applicant when the fee is over $2,500 would have reduced the burden on
OCRM of reviewing these additional documents.
[[Page 80584]]
Table 4--Estimated Annual Benefit to SBA From the Interim Final Rule, Forgone With Rescission
----------------------------------------------------------------------------------------------------------------
Number of Average time
expected saved per
Outcomes occurrences occurrence Total forgone benefit
per year (hours)
----------------------------------------------------------------------------------------------------------------
Increased efficiency in reviewing credit 2,000 0.25-0.5 500-1,000 hours, $18,375-$36,750.
elsewhere assessment.
Increased efficiency in reviewing fees 1,300 0.5-1 650-1,300 hours, $23,888-$47,775.
charged to Applicants.
Increased efficiency in reviewing Lender's 2,000 0.25-0.5 500-1,000 hours, $18,375-$36,750.
affiliation determination.
---------------------------------------------------------------------
Estimated Forgone Annual Benefit...................................... 1,650-3,300 hours, $60,638-
$121,275.\4\
----------------------------------------------------------------------------------------------------------------
SBA expected these benefits to be realized immediately upon
enactment of the rule and to have remained the same each year
thereafter, subject to changes in the number of loan files reviewed and
hourly rates. These benefits are forgone with rescission of the interim
final rule.
---------------------------------------------------------------------------
\4\ SBA developed this estimated annual benefit based on an
estimate from OCRM on the range of time that the guidance and
bright-line tests included in the interim final rule would have
saved a Financial Analyst, on average, in reviewing each relevant
element of an SBA Lender's analysis during OCRM-conducted loan file
reviews. The number of expected occurrences per year was based on
the approximately 2,000 loan files reviewed by OCRM annually. The
SBA Lender is required to address credit elsewhere and affiliation
on every loan, but fees are not charged in connection with every
loan. OCRM estimates that in approximately 65 percent of the 2,000
loans reviewed annually, OCRM identifies an issue related to fees
charged to Applicants by SBA Lenders and/or Agents, including
underreporting, inaccurate reporting, or impermissible fees. The
number of expected occurrences per year for each outcome was
multiplied by the average time saved per occurrence to estimate the
total hourly benefit. The cost estimate was obtained by multiplying
the hourly rate of a GS-13, Step 1 ($36.75 per hour) by the number
of expected occurrences per year and the average time saved per
occurrence.
---------------------------------------------------------------------------
Costs to SBA Lenders, Applicants, and Agents
For purposes of the Regulatory Impact Analysis (RIA), the only
costs to program participants and relevant stakeholders necessary to
comply with the interim final rule were administrative costs.
Administrative costs considered included estimations on reading and
interpreting the regulation, developing and revising internal policies
and procedures, and training. It is noted that program participants are
presumed to incur such administrative costs continuously in order to
maintain familiarity with SBA Loan Program Requirements, as required by
13 CFR 120.180, and to remain in good standing with SBA as defined in
13 CFR 120.420(f). The Table below shows the estimated administrative
costs attributable to the interim final rule, which were expected to
occur mainly in the first year of implementation, decrease by half in
the second year, and be eliminated by the third year. These costs are
forgone with rescission of the interim final rule.
Table 5--Estimates of Administrative Compliance Costs to SBA Lenders and Agents in the Interim Final Rule,
Forgone With Rescission
----------------------------------------------------------------------------------------------------------------
Number of SBA
Amount of time Frequency for lenders/ Total forgone
required Value of time first year agents cost
(hours) affected
----------------------------------------------------------------------------------------------------------------
Read and interpret the 2-3 $36.67 5-7 3,500 35,000-73,500
regulation. hours,
$1,283,450-$2,6
95,245.
Develop or Revise Internal 5-7 $36.67 5-6 3,500 87,500-147,000
Policies and Procedures. hours,
$3,208,625-$5,3
90,490.
Training...................... 5-8 $36.67 10-12 3,500 175,000-336,000
hours,
$6,417,250-$12,
321,120.
---------------------------------------------------------------------------------
Estimated First Year Forgone Administrative Costs......................................... 297,500-556,500
hours,
$10,909,325-$20
,406,855.\5\
----------------------------------------------------------------------------------------------------------------
Costs to SBA
---------------------------------------------------------------------------
\5\ SBA developed the estimate for the administrative costs in
the first year of the final rule based on the approximate number of
active SBA Lenders and Agents. Although approximately 4,500 Lenders
have executed agreements to participate as a 7(a) Lender, over the
past two fiscal years, the average number of active Lenders has
totaled only 1,958. (A 7(a) Lender is considered to be ``active'' if
it has approved at least one 7(a) loan in that fiscal year.) SBA
estimated that only those Lenders actively participating in the
program would have been affected by the costs of the interim final
rule since the estimated costs are strictly administrative. The
number of SBA Lenders and Agents affected included approximately
2,474 active SBA Lenders (including approximately 2,061 active 7(a)
Lenders, 213 CDCs, 135 Microloan Intermediaries, 33 ILP
Intermediaries, and 32 Sureties), plus approximately 1,018 Agents
identified as having conducted business with SBA during fiscal years
2013-2017, rounded up to the next hundred to account for trade
associations, and other resource partners. SBA estimated that on
average between 5-7 employees at each SBA Lending institution or
Agent entity may have spent between 2-3 hours each reading and
interpreting the rule in the first year and that these employees are
compensated at the mean hourly wage for a loan officer, as reported
by the U.S. Department of Labor's Bureau of Labor Statistics
($36.67). SBA also estimated that 5-6 employees on average may have
been involved in developing or revising the internal policies of the
respective program participant and would likely have spent between
5-7 hours updating policies specifically related to the interim
final rule. Finally, SBA estimated that between 10-12 employees on
average for each program participant would have spent between 5-8
hours on training related to updates and modifications made by the
interim final rule. Applicants were not included as an entity
affected by the administrative costs of the rule, as the Applicant
relies on the SBA Lender or third-party Agent to inform them of SBA
policy and procedure.
---------------------------------------------------------------------------
There were no expected additional costs to the Agency required to
achieve
[[Page 80585]]
the outcomes of the interim final rule. The administrative costs
considered for the loan program participants, including reading and
interpreting the regulation, developing and revising internal policies
and procedures, and training are already inherent requirements of SBA
employees and therefore, the publication of this interim final rule had
no additional bearing on the responsibilities of relevant SBA employees
involved in the Agency's loan programs. SBA determines that the Agency
bears no costs from rescission of the interim final rule.
Transfers
SBA identified a transfer of costs, due to the limits on
permissible fees charged to an Applicant by Agents and Lenders, as well
as the prohibition against Agents providing services to both an
Applicant and an SBA Lender in connection with the same SBA loan
application. These changes in the interim final rule would have
provided a cost savings to Applicants; however, the Agency acknowledged
that this savings to the Applicant would have resulted in a cost
(``transfer'') to the small number of Agents and Lenders that reported
charging fees in excess of the limits imposed by the interim final
rule. This transfer is forgone with the rescission of the interim final
rule.
Table 6--Estimated Transfers of Costs in the Interim Final Rule, Forgone With Rescission
----------------------------------------------------------------------------------------------------------------
Number of
expected Average money Total forgone
Outcomes occurrences saved per transfer
per year occurrence
----------------------------------------------------------------------------------------------------------------
Elimination of fees exceeding set limits..................... 746 $2,380.75 $1,776,042.63
--------------------------------------------------
Estimated Forgone Annual Transfer........................................................ 1,776,042.63 \6\
----------------------------------------------------------------------------------------------------------------
Below is a table showing an estimation of the total forgone costs
and forgone benefits of the interim rule over three years.
---------------------------------------------------------------------------
\6\ SBA arrived at this estimate based on the total number of
loans guaranteed between FY2013 and FY2017 that reported fees
charged to an Applicant by an Agent or Lender over the limits
imposed in the interim final rule and the total amount that those
fees on those loans exceeded the imposed limit for each threshold.
Table 7--Estimated Undiscounted Benefits and Costs Schedule in the Interim Final Rule, Forgone With Rescission
----------------------------------------------------------------------------------------------------------------
Forgone benefits Forgone costs
----------------------------------------------------------------------------------------------------------------
Low estimate High estimate Low estimate High estimate
----------------------------------------------------------------------------------------------------------------
Year 1
----------------------------------------------------------------------------------------------------------------
267,429 hours, $9,806,754........ 534,856 hours, 297,500 hours, 556,500 hours,
$19,613,433. $10,909,325. $20,406,855.
----------------------------------------------------------------------------------------------------------------
Year 2
----------------------------------------------------------------------------------------------------------------
267,429 hours, $9,806,754........ 534,856 hours, 148,750 hours, 278,250 hours,
$19,613,433. $5,454,662.50. $10,203,427.50.
----------------------------------------------------------------------------------------------------------------
Year 3
----------------------------------------------------------------------------------------------------------------
267,429 hours, $9,806,754........ 534,856 hours, 0 hours, $0............. 0 hours, $0.
$19,613,433.
----------------------------------------------------------------------------------------------------------------
Below is a table showing the annualized values of the forgone
estimated costs and cost savings, as of 2016, over an infinite horizon,
based on the interim final rule's estimates of these annualized values.
Table 8--Annualized Values as of 2016 Over an Infinite Horizon
----------------------------------------------------------------------------------------------------------------
Primary estimate
---------------------------------------------------------------
3% discount rate 7% discount rate
---------------------------------------------------------------
Low estimate High estimate Low estimate High estimate
----------------------------------------------------------------------------------------------------------------
Forgone Annualized Cost Savings................. $9,806,751 $19,613,433 $9,806,754 $19,613,433
Forgone Annualized Costs........................ 485,479 908,132 1,077,116 2,014,841
---------------------------------------------------------------
Forgone Annualized Net Cost Savings......... 9,321,272 18,705,301 8,729,638 17,598,592
----------------------------------------------------------------------------------------------------------------
[[Page 80586]]
Executive Order 12988
This rule meets applicable standards set forth in sections 3(a) and
3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The rule has no
preemptive effect but consistent with section 1102(e) of the CARES Act,
which made the rescission of the regulations effective on March 27,
2020, the rule necessarily has retroactive effect.
Executive Order 13132
SBA has determined that this rule will not have substantial, direct
effects on the States, on the relationship between the National
Government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, for
the purposes of Executive Order 13132, SBA has determined that this
rule has no federalism implications warranting preparation of a
federalism assessment.
Executive Order 13771
This rescission is considered an E.O. 13771 regulatory action. SBA
determines that the estimated $12,633,634 in annualized savings from
the interim final rule using a 7% discount rate in perpetuity in 2016
dollars is forgone with this rescission. In addition, SBA determines
that the estimated present value of savings in perpetuity from the
interim final rule of $180,480,486 is forgone with this rescission.
Details on the breakdown of the estimated cost savings of this interim
final rule can be found in the rule's economic analysis.
Paperwork Reduction Act, 44 U.S.C. 3501-3521
The Express IFR required modification to reporting or recordkeeping
requirements contained in several SBA forms: Form 1920, Lender's
Application for Guaranty (OMB Control number 3245-0348); Form 2450,
Eligibility Information Required for 504 Submission (Non-PCLP) (OMB
Control number 3245-0071); Form 2234 (Part C), Eligibility Information
Required for 504 Submission (PCLP) (OMB Control number 3245-0346); and
Form 159, Fee Disclosure and Compensation Agreement (OMB Control number
3245-0201).
Since publication of the Express IFR, SBA has cancelled Form 2234
and Form 2450. With respect to Form 1920 and Form 159, none of the
proposed changes had been finalized and submitted to OMB for approval
prior to enactment of the CARES Act; therefore, no action is required
as a result of the rescission of the Express IFR. In addition, the
Express IFR codified an existing requirement for Small Business Lending
Companies (SBLCs) to annually submit to SBA the validation of any
credit scoring model they use in connection with SBA Express and Export
Express loans. Since the reporting requirement was already included in
an approved information collection, SBA Lender Reporting Requirements
(OMB Control Number 3245-0365), no amendment was required. As a result,
the rescission of the rule does not impact SBLCs' duty to report.
Regulatory Flexibility Act, 5 U.S.C. 601-612
When an agency issues a rule, the Regulatory Flexibility Act (RFA),
5 U.S.C. 601-612, requires the agency to ``prepare and make available
for public comment a final regulatory analysis'' which will ``describe
the impact of the proposed rule on small entities.'' Section 605 of the
RFA allows the head of an agency to certify a rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities, in lieu of preparing an analysis.
Small entities likely to be affected by the rescission of the
interim final rule include small SBA Lenders and small Agents who
assist small business Applicants with obtaining SBA-guaranteed
financing. Other entities that provide services to an Applicant for
obtaining SBA-guaranteed financing include individuals who may assist
with packaging a loan application or assisting the Applicant with
finding an SBA Lender, entities formed for the purpose of providing
such assistance, attorneys, and Certified Public Accountants. The RIA
of the interim final rule estimated that approximately 3,207 small
entities would be affected. The rescission of the interim final rule
also affects these 3,207 small entities.
As described more fully in the RIA, SBA determined that the only
costs to program participants and relevant stakeholders necessary to
comply with the interim final rule were administrative costs, which are
forgone with the rescission. Administrative costs considered include
estimations on reading and interpreting the regulation, developing and
revising internal policies and procedures, and training. Although these
costs were estimated for the purposes of the Regulatory Flexibility Act
for the interim final rule, it is important to note that, regardless of
any new rulemaking, program participants are presumed to incur
administrative costs related to reading and interpreting SBA Loan
Program Requirements, revising and updating internal policies, and
training staff continuously in order to maintain familiarity with SBA
Loan Program Requirements, as required by 13 CFR 120.180, and to remain
in good standing with SBA as defined in 13 CFR 120.420(f). SBA
determines that the rescission of the interim final rule causes these
costs to be forgone.
The RIA for the interim final rule identified an estimated transfer
of costs due to the limits on permissible fees charged to an Applicant
by Agents and Lenders, as well as the prohibition against an Agent
providing services to both an Applicant and an SBA Lender in connection
with the same SBA loan application. The Agency acknowledged that any
savings to the Applicant from these limitations in the interim final
rule would have resulted in a potential loss of revenue to the small
number of Agents and Lenders that reported charging fees in excess of
the limits. With the rescission of the interim final rule, these
transfers are forgone.
To estimate the average annualized forgone cost per small entity in
the interim final rule, SBA annualized the sum of all administrative
costs plus the estimated potential loss of revenue (e.g., the total
transfer amount of $1,776,042.63) identified in the RIA (see Table 6 in
the RIA). The estimated total annualized costs, which are forgone with
the rescission, over 10 years at a 7 percent discount rate range from a
low estimate of $2,773,295.70 to a high estimate of $4,331,035.
Dividing the total estimated annualized costs by the 3,207 estimated
small entities affected, the forgone annualized cost per entity with
the rescission is estimated to be between approximately $864.76 and
$1,350.49. Although SBA was unable to ascertain the NAICS codes of all
types of entities considered to be Agents for estimation purposes in
the interim final rule, SBA used data from the 2012 U.S. Census
Bureau's SUSB for NAICS code 522310 for Mortgage and Nonmortgage Loan
Brokers as an example to examine the annualized compliance cost as a
percentage of annual receipts for small entities classified by this
NAICS code. For the purposes of this estimation in the interim final
rule, SBA averaged the high and low estimates of the annualized cost
for a mid-point total of $388 per entity. This annualized cost per
entity is forgone with the rescission of the interim final rule.
[[Page 80587]]
Mortgage and Nonmortgage Loan Brokers (NAICS 522310)--$7.5 Million Size Standard
----------------------------------------------------------------------------------------------------------------
Average Annualized
Firm size (by receipts) annual forgone cost # of firms % of small Revenue test
receipts per firm firms * (%)
----------------------------------------------------------------------------------------------------------------
All Firms....................... 1,005,967 388 7,007 N/A 0.0
Small Firms..................... 549,802 388 6,817 100 0.1
<$100K.......................... 48,038 388 1,533 22 0.8
100K-499,999.................... 250,730 388 3,233 47 0.2
500,000-999,999................. 693,276 388 1,042 15 0.1
1,000,000-2,499,999............. 1,482,997 388 721 12 0.0
2,500,000-4,999,999............. 3,244,231 388 216 3 0.0
5,000,000-7,499,999............. 5,157,764 388 72 1 0.0
----------------------------------------------------------------------------------------------------------------
* Annualized compliance costs as a percentage of annual receipts.
SBA has determined that forgoing the annualized cost per entity of
the interim final rule by its rescission will not have a significant
economic impact on a substantial number of small entities. The average
annualized cost in the example above is not a significant percentage of
each entity's average annual revenue for any size firm considered to be
small. It is also noted that these forgone annualized costs are set
against forgone annualized benefits ranging from a low estimate of
$9,806,754 to a high estimate of $19,613,433 (or approximately $3,056-
$6,116 per entity). Also, the number of small entities affected is not
substantial. SBA estimated that from FY2013 through FY2017, 213 small
entities (83 small Lenders and 130 small Agents) reported charging fees
in excess of the limits imposed in the interim final rule. SBA does not
consider 83 small Lenders to be a substantial number when compared to
the overall number of small Lenders, which is approximately 2,000. With
respect to small Agents, SBA does not consider 130 Agents to be a
substantial number when compared to the overall number of small Agents.
SBA believes the number of small entities acting as Agents in
connection with the SBA loan programs is most likely much larger when
taking into consideration the attorneys, accountants, business
consultants and others that act as Agents. As SBA noted above, the
NAICS Code for Mortgage and Nonmortgage Loan Brokers is only one of
numerous NAICS codes under which Agents may be classified. Many
different types of individuals and entities, including attorneys,
accountants, and business consultants, act as Agents and assist
Applicants in obtaining SBA-guaranteed loans. Thus, SBA believes that
the actual universe of small Agents may be considerably larger than
602. When all of the potentially relevant NAICS codes are considered,
SBA believes that the number of small entities affected by the
rescission of the interim final rule would be even smaller than the 8%
noted above.
SBA determined that the interim final rule did not have a
significant impact on a substantial number of small entities. The
Administrator of SBA likewise certifies that the rescission of the
interim final rule has no significant impact on a substantial number of
small entities.
List of Subjects
13 CFR Part 103
Administrative practice and procedure.
13 CFR Part 120
Community development, Environmental protection, Equal employment
opportunity, Exports, Loan programs--business, Reporting and
recordkeeping requirements, Small businesses.
13 CFR Part 121
Loan programs--business, Reporting and recordkeeping requirements,
Small businesses.
For the reasons stated in the preamble, SBA is amending 13 CFR
parts 103, 120, and 121 as follows:
PART 103--STANDARDS FOR CONDUCTING BUSINESS WITH SBA
0
1. The authority citation for part 103 continues to read as follows:
Authority: 15 U.S.C. 634, 642.
0
2. Amend Sec. 103.1 by:
0
a. Revising paragraph (a);
0
b. Redesignating paragraph (d) as paragraph (g); and
0
c. Adding a new paragraph (d) and paragraphs (e) and (f).
The revision and additions read as follows:
Sec. 103.1 Key definitions.
(a) Agent means an authorized representative, including an
attorney, accountant, consultant, packager, lender service provider, or
any other person representing an Applicant or Participant by conducting
business with 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) Referral Agent means a person or entity who identifies and
refers an Applicant to a lender or a lender to an Applicant. The
Referral Agent may be employed and compensated by either an Applicant
or a lender.
* * * * *
0
3. Amend Sec. 103.4 by revising paragraph (g) to read as follows:
Sec. 103.4 What is ``good cause'' for suspension or revocation?
* * * * *
(g) Acting as both a Lender Service Provider or Referral Agent and
a Packager for an Applicant on the same SBA business loan and receiving
compensation for such activity from both the Applicant and lender. A
limited exception to the ``two master'' prohibition in this paragraph
(g) exists when an Agent acts as a Packager and is compensated by the
Applicant for packaging services; also acts as a Referral Agent and is
compensated by the lender for those activities; discloses the referral
activities to the Applicant; and discloses the packaging activities to
the lender.
* * * * *
0
4. Amend Sec. 103.5 by revising paragraph (b) and the last sentence of
paragraph (c) to read as follows:
[[Page 80588]]
Sec. 103.5 How does SBA regulate an Agent's fees and provision of
service?
* * * * *
(b) Compensation agreements must provide that in cases where SBA
deems the compensation unreasonable, the Agent or Packager 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) * * * However, such compensation may not be directly charged to
an Applicant or Borrower.
PART 120--BUSINESS LOANS
0
5. The authority citation for part 120 continues to read as follows:
Authority: 15 U.S.C. 634(b) (6), (b) (7), (b) (14), (h), and
note, 636(a), (h) and (m), and note, 650, 657t, and note, 657u, and
note, 687(f), 696(3) and (7), and note, and 697(a) and (e), and
note.
0
6. Amend Sec. 120.10 by revising paragraph (1)(i) of the defined term
``Associate'' to read as follows:
Sec. 120.10 Definitions.
* * * * *
Associate. (1) * * *
(i) An officer, director, key employee, or holder of 20 percent or
more of the value of the Lender's or CDC's stock or debt instruments,
or an agent involved in the loan process; or
* * * * *
Sec. 120.102 [Removed and Reserved]
0
7. Remove and reserve Sec. 120.102.
0
8. Amend Sec. 120.130 by revising paragraph (c) to read as follows:
Sec. 120.130 Restrictions on uses of proceeds.
* * * * *
(c) Floor plan financing or other revolving line of credit, except
under Sec. 120.340 or Sec. 120.390;
* * * * *
0
9. Amend Sec. 120.221 by:
0
a. Revising the section heading and paragraph (a); and
0
b. Removing the last sentence of paragraph (b).
The revisions read as follows:
Sec. 120.221 Fees and expenses that the Lender may collect from a
loan applicant or Borrower.
* * * * *
(a) Service and packaging fees. The Lender may charge an applicant
reasonable fees (customary for similar Lenders in the geographic area
where the loan is being made) for packaging and other services. The
Lender must advise the applicant in writing that the applicant is not
required to obtain or pay for unwanted services. The applicant is
responsible for deciding whether fees are reasonable. SBA may review
these fees at any time. Lender must refund any such fee considered
unreasonable by SBA.
* * * * *
Sec. 120.222 [Amended]
0
10. Amend Sec. 120.222 by adding the word ``in'' before the words
``any premium received''.
0
11. Revise Sec. 120.344(b) to read as follows:
Sec. 120.344 Unique requirements of the EWCP.
* * * * *
(b) SBA does not limit the amount of extraordinary servicing fees,
as referenced in Sec. 120.221(b), under the EWCP.
* * * * *
0
12. Revise Sec. 120.350 to read as follows:
Sec. 120.350 Policy.
Section 7(a)(15) of the Act authorizes SBA to guarantee a loan to a
qualified employee trust (``ESOP'') to:
(a) Help finance the growth of its employer's small business; or
(b) Purchase ownership or voting control of the employer.
0
13. Revise Sec. 120.352 to read as follows:
Sec. 120.352 Use of proceeds.
Loan proceeds may be used for two purposes.
(a) Qualified employer securities. A qualified employee trust may
relend loan proceeds to the employer by purchasing qualified employer
securities. The small business concern may use these funds for any
general purpose under section 7(a) of the Act.
(b) Control of employer. A qualified employee trust may use loan
proceeds to purchase a controlling interest (51 percent) in the
employer. Ownership and control must vest in the trust by the time the
loan is repaid.
Sec. 120.432 [Amended]
0
14. Amend Sec. 120.432(a) by removing the last sentence.
0
15. Amend Sec. 120.440 by revising paragraph (c) to read as follows:
Sec. 120.440 How does a 7(a) Lender obtain delegated authority?
* * * * *
(c) If delegated authority is approved or renewed, Lender must
execute a Supplemental Guarantee Agreement, which will specify a term
not to exceed two years. SBA may grant shortened renewals based on risk
or any of the other delegated authority criteria. Lenders with less
than 3 years of SBA lending experience will be limited to a term of 1
year or less.
0
16. Remove the undesignated center heading ``SBA Express and Export
Express Loan Programs'' that appears before Sec. 120.441.
Sec. Sec. 120.441 through 120.447 [Removed and Reserved]
0
17. Remove and reserve Sec. Sec. 120.441 through 120.447.
Sec. 120.707 [Amended]
0
18. Amend Sec. 120.707(b) by removing the word ``seven'' and adding in
its place the word ``six.''
0
19. Amend Sec. 120.712 by:
0
a. Revising paragraph (b)(1); and
0
b. In paragraph (d), removing the number ``30'' and adding in its place
the number ``25.''
The revision reads as follows:
Sec. 120.712 How does an Intermediary get a grant to assist Microloan
borrowers?
* * * * *
(b) * * *
(1) Up to 25 percent of the grant funds may be used to provide
information and technical assistance to prospective Microloan
borrowers; and
* * * * *
0
20. Amend Sec. 120.840 by revising paragraph (b) to read as follows:
Sec. 120.840 Accredited Lenders Program (ALP).
* * * * *
(b) Application. A CDC must apply for ALP status to the Lead SBA
Office. The Lead SBA Office will send its recommendation and the
application to the D/FA for final decision.
* * * * *
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
21. The authority citation for part 121 continues to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, and
694a(9); Public Law 116-136, Section 1114.
0
22. Amend Sec. 121.301 by:
0
a. Revising paragraph (f)(4);
0
b. Removing paragraphs (f)(5) and (6);
0
c. Redesignating paragraphs (f)(7) through (9) as paragraphs (f)(5)
through (7), respectively; and
0
d. Revising newly redesignated paragraph (f)(5).
The revisions to read as follows:
[[Page 80589]]
Sec. 121.301 What size standards and affiliation principles are
applicable to financial assistance programs?
* * * * *
(f) * * *
(4) Affiliation based on identity of interest. Affiliation arises
when there is an identity of interest between close relatives, as
defined in 13 CFR 120.10, with identical or substantially identical
business or economic interests (such as where the close relatives
operate concerns in the same or similar industry in the same geographic
area). Where SBA determines that interests should be aggregated, an
individual or firm may rebut that determination with evidence showing
that the interests deemed to be one are in fact separate.
(5) Affiliation based on franchise and license agreements. The
restraints imposed on a franchisee or licensee by its franchise or
license agreement generally will not be considered in determining
whether the franchisor or licensor is affiliated with an applicant
franchisee or licensee provided the applicant franchisee or licensee
has the right to profit from its efforts and bears the risk of loss
commensurate with ownership. SBA will only consider the franchise or
license agreements of the applicant concern.
* * * * *
0
23. Amend Sec. 121.302 by revising paragraphs (a) and (b) to read as
follows:
Sec. 121.302 When does SBA determine the size status of an applicant?
(a) The size status of an applicant for SBA financial assistance is
determined as of the date the application for financial assistance is
accepted for processing by SBA, except for applications under the
Preferred Lenders Program (PLP), the Disaster Loan program, the SBIC
program, and the New Markets Venture Capital (NMCV) program.
(b) For the Preferred Lenders Program, size is determined as of the
date of approval of the loan by the Preferred Lender.
* * * * *
Jovita Carranza,
Administrator.
[FR Doc. 2020-26450 Filed 12-11-20; 8:45 am]
BILLING CODE 8026-03-P
