13 C.F.R. § 120.854 Grounds for taking enforcement action against a CDC.
Title 13 - Business Credit and Assistance
(a) General. The AA/FA or his or her authorized delegate may undertake one or more of the enforcement actions set forth in §§120.855(a) and (b) with respect to a CDC, based upon a determination that one or more of the following grounds exist: (1) The CDC has failed to receive SBA approval for at least four 504 loans during two consecutive fiscal years; (2) The CDC has failed to comply materially with any requirement imposed by statute, regulation, SOP, policy and procedural notice, any agreement the CDC has executed with SBA, or the terms of a Debenture or loan authorization. (3) The CDC has made a material false statement or has failed to disclose a material fact to SBA: (i) With respect to a 504 loan; (ii) In applying to SBA for authority to participate in the 504 program or for any change in the CDC's participation in the 504 program; or (iii) In any report or other disclosure of information that SBA requires. (4) The CDC is not performing underwriting, closing, servicing, liquidation, litigation, or other actions with respect to 504 loans in a commercially reasonable or prudent manner. Supporting evidence of a CDC's commercially unreasonable or imprudent action may include, but is not limited to, failure to meet one or more of the portfolio benchmarks. (5) The CDC fails to correct an underwriting, closing, servicing, liquidation, litigation, or reporting deficiency, or fails to take other corrective action, after receiving notice from SBA of a deficiency and the need to take corrective action, if any, within the time period specified in SBA's notice of deficiency. Such a notice must give the CDC a reasonable time, as determined by SBA in its sole discretion, to correct the deficiency. (6) The CDC has engaged in a pattern of uncooperative behavior or taken an action that SBA determines is deleterious to the 504 program, that undermines SBA's management and administration of the 504 program, or that is not consistent with standards of good conduct. Prior to issuing a notice of a proposed enforcement action or immediate suspension under §120.855(a) or §120.855(b) based upon this paragraph, SBA must send prior written notice to the CDC explaining why the CDC's actions were uncooperative, deleterious to the program, undermined SBA's management of the program, or were not consistent with standards of good conduct. The prior notice must also state that the CDC's actions could give rise to a specified enforcement action, and provide the CDC with a reasonable time to cure the deficiency before any further action is taken. (b) ALP CDCs. The AA/FA or his or her authorized delegate may undertake one of the enforcement actions set forth in §120.855(c) with respect to a CDC, based upon a determination that one or more of the following grounds exist: (1) The CDC has not continued to meet the criteria for eligibility under section 507(b) of Title V, 15 U.S.C. 697d. (2) The CDC has failed to adhere to the SBA's rules and regulations or is violating any other applicable provision of law. (c) PCLP CDCs. The AA/FA or his or her authorized delegate may undertake one of the enforcement actions set forth in §120.855(d) with respect to a CDC, based upon a determination that one or more of the following grounds exist: (1) The CDC has not continued to meet the criteria for eligibility under section 508(b) of Title V, 15 U.S.C. 697e. (2) The CDC has not established or maintained the loss reserve required under this paragraph (c). (3) The CDC has failed to adhere to the SBA's rules and regulations. (4) The CDC is violating any other applicable provision of law. [68 FR 57985, Oct. 7, 2003]
Title 13: Business Credit and Assistance
PART 120—BUSINESS LOANS
Subpart H—Development Company Loan Program (504)
SBA Enforcement Actions
§ 120.854 Grounds for taking enforcement action against a CDC.
