SBA said it might waive or provide an exemption for the fees due from very small volume lenders when the administrative costs of collecting the fee from a lender are greater than the amount of the fee itself, for instance, "when it is not cost effective to collect such fees," the agency said, adding it is in the process of determining this dollar amount. NAFCU is also suggesting that SBA broaden its proposed waiver provision.

Meanwhile, CUNA has several issues with the proposal saying lenders "already pay sufficient fees" through the guarantee and servicing fees assessed by the agency. This new fee, combined with current SBA fees, would "dampen enthusiasm" for participation.

"Ultimately, the fee could hinder the goal of the 7(a) program to provide loans to small businesses that would otherwise not be able to obtain a loan," said Catherine Orr, CUNA senior regulatory counsel.

CUNA said based on the estimates in SBA's proposal, it believes the majority of credit union participants in the 7(a) program would fall in the fee categories ranging from $327 and less. Orr said while this "represents a small amount of money by itself, when coupled with the current substantial guarantee fee as well as the annual service fee of up to .545% of the outstanding balance of the guaranteed portion of each loan, the expenses add up."

SBA has proposed a "risk-based" methodology depending on the size of the lender's guaranteed portfolio, but the size of a loan portfolio does not provide an accurate measure of the level of risk posed by the lender, Orr said. Larger portfolios may technically have more funds "at risk." However, if they are primarily made up of large loans they are also more likely to be secured with a higher quality of tangible collateral and undergo a more thorough review than smaller loans that can be granted based on a lesser set of criteria such as income or credit scoring models, according to CUNA.

"Since the SBA examination looks at a percentage of funded loans regardless of size, assessing fees based on portfolio size alone may penalize the smaller lenders that fund fewer loans or loans with a higher-than-average size," Orr said. "An institution with numerous small loans may take more time and manpower on the part of SBA to perform an examination than an institution with fewer loans but of larger size."

CUNA also takes issue with regulatory overlap fee implementation could bring. Orr said NCUA already "scrutinizes" the guaranteed loan programs when examiners conduct reviews of credit unions' member business loan programs. SBA should rely on those exams, working cooperatively with the federal credit union regulator, CUNA suggested.

Clarity is also needed on how SBA defines "guaranteed dollars" when describing the formula used to calculate the offsite review fees, CUNA offered. Under the proposal, the term is defined to include "guarantees of both loans held by the lender and loans sold into the secondary market, securitized, or for which a lender has sold a participation interest" and "loans that have been purchased by SBA but have not yet been charged off." "If SBA determines the new fees are necessary, we urge SBA to include this definition in the proposed new provisions on Lender Oversight Fees (Section 120.1070) or in the definitions section of SBA's rules (Section 120.10) so that it is clear what that term encompasses," Orr said. The interchangeable use of "monitoring," "review," and "exam" might also be confusing and SBA should consider defining what is specifically involved in each activity and how they differ in the lender oversight fees section of the agency's rules, CUNA recommended. Should the fees go through, CUNA is suggesting that SBA extend its proposed 30-day fee due date to either 45 or 60 days to give credit unions more time to properly route the bill through their internal accounting/invoice system. SBA said lenders' outstanding SBA guarantees and the total guaranteed SBA dollars would be calculated using Sept. 30 portfolio figures, but CUNA said clarity is needed on whether the new fees are effective prospectively or retroactively. CUNA urged the agency to grandfather existing loans saying "it would not be fair to those lenders who entered into contacts with their borrowers without having had the opportunity to work new pricing/charges into the pricing charged to the borrower to the extent allowed under the agency's rules." Finally, under the proposed rule, SBA said it has the authority to recover its other expenses in carrying out lender oversight activities, for example, the salaries and travel expenses of SBA employees and equipment expenses that are related to carrying out lender oversight activities, but will not do this at this time. CUNA said it supports the agency's proposal not to charge lenders for these expenses and encouraged SBA to maintain this position. –[email protected]