WASHINGTON, DC — On Thursday, June 5, the U.S. House of Representatives passed Representative Rob Bresnahan’s, Jr. (PA-08) legislation, H.R. 2987, the Capping Excessive Awarding of SBLC Entrants (CEASE) Act. The legislation, which passed by a bipartisan vote of 214-198, will restore responsible and correct oversight capabilities of the Small Business Administration (SBA) for small business lending companies (SBLCs) for which they are the primary regulator.

“Small businesses deserve a reliable program that works for them, and that means keeping our community banks at the core of the system,” said Bresnahan. “President Trump and I agree, we shouldn’t be incentivizing fraud and abuse by flooding the program with risky, underregulated institutions. My legislation caps the number of non-bank SBLC licenses, ensuring taxpayer-backed guarantees are not handed out to lenders the SBA cannot properly oversee. I am proud to see my legislation passed today, and I look forward to President Trump signing it into law.”

The SBA is authorized to issue government-backed 7(a) loans through certified depository institutions, like banks and credit unions, as well as certified non-bank lenders, like fintech companies. Unlike certified depository institutions, whose primary regulator is the Federal Reserve, the non-bank SBLCs are primarily regulated by the SBA, meaning they are not subject to the same regulations and requirements.

These non-depository institutions had an increased rate of fraud during PPP (Paycheck Protection Program) COVID lending. The Biden Administration increased the number of SBLCs for the first time in nearly 30 years. These entities do not go through the same rigorous rules and oversight as banks do in the lending process. As consequence, these entities saw higher rates of fraud with PPP loans. The CEASE Act caps the limit of SBLC licenses to 16, the current number of SBLCs that have licenses.

The legislation is endorsed by American Bankers Association, Independent Community Bankers of America, America’s Credit Unions.