---
kind: "section"
citation: "15 U.S.C. § 650"
title: "15"
title_heading: "Commerce and Trade"
number: "650"
heading: "Supervisory and enforcement authority for small business lending companies"
release: "119-102"
url: "https://uscodex.org/usc/15/650"
units:
  - "Chapter 14A — Aid to Small Business"
---

# §650. Supervisory and enforcement authority for small business lending companies

- (a) **In general—** The [Administrator](/usc/15/637c.md?p=1) is authorized—
  - (1) to supervise the safety and soundness of [small business lending companies](/usc/15/632.md?p=r-1) and [non-Federally regulated lenders](/usc/15/632.md?p=r-2);
  - (2) with respect to [small business lending companies](/usc/15/632.md?p=r-1) to set capital standards to regulate, to examine, and to enforce laws governing such companies, in accordance with the purposes of this chapter; and
  - (3) with respect to [non-Federally regulated lenders](/usc/15/632.md?p=r-2) to regulate, to examine, and to enforce laws governing the lending activities of such lenders under [section 636(a) of this title](/usc/15/636.md?p=a) in accordance with the purposes of this chapter.
- (b) **Capital directive—**
  - (1) **In general—** If the [Administrator](/usc/15/637c.md?p=1) determines that a [small business lending company](/usc/15/632.md?p=r-1) is being operated in an imprudent manner, the [Administrator](/usc/15/637c.md?p=1) may, in addition to any other action authorized by law, issue a directive to such company to increase capital to such level as the [Administrator](/usc/15/637c.md?p=1) determines will result in the safe and sound operation of such company.
  - (2) **Delegation—** The [Administrator](/usc/15/637c.md?p=1) may not delegate the [authority](/usc/15/3051.md?p=1) granted under [paragraph (1)](#b-1) except to an Associate Deputy [Administrator](/usc/15/637c.md?p=1).
  - (3) **Regulations—** The [Administrator](/usc/15/637c.md?p=1) shall issue regulations outlining the conditions under which the [Administrator](/usc/15/637c.md?p=1) may determine the level of capital pursuant to [paragraph (1)](#b-1).
- (c) **Civil action—** If a [small business lending company](/usc/15/632.md?p=r-1) violates this chapter, the [Administrator](/usc/15/637c.md?p=1) may [institute](/usc/15/9401.md?p=7) a civil action in an appropriate district court to terminate the rights, privileges, and franchises of the company under this chapter.
- (d) **Revocation or suspension of loan authority—**
  - (1) The [Administrator](/usc/15/637c.md?p=1) may revoke or suspend the [authority](/usc/15/3051.md?p=1) of a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2) to make, service or liquidate business loans authorized by [section 636(a) of this title](/usc/15/636.md?p=a)—
    - (A) for false statements knowingly made in any written submission required under this chapter;
    - (B) for omission of a material fact from any written submission required under this chapter;
    - (C) for willful or repeated [violation](/usc/15/57b–1.md?p=a-7) of this chapter;
    - (D) for willful or repeated [violation](/usc/15/57b–1.md?p=a-7) of any condition imposed by the [Administrator](/usc/15/637c.md?p=1) with respect to any [application](/usc/15/77ccc.md?p=8), request, or [agreement](/usc/15/7a.md?p=2) under this chapter; or
    - (E) for [violation](/usc/15/57b–1.md?p=a-7) of any cease and desist [order](/usc/15/8702.md?p=14) of the [Administrator](/usc/15/637c.md?p=1) under this section.
  - (2) The [Administrator](/usc/15/637c.md?p=1) may revoke or suspend [authority](/usc/15/3051.md?p=1) under [paragraph (1)](#d-1) only after a hearing under [subsection (f)](#f). The [Administrator](/usc/15/637c.md?p=1) may delegate power to revoke or suspend [authority](/usc/15/3051.md?p=1) under [paragraph (1)](#d-1) only to the Deputy [Administrator](/usc/15/637c.md?p=1) and only if the [Administrator](/usc/15/637c.md?p=1) is unavailable to take such action.
    - (A) The [Administrator](/usc/15/637c.md?p=1), after finding extraordinary circumstances and in [order](/usc/15/8702.md?p=14) to protect the financial or legal position of the [United States](/usc/15/633.md?p=a), may issue a suspension [order](/usc/15/8702.md?p=14) without conducting a hearing pursuant to [subsection (f)](#f). If the [Administrator](/usc/15/637c.md?p=1) issues a suspension under the preceding sentence, the [Administrator](/usc/15/637c.md?p=1) shall within two business days follow the procedures set forth in [subsection (f)](#f).
    - (B) Any suspension under [paragraph (1)](#d-1) shall remain in effect until the [Administrator](/usc/15/637c.md?p=1) makes a decision pursuant to [subparagraph (4)](#d-4) to permanently revoke the [authority](/usc/15/3051.md?p=1) of the [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2), suspend the [authority](/usc/15/3051.md?p=1) for a time certain, or terminate the suspension.
  - (3) The [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2) must notify [borrowers](/usc/15/697f.md?p=e-2) of a revocation and that a new entity has been appointed to service their loans. The [Administrator](/usc/15/637c.md?p=1) or an employee of the [Administration](/usc/15/636e.md?p=1) designated by the [Administrator](/usc/15/637c.md?p=1) may provide such notice to the [borrower](/usc/15/697f.md?p=e-2).
  - (4) Any revocation or suspension under [paragraph (1)](#d-1) shall be made by the [Administrator](/usc/15/637c.md?p=1) except that the [Administrator](/usc/15/637c.md?p=1) shall delegate to an administrative law judge as that term is used in [section 3105 of title 5](/usc/5/3105.md) the [authority](/usc/15/3051.md?p=1) to conduct any hearing required under [subsection (f)](#f). The [Administrator](/usc/15/637c.md?p=1) shall base the decision to revoke on the record of the hearing.
- (e) **Cease and desist order—**
  - (1) Where a [small business lending company](/usc/15/632.md?p=r-1), a [non-Federally regulated lender](/usc/15/632.md?p=r-2), or other [person](/usc/15/78m.md?p=h-8-E) violates this chapter or is engaging or is about to engage in any acts or practices which constitute or will constitute a [violation](/usc/15/57b–1.md?p=a-7) of this chapter, the [Administrator](/usc/15/637c.md?p=1) may [order](/usc/15/8702.md?p=14), after the opportunity for hearing pursuant to [subsection (f)](#f), the company, lender, or other [person](/usc/15/78m.md?p=h-8-E) to cease and desist from such action or failure to act. The [Administrator](/usc/15/637c.md?p=1) may delegate the [authority](/usc/15/3051.md?p=1) under the preceding sentence only to the Deputy [Administrator](/usc/15/637c.md?p=1) and only if the [Administrator](/usc/15/637c.md?p=1) is unavailable to take such action.
  - (2) The [Administrator](/usc/15/637c.md?p=1), after finding extraordinary circumstances and in [order](/usc/15/8702.md?p=14) to protect the financial or legal position of the [United States](/usc/15/633.md?p=a), may issue a cease and desist [order](/usc/15/8702.md?p=14) without conducting a hearing pursuant to [subsection (f)](#f). If the [Administrator](/usc/15/637c.md?p=1) issues a cease and desist [order](/usc/15/8702.md?p=14) under the preceding sentence, the [Administrator](/usc/15/637c.md?p=1) shall within two business days follow the procedures set forth in [subsection (f)](#f).
  - (3) The [Administrator](/usc/15/637c.md?p=1) may further [order](/usc/15/8702.md?p=14) such [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2) or other [person](/usc/15/78m.md?p=h-8-E) to take such action or to refrain from such action as the [Administrator](/usc/15/637c.md?p=1) deems necessary to insure compliance with this chapter.
  - (4) A cease and desist [order](/usc/15/8702.md?p=14) under this subsection may also provide for the suspension of [authority](/usc/15/3051.md?p=1) to lend in [subsection (d)](#d).
- (f) **Procedure for revocation or suspension of loan authority and for cease and desist order—**
  - (1) Before revoking or suspending [authority](/usc/15/3051.md?p=1) under [subsection (d)](#d) or issuing a cease and desist [order](/usc/15/8702.md?p=14) under [subsection (e)](#e), the [Administrator](/usc/15/637c.md?p=1) shall serve an [order](/usc/15/8702.md?p=14) to show cause upon the [small business lending company](/usc/15/632.md?p=r-1), [non-Federally regulated lender](/usc/15/632.md?p=r-2), or other [person](/usc/15/78m.md?p=h-8-E) why an [order](/usc/15/8702.md?p=14) revoking or suspending the [authority](/usc/15/3051.md?p=1) or a cease and desist [order](/usc/15/8702.md?p=14) should not be issued. The [order](/usc/15/8702.md?p=14) to show cause shall contain a statement of the matters of fact and law asserted by the [Administrator](/usc/15/637c.md?p=1) and the legal [authority](/usc/15/3051.md?p=1) and jurisdiction under which a hearing is to be held, and shall set forth that a hearing will be held before an administrative law judge at a time and place stated in the [order](/usc/15/8702.md?p=14). Such hearing shall be conducted pursuant to the provisions of sections [554](/usc/5/554.md), [556](/usc/5/556.md), and [557](/usc/5/557.md) of title 5. If after hearing, or a waiver thereof, the [Administrator](/usc/15/637c.md?p=1) determines that an [order](/usc/15/8702.md?p=14) revoking or suspending the [authority](/usc/15/3051.md?p=1) or a cease and desist [order](/usc/15/8702.md?p=14) should be issued, the [Administrator](/usc/15/637c.md?p=1) shall promptly issue such [order](/usc/15/8702.md?p=14), which shall include a statement of the findings of the [Administrator](/usc/15/637c.md?p=1) and the grounds and reasons therefor and specify the effective date of the [order](/usc/15/8702.md?p=14), and shall cause the [order](/usc/15/8702.md?p=14) to be served on the [small business lending company](/usc/15/632.md?p=r-1), [non-Federally regulated lender](/usc/15/632.md?p=r-2), or other [person](/usc/15/78m.md?p=h-8-E) involved.
  - (2) Witnesses summoned before the [Administrator](/usc/15/637c.md?p=1) shall be paid by the party at whose instance they were called the same fees and mileage that are paid witnesses in the courts of the [United States](/usc/15/633.md?p=a).
  - (3) A cease and desist [order](/usc/15/8702.md?p=14), suspension or revocation issued by the [Administrator](/usc/15/637c.md?p=1), after the hearing under this subsection is final [agency](/usc/15/632.md?p=b) action for purposes of [chapter 7](/usc/5/chptI-ch7.md) of title 5. An adversely aggrieved party shall have 20 days from the date of issuance of the cease and desist [order](/usc/15/8702.md?p=14), suspension or revocation, to seek judicial review in an appropriate district court.
- (g) **Removal or suspension of management official—**
  - (1) **Definition—** In this section, the term “management official” means, with respect to a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2), an officer, director, general partner, manager, employee, agent, or other participant in the management of the affairs of the company’s or lender’s activities under [section 636(a) of this title](/usc/15/636.md?p=a).
  - (2) **Removal of management official—**
    - (A) **Notice—** The [Administrator](/usc/15/637c.md?p=1) may serve upon any [management official](#g-1) a written notice of its intention to remove that [management official](#g-1) if, in the opinion of the [Administrator](/usc/15/637c.md?p=1), the [management official](#g-1)—
      - (i) willfully and knowingly commits a substantial [violation](/usc/15/57b–1.md?p=a-7) of—
        - (I) this chapter;
        - (II) any regulation issued under this chapter;
        - (III) a final cease-and-desist [order](/usc/15/8702.md?p=14) under this chapter; or
        - (IV) any [agreement](/usc/15/7a.md?p=2) by the [management official](#g-1), the [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2) under this chapter; or
      - (ii) willfully and knowingly commits a substantial breach of a fiduciary duty of that [person](/usc/15/78m.md?p=h-8-E) as a [management official](#g-1) and the [violation](/usc/15/57b–1.md?p=a-7) or breach of fiduciary duty is one involving personal dishonesty on the part of such [management official](#g-1).
    - (B) **Contents of notice—** A notice under [subparagraph (A)](#g-2-A) shall contain a statement of the facts constituting grounds therefor and shall fix a time and place at which a hearing, conducted pursuant to sections [554](/usc/5/554.md), [556](/usc/5/556.md), and [557](/usc/5/557.md) of title 5, will be held thereon.
    - (C) **Hearing—**
      - (i) **Timing—** A hearing under [subparagraph (B)](#g-2-B) shall be held not earlier than 30 days and later than 60 days after the date of service of notice of the hearing, unless an earlier or a later date is set by the [Administrator](/usc/15/637c.md?p=1) at the request of—
        - (I) the [management official](#g-1), and for good cause shown; or
        - (II) the Attorney General.
      - (ii) **Consent—** Unless the [management official](#g-1) appears at a hearing under this paragraph in [person](/usc/15/78m.md?p=h-8-E) or by a duly authorized representative, the [management official](#g-1) shall be deemed to have consented to the issuance of an [order](/usc/15/8702.md?p=14) of removal under [subparagraph (A)](#g-2-A).
    - (D) **Order of removal—**
      - (i) **In general—** In the event of consent under [subparagraph (C)(ii)](#g-2-C-ii), or if upon the record made at a hearing under this subsection, the [Administrator](/usc/15/637c.md?p=1) finds that any of the grounds specified in the notice of removal has been established, the [Administrator](/usc/15/637c.md?p=1) may issue such [orders](/usc/15/8702.md?p=14) of removal from office as the [Administrator](/usc/15/637c.md?p=1) deems appropriate.
      - (ii) **Effectiveness—** An [order](/usc/15/8702.md?p=14) under [clause (i)](#g-2-D-i) shall—
        - (I) take effect 30 days after the date of service upon the subject [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2) and the [management official](#g-1) concerned (except in the case of an [order](/usc/15/8702.md?p=14) issued upon consent as described in [subparagraph (C)(ii)](#g-2-C-ii), which shall become effective at the time specified in such [order](/usc/15/8702.md?p=14)); and
        - (II) remain effective and enforceable, except to such extent as it is stayed, modified, terminated, or set aside by action of the [Administrator](/usc/15/637c.md?p=1) or a reviewing court in accordance with this section.
  - (3) **Authority to suspend or prohibit participation—**
    - (A) **In general—** In [order](/usc/15/8702.md?p=14) to protect a [small business lending company](/usc/15/632.md?p=r-1), a [non-Federally regulated lender](/usc/15/632.md?p=r-2) or the interests of the [Administration](/usc/15/636e.md?p=1) or the [United States](/usc/15/633.md?p=a), the [Administrator](/usc/15/637c.md?p=1) may suspend from office or prohibit from further participation in any manner in the management or conduct of the affairs of a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2) a [management official](#g-1) by written notice to such effect served upon the [management official](#g-1). Such suspension or prohibition may prohibit the [management official](#g-1) from making, servicing, reviewing, approving, or liquidating any loan under [section 636(a) of this title](/usc/15/636.md?p=a).
    - (B) **Effectiveness—** A suspension or prohibition under [subparagraph (A)](#g-3-A)—
      - (i) shall take effect upon service of notice under [paragraph (2)](#g-2); and
      - (ii) unless stayed by a court in proceedings authorized by [subparagraph (C)](#g-3-C), shall remain in effect—
        - (I) pending the completion of the administrative proceedings pursuant to a notice of intention to remove served under [paragraph (2)](#g-2); and
        - (II) until such time as the [Administrator](/usc/15/637c.md?p=1) dismisses the charges specified in the notice, or, if an [order](/usc/15/8702.md?p=14) of removal or prohibition is issued against the [management official](#g-1), until the effective date of any such [order](/usc/15/8702.md?p=14).
    - (C) **Judicial review of suspension prior to hearing—** Not later than 10 days after a [management official](#g-1) is suspended or prohibited from participation under [subparagraph (A)](#g-3-A), the [management official](#g-1) may apply to an appropriate district court for a stay of the suspension or prohibition pending the completion of the administrative proceedings pursuant to a notice of intent to remove served upon the [management official](#g-1) under [paragraph (2)](#g-2).
  - (4) **Authority to suspend on criminal charges—**
    - (A) **In general—** If a [management official](#g-1) is charged in any information, indictment, or complaint authorized by a [United States](/usc/15/633.md?p=a) attorney, with a felony involving dishonesty or breach of trust, the [Administrator](/usc/15/637c.md?p=1) may, by written notice served upon the [management official](#g-1), suspend the [management official](#g-1) from office or prohibit the [management official](#g-1) from further participation in any manner in the management or conduct of the affairs of the [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2).
    - (B) **Effectiveness—** A suspension or prohibition under [subparagraph (A)](#g-4-A) shall remain in effect until the information, indictment, or complaint is finally disposed of, or until terminated by the [Administrator](/usc/15/637c.md?p=1) or upon an [order](/usc/15/8702.md?p=14) of a district court.
    - (C) **Authority upon conviction—** If a judgment of conviction with respect to an offense described in [subparagraph (A)](#g-4-A) is entered against a [management official](#g-1), then at such time as the judgment is not subject to further judicial review (and for purposes of this subparagraph shall not include any petition for a writ of habeas corpus), the [Administrator](/usc/15/637c.md?p=1) may issue and serve upon the [management official](#g-1) an [order](/usc/15/8702.md?p=14) removing the [management official](#g-1), effective upon service of a copy of the [order](/usc/15/8702.md?p=14) upon the [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2).
    - (D) **Authority upon dismissal or other disposition—** A finding of not guilty or other disposition of charges described in [subparagraph (A)](#g-4-A) shall not preclude the [Administrator](/usc/15/637c.md?p=1) from instituting proceedings under subsection [(e)](#e) or [(f)](#f).
  - (5) **Notification to small business lending company or a non-Federally regulated lender—** Copies of each notice required to be served on a [management official](#g-1) under this section shall also be served upon the [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2) involved.
  - (6) **Final agency action and judicial review—**
    - (A) **Issuance of orders—** After a hearing under this subsection, and not later than 30 days after the [Administrator](/usc/15/637c.md?p=1) notifies the parties that the case has been submitted for final decision, the [Administrator](/usc/15/637c.md?p=1) shall render a decision in the matter (which shall include findings of fact upon which its decision is predicated), and shall issue and cause to be served upon each party to the proceeding an [order](/usc/15/8702.md?p=14) or [orders](/usc/15/8702.md?p=14) consistent with this section. The decision of the [Administrator](/usc/15/637c.md?p=1) shall constitute final [agency](/usc/15/632.md?p=b) action for purposes of [chapter 7](/usc/5/chptI-ch7.md) of title 5.
    - (B) **Judicial review—** An adversely aggrieved party shall have 20 days from the date of issuance of the [order](/usc/15/8702.md?p=14) to seek judicial review in an appropriate district court.
- (h) **Appointment of receiver—**
  - (1) In any proceeding under subsection (f)(4) or subsection (g)(6)(C),[^1] the court may take exclusive jurisdiction of a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2) and appoint a receiver to hold and administer the assets of the company or lender.
  - (2) Upon request of the [Administrator](/usc/15/637c.md?p=1), the court may appoint the [Administrator](/usc/15/637c.md?p=1) as a receiver under [paragraph (1)](#h-1).
- (i) **Possession of assets—**
  - (1) If a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2) is not in compliance with capital requirements or is insolvent, the [Administrator](/usc/15/637c.md?p=1) may take possession of the portfolio of loans guaranteed by the [Administrator](/usc/15/637c.md?p=1) and sell such loans to a third party by means of a receiver appointed under [subsection (h)](#h).
  - (2) If a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2) is not in compliance with capital requirements or is insolvent or otherwise operating in an unsafe and unsound condition, the [Administrator](/usc/15/637c.md?p=1) may take possession of servicing activities of loans that are guaranteed by the [Administrator](/usc/15/637c.md?p=1) and sell such servicing rights to a third party by means of a receiver appointed under [subsection (h)](#h).
- (j) **Penalties and forfeitures—**
  - (1) Except as provided in [paragraph (2)](#j-2), a [small business lending company](/usc/15/632.md?p=r-1) or a [non-Federally regulated lender](/usc/15/632.md?p=r-2) which violates any regulation or written directive issued by the [Administrator](/usc/15/637c.md?p=1) regarding the filing of any regular or special report shall pay to the [United States](/usc/15/633.md?p=a) a civil penalty of not more than $5,000 for each day of the continuance of the failure to file such report, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. The civil penalties under this subsection may be enforced in a civil action brought by the [Administrator](/usc/15/637c.md?p=1). The penalties under this subsection shall not apply to any affiliate of a [small business lending company](/usc/15/632.md?p=r-1) that procures at least 10 percent of its annual purchasing requirements from small [manufacturers](/usc/15/1278.md?p=c-1-D-i).
  - (2) The [Administrator](/usc/15/637c.md?p=1) may by rules and regulations that shall be codified in the Code of Federal Regulations, after an opportunity for notice and comment, or upon [application](/usc/15/77ccc.md?p=8) of an interested party, at any time previous to such failure, by [order](/usc/15/8702.md?p=14), after notice and opportunity for hearing which shall be conducted pursuant to sections [554](/usc/5/554.md), [556](/usc/5/556.md), and [557](/usc/5/557.md) of title 5, exempt in whole or in part, any [small business lending company](/usc/15/632.md?p=r-1) or [non-Federally regulated lender](/usc/15/632.md?p=r-2) from [paragraph (1)](#j-1), upon such terms and conditions and for such period of time as it deems necessary and appropriate, if the [Administrator](/usc/15/637c.md?p=1) finds that such action is not inconsistent with the public interest or the protection of the [Administration](/usc/15/636e.md?p=1). The [Administrator](/usc/15/637c.md?p=1) may for the purposes of this section make any alternative requirements appropriate to the situation.

## Footnotes

[^1]: So in original. There is no subsec. (f)(4) or (g)(6)(C) in this section.

## Source credit

(Pub. L. 85–536, § 2[23], as added Pub. L. 98–473, title I, § 111A(a), Oct. 12, 1984, 98 Stat. 1965; Pub. L. 108–447, div. K, title I, § 161, Dec. 8, 2004, 118 Stat. 3458.)

## Notes

### Editorial Notes

### Prior Provisions

A prior section 650, acts July 30, 1953, ch. 282, title II, § 221, 67 Stat. 240; June 30, 1955, ch. 251, § 4, 69 Stat. 225; Aug. 9, 1955, ch. 628, § 13, 69 Stat. 551; Pub. L. 85–120, § 2, Aug. 3, 1957, 71 Stat. 341, provided for a termination date of the Small Business Act of 1953, and was omitted from the general revision by Pub. L. 85–536. See Codification note set out under section 631 of this title.

### Amendments

2004—Pub. L. 108–447 amended section catchline and text generally. Prior to amendment, text related to disaster loan assistance to small business concerns in the fishing industry due to El Nino-related ocean conditions.