12 U.S.C. § 4743 — Approving States for participation

Page 1755 TITLE 12—BANKS AND BANKING § 4743 1 So in original. Probably should be capitalized. 1 See References in Text note below. 2 So in original. Probably should be capitalized. (9) the term ‘‘Program’’ means the Small Business Capital Enhancement Program estab- lished under this subchapter; (10) the term ‘‘reserve fund’’ means a fund, established by a participating State, ear- marked for a particular participating financial institution, for the purposes of— (A) depositing all required premium charges paid by the participating financial institution and by each borrower receiving a loan under the Program from a participating financial institution; (B) depositing contributions made by the participating State; and (C) covering losses on enrolled loans by disbursing accumulated funds; and (11) the term ‘‘State’’ means— (A) a State of the United States; (B) the District of Columbia; (C) any political subdivision of a State of the United States, which subdivision has a population in excess of the population of the least populated State of the United States; and (D) any other political subdivision of a State of the United States that the Fund de- termines has the capacity to participate in the program.1 (Pub. L. 103–325, title II, § 252, Sept. 23, 1994, 108 Stat. 2204.) Editorial Notes REFERENCES IN TEXT The Federal Credit Union Act, referred to in par. (2)(B), is act June 26, 1934, ch. 750, 48 Stat. 1216, which is classified generally to chapter 14 (§ 1751 et seq.) of this title. For complete classification of this Act to the Code, see section 1751 of this title and Tables. § 4743. Approving States for participation (a) Application Any State may apply to the Fund for approval to be a participating State under the Program and to be eligible for reimbursement by the Fund pursuant to section 4747 of this title. (b) Approval criteria The Fund shall approve a State to be a partici- pating State, if— (1) a specific department or agency of the State has been designated to implement the Program; (2) all legal actions necessary to enable such designated department or agency to imple- ment the Program have been accomplished; (3) funds in the amount of at least $1 for every 2 people residing in the State (as of the last decennial census for which data have been released) are available and have been legally committed to contributions by the State to reserve funds, with such funds being available without time limit and without requiring ad- ditional legal action, except that such require- ments shall not be construed to limit the au- thority of the State to take action at a later time that results in the termination of its ob- ligation to enroll loans and make contribu- tions to reserve funds; (4) the State has prescribed a form of par- ticipation agreement to be entered into be- tween it and each participating financial insti- tution that is consistent with the require- ments and purposes of this subchapter; and (5) the State and the Fund have executed a reimbursement agreement that conforms to the requirements of this subchapter. (c) Existing State programs (1) In general A State that is not a participating State, but that has its own capital access program providing portfolio insurance for business loans (based on a separate loss reserve fund for each financial institution), may apply at any time to the Fund to be approved to be a par- ticipating State. The Fund shall approve such State to be a participating State, and to be el- igible for reimbursements by the Fund pursu- ant to section 4747 of this title, if the State— (A) satisfies the requirements of sub- sections (a) and (b); and (B) certifies that each affected financial institution has satisfied the requirements of section 4744 of this title. (2) Applicable terms of participation (A) Status of institutions If a State is approved for participation under paragraph (1), each financial institu- tion with a participation agreement in effect with the participating State shall imme- diately be considered a participating finan- cial institution. Reimbursements may be made under section 4747 1 of this title in con- nection with all contributions made to the reserve fund by the State in connection with lending that occurs on or after the date on which the Fund approves the State for par- ticipation. (B) Effective date of participation If an amended participation agreement that conforms with section 4745 of this title is required in order to secure participation approval by the Fund, contributions subject to reimbursement under section 4747 of this title shall include only those contributions made to a reserve fund with respect to loans enrolled on or after the date that an amend- ed participation agreement between the par- ticipating State and the participating finan- cial institution becomes effective. (C) Use of accumulated reserve funds A State that is approved for participation in accordance with this subsection may con- tinue to implement the program 2 utilizing the reserve funds accumulated under the State program. (d) Prior appropriations requirement The Fund shall not approve a State for par- ticipation in the Program until at least $50,000,000 has been appropriated to the Fund (subject to an appropriations Act), without fis- cal year limitation, for the purpose of making reimbursements pursuant to section 4747 of this title and otherwise carrying out this subchapter. Page 1756 TITLE 12—BANKS AND BANKING § 4744 (e) Amendments to agreements If a State that has been approved to be a par- ticipating State wishes to amend its form of participation agreement and continue to be a participating State, such State shall submit such amendment for review by the Fund in ac- cordance with subsection (b)(4). Any such amendment shall become effective only after it has been approved by the Fund. (Pub. L. 103–325, title II, § 253, Sept. 23, 1994, 108 Stat. 2205.) Editorial Notes REFERENCES IN TEXT Section 4747 of this title, referred to in subsec. (c)(2)(A), was in the original ‘‘section 237’’ and was translated as reading ‘‘section 257’’ meaning section 257 of Pub. L. 103–325, to reflect the probable intent of Con- gress. Pub. L. 103–325 does not contain a section 237. § 4744. Participation agreements (a) In general A participating State may enter into a par- ticipation agreement with any financial institu- tion determined by the participating State, after consultation with the appropriate Federal banking agency, to have sufficient commercial lending experience and financial and managerial capacity to participate in the Program. The de- termination by the State shall not be reviewable by the Fund. (b) Participating financial institutions Upon entering into the participation agree- ment with the participating State, the financial institution shall become a participating finan- cial institution eligible to enroll loans under the Program. (Pub. L. 103–325, title II, § 254, Sept. 23, 1994, 108 Stat. 2207.) § 4745. Terms of participation agreements (a) In general The participation agreement to be entered into by a participating State and a participating financial institution shall include all provisions required by this section, and shall not include any provisions inconsistent with the provisions of this section. (b) Establishment of separate reserve funds A separate reserve fund shall be established by the participating State for each participating fi- nancial institution. All funds credited to a re- serve fund shall be the exclusive property of the participating State. Each reserve fund shall be an administrative account for the purposes of— (1) receiving all required premium charges to be paid by the borrower and participating fi- nancial institution and contributions by the participating State; and (2) disbursing funds, either to cover losses sustained by the participating financial insti- tution in connection with loans made under the Program, or as contemplated by sub- sections (d) and (r). (c) Investment authority Subject to applicable State law, the partici- pating State may invest, or cause to be in- vested, funds held in a reserve fund by estab- lishing a deposit account at the participating fi- nancial institution in the name of the partici- pating State. In the event that funds in the re- serve fund are not deposited in such an account, such funds shall be invested in a form that the participating State determines is safe and liq- uid. (d) Earned income and interest Interest or income earned on the funds cred- ited to a reserve fund shall be deemed to be part of the reserve fund, except that a participating State may, as further specified in the participa- tion agreement, provide authority for the par- ticipating State to withdraw some or all of such interest or income earned. (e) Loan terms and conditions (1) In general A loan to be filed for enrollment under the Program may be made with such interest rate, fees, and other terms and conditions as agreed upon by the participating financial institution and the borrower, consistent with applicable law. (2) Lines of credit If a loan to be filed for enrollment is in the form of a line of credit, the amount of the loan shall be considered to be the maximum amount that can be drawn by the borrower against the line of credit. (f) Enrollment process (1) Filing (A) In general A participating financial institution shall file each loan made under the Program for enrollment by completing and submitting to the participating State a form prescribed by the participating State. (B) Form The form referred to in subparagraph (A) shall include a representation by the partici- pating financial institution that it has com- plied with the participation agreement in enrolling the loan with the State. (C) Premium charges Accompanying the completed form shall be the nonrefundable premium charges paid by the borrower and the participating finan- cial institution, or evidence that such pre- mium charges have been deposited into the deposit account containing the reserve fund, if applicable. (D) Submission The participation agreement shall require that the items required by this subsection shall be submitted to the participating State by the participating financial institutions not later than 10 calendar days after a loan is made. (2) Enrollment by State Upon receipt by the participating State of the filing submitted in accordance with para- graph (1), the participating State shall promptly enroll the loan and make a matching contribution to the reserve fund in accordance