H. Rpt. 119-500 accompanies the "Small Business Lending Fraud Prevention Act" — legislation that falls within the Small Business Committee's jurisdiction. Committee reports serve as the official legislative history of a bill, documenting what the legislation would do and why the committee recommends passage. Reports of this kind include the committee's section-by-section analysis, any amendments adopted during markup, the Congressional Budget Office cost estimate, dissenting views from minority members, and the legal basis for the legislation. Courts and agencies consult committee reports when interpreting enacted laws, making these documents important beyond the immediate legislative moment.
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House Report 119-500 - SMALL BUSINESS LENDING FRAUD PREVENTION ACT
[House Report 119-500]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 119-500
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SMALL BUSINESS LENDING FRAUD PREVENTION ACT
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February 20, 2026.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
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Mr. Williams of Texas, from the Committee on Small Business,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 7401]
The Committee on Small Business, to whom was referred the
bill (H.R. 7401) to require employees of the Small Business
Administration to certify that the employee does not have any
prohibited conflicts of interest with respect to loans in which
the employee is involved, and for other purposes, having
considered the same, reports favorably thereon without
amendment and recommends that the bill do pass.
CONTENTS
Page
I. Purpose and Bill Summary........................................2
II. Need for Legislation............................................2
III. Hearings........................................................2
IV. Committee Consideration.........................................2
V. Committee Votes.................................................2
VI. Section-by-Section of H.R. 7401.................................4
VII. Congressional Budget Office Cost Estimate.......................4
VIII. New Budget Authority, Entitlement Authority, and Tax Expenditure4
IX. Oversight Findings & Recommendations............................4
X. Performance Goals and Objectives................................4
XI. Statement of Duplication of Federal Programs....................4
XII. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits........................................................5
XIII. Federal Mandates Statement......................................5
XIV. Federal Advisory Committee Statement............................5
XV. Applicability to Legislative Branch.............................5
XVI. Statement of Constitutional Authority...........................5
XVII. Minority Views..................................................6
I. PURPOSE AND BILL SUMMARY
On February 5, 2026, Rep. Dan Meuser (R-PA) and Rep. Maggie
Goodlander (D-NH), introduced H.R. 7401, the Small Business
Lending Fraud Prevention Act. H.R. 7401 strengthens the U.S.
Small Business Administration's (SBA) conflict of interest
rules by requiring SBA employees to certify that they do not
have a conflict of interest prior to handling an SBA loan,
including loan origination, review, or approval.
II. NEED FOR LEGISLATION
In August 2025, a former SBA employee pled guilty to making
false statements in connection with fraudulent loan
applications. While employed by the SBA in 2021, the employee
approved $550,000 in fraudulent pandemic loans to herself and
relatives. The SBA Office of Inspector General has identified
multiple instances in which SBA employees processed loans to
family members or others barred under conflict of interest
rules.
This bill strengthens SBA's conflict of interest rules by
requiring SBA employees who process SBA loans to certify, prior
to participation, that they do not have a conflict of interest;
that they will immediately disclose and recuse themselves if a
conflict is discovered; and that they understand the rules and
regulations regarding conflicts of interest.
This quick certification process will act as a safeguard,
preventing employees from handling loans when a conflict
exists. It will also provide a clear basis for disciplinary
action if employees make false certifications. Reforming the
conflict of interest requirements is a necessary step to
protect taxpayer dollars and ensure accountability within the
SBA.
III. HEARINGS
On September 16, 2025, the Committee on Small Business held
a hearing examining matters related to H.R. 7401 titled
``Pathway to Capital: The Role of SBA Lending in Supporting
Main Street America.''
IV. COMMITTEE CONSIDERATION
The Committee on Small Business met in open session, with a
quorum being present, on February 11, 2026, and ordered H.R.
7401 to be reported favorably to the House of Representatives
by a roll call vote of 24 ayes to 0 nos.
V. COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report legislation and amendments
thereto. The Committee voted to favorably report H.R. 7401 to
the House of Representatives at 9:40 a.m.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
VI. SECTION-BY-SECTION OF H.R. 7401
Section 1--Short title
This Act may be cited as the ``Small Business Lending Fraud
Prevention Act.''
Section 2--Small Business Administration employee conflict of interest
certification
This section requires SBA employees who are involved in
originating, reviewing, or approving loans to certify, prior to
handling an SBA loan, that they do not have any conflicts of
interest, that they will inform their supervisor and recuse
themselves should any conflicts arise, and that they understand
conflict of interest rules.
VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
Pursuant to 3(c)(3) of rule XIII of the Rules of the House
of Representatives, the Committee adopts as its own the cost
estimate prepared by the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974. At the time this report was filed, the Committee has
requested but not received a cost estimate from the Director of
the Congressional Budget Office.
VIII. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY,
AND TAX EXPENDITURES
Pursuant to clause 3(c)(2) of rule XIII of the Rules of the
House of Representatives and section 308(a)(I) of the
Congressional Budget Act of 1974, the Committee provides the
following opinion and estimate with respect to new budget
authority, entitlement authority, and tax expenditures. While
the Committee has not received an estimate of new budget
authority contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974, the Committee does
not believe that there will be any new or increased costs
attributable to this legislation.
IX. OVERSIGHT FINDINGS & RECOMMENDATIONS
In accordance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the oversight findings and recommendations of the Committee on
Small Business with respect to the subject matter contained in
H.R. 7401 are incorporated into the descriptive portions of
this report.
X. PERFORMANCE GOALS AND OBJECTIVES
With respect to the requirements of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the goal of
H.R. 7401 is to strengthen the SBA's conflict of interest
rules.
XI. STATEMENT OF DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, no provision of H.R. 7401 is known to
be duplicative of another Federal program, including any
program that was included in a report to Congress pursuant to
section 21 of Public Law 111-139 or the most recent Catalog of
Federal Domestic Assistance.
XII. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS,
AND LIMITED TARIFF BENEFITS
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee finds that the bill
does not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits as defined in clause 9(e),
9(f), or 9(g) of rule XXI of the Rules of the House of
Representatives.
XIII. FEDERAL MANDATES STATEMENT
The Committee will adopt as its own the estimate of the
Federal mandates prepared by the Director of the Congressional
Budget Office pursuant to section 423 of the Unfunded Mandates
Reform Act.
XIV. FEDERAL ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
XV. APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
XVI. STATEMENT OF CONSTITUTIONAL AUTHORITY
Pursuant to clause 7 of rule XII of the Rules of the House,
the Committee finds that the authority for this legislation in
Art. I, Sec. 8, cl.1 of the Constitution of the United States.
XVII. MINORITY VIEWS
On August 11, 2025, Rena Barrett, of Covington, Georgia,
pled guilty to making false statements in connection with
fraudulent COVID-19 pandemic loan applications of over
$500,000. Ms. Barrett became an employee of the Small Business
Administration (SBA) in October 2020, and in May 2021, she
submitted a fraudulent Economic Injury Disaster Loan (EIDL)
application for $170,000. The SBA initially declined the
application but in July 2021, Ms. Barrett approved the loan for
herself, and other loans submitted by relatives, receiving
nearly half of the $550,000 sought. She resigned from the SBA
after the fraud was discovered, and her case was investigated
by the Office of Inspector General (OIG).\1\ She was sentenced
on February 2, 2026, in the Northern District of Georgia (NDGA)
to 14 months imprisonment, followed by one (1) year of
supervised release. Ms. Barrett was also ordered to pay a $100
special assessment and make restitution in the amount of
$350,849.
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\1\U.S. Dep't of Just., Former Federal Employee and Two Other Women
Plead Guilty in Pandemic Fraud Cases, U.S. Attorney's Office for the
N.D. Ga. (Aug. 12, 2025), https://www.justice.gov/usao-ndga/pr/former-
federal-employee-and-two-other-women-plead-guilty-
pandemic-fraud-cases.
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Federal employees are required to abide by 18 U.S.C.
Sec. 208, a Criminal Conflict of Interest Statute, as well as 5
C.F.R. Part 2635, Standards of Ethical Conduct for Employees of
the Executive Branch. The Criminal Conflict of Interest Statute
prohibits federal employees from participating in government
matters in which they have a financial interest. This
requirement extends to their spouse or minor children, their
general partners, or any organization in which the employee
serves as an officer, director, trustee, general partner, or
employee.\2\ The Standards of Ethical Conduct for Employees of
the Executive Branch applies to all employees in the executive
branch to ensure federal employees maintain the public's trust
by adhering to ethical principles that prevent conflict of
interest, improper influence, and abuse of public office.\3\
Violations may result in disciplinary action including removal,
suspension, or reprimand.\4\
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\2\Acts Affecting a personal financial interest 18 U.S.C. Sec. 208
(2025).
\3\5 C.F.R. 2635 (2025).
\4\5 U.S.C. Sec. 75 (2025).
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The process worked well in the instance of Ms. Barrett,
however, a certification form will provide an extra layer of
security and help the SBA to more effectively link an action to
an associated fraudulent act.
Nydia M. Velazquez,
Ranking Member.
[all]