SANCTIONS AGAINST LENDERS AND INSTITUTIONS.

SEC. 2006. SANCTIONS AGAINST LENDERS AND INSTITUTIONS. (a) Sanctions by Secretary on Lenders.—Section 432 of the Higher Education Act of 1965 (20 U.S.C. 1082) is amended by adding at the end thereof the following new subsection: “(j) Authority of the Secretary To Take Emergency Actions Against Lenders.— “(1) Imposition of sanctions.— If the Secretary— “(A) receives information, determined by the Secretary to be reliable, that a lender is violating any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation; “(B) determines that immediate action is necessary to prevent misuse of Federal funds; and “(C) determines that the likelihood of loss outweighs the importance of following the limitation, suspension, or termination procedures authorized in subsection (h); the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to the lender (by registered mail, return receipt requested), take emergency action to stop the issuance of guarantee commitments and the payment of interest benefits and special allowance to the lender. “(2) Length of emergency action.—An emergency action under this subsection may not exceed 30 days unless a limitation, suspension, or termination proceeding is initiated against the lender under subsection (h) before the expiration of that period. “(3) Opportunity to show cause.—The Secretary shall provide the lender, if it so requests, an opportunity to show cause that the emergency action is unwarranted.”. (b) Sanctions by Guaranty Agencies.—Section 428(b)(1) (20 U.S.C. 1078(b)(1)) is amended— (1) by inserting “emergency action,” before “limitation,” each place it appears in subparagraphs (T) and (U); and (2) by inserting “take emergency action,” before “limit, suspend,” in subparagraph (U). (c) Sanctions Against Institutions and Institutions’ Agents.—Section 487(c)(1) of the Higher Education Act of 1965 (20 U.S.C. 1094(c)(1)) is amended— (1) in subparagraph (C), by striking “and” at the end thereof; 103 STAT. 2119 (2) in subparagraph (D)— (A) by striking “or any regulation prescribed under this title,” and inserting in lieu thereof a comma and “any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation,”; and (B) by striking out the period at the end thereof and inserting in lieu thereof a semicolon; and (3) by adding at the end thereof the following new subparagraphs: “(E) an emergency action against an institution, under which the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to the institution (by registered mail, return receipt requested), withhold funds from the institution or its students and withdraw the institution’s authority to obligate funds under any program under this title, if the Secretary— “(i) receives information, determined by the Secretary to be reliable, that the institution is violating any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation, “(ii) determines that immediate action is necessary to prevent misuse of Federal funds, and “(iii) determines that the likelihood of loss outweighs the importance of the procedures prescribed under subparagraph (D) for limitation, suspension, or termination, except that an emergency action shall not exceed 30 days unless limitation, suspension, or termination proceedings are initiated by the Secretary against the institution within that period of time, and except that the Secretary shall provide the institution an opportunity to show cause, if it so requests, that the emergency action is unwarranted; “(F) the limitation, suspension, or termination of the eligibility of an individual or an organization to contract with any institution to administer any aspect of an institution’s student assistance program under this title, or the imposition of a civil penalty under paragraph (2)(B), whenever the Secretary has determined, after reasonable notice and opportunity for a hearing on the record, that such organization, acting on behalf of an institution, has violated or failed to carry out any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation, except that no period of suspension under this subparagraph shall exceed 60 days unless the organization and the Secretary agree to an extension, or unless limitation or termination proceedings are initiated by the Secretary against the individual or organization within that period of time; and “(G) an emergency action against an individual or an organization that has contracted with an institution to administer any aspect of the institution’s student assistance program under this title, under which the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to such individual or organization (by registered mail, return receipt requested), withhold funds from the individual or organization and withdraw the 103 STAT. 2120individual or organization’s authority to act on behalf of an institution under any program under this title, if the Secretary— “(i) receives information, determined by the Secretary to be reliable, that the individual or organization, acting on behalf of an institution, is violating any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation, “(ii) determines that immediate action is necessary to prevent misuse of Federal funds, and “(iii) determines that the likelihood of loss outweighs the importance of the procedures prescribed under subparagraph (F), for limitation, suspension, or termination, except that an emergency action shall not exceed 30 days unless the limitation, suspension, or termination proceedings are initiated by the Secretary against the individual or organization within that period of time, and except that the Secretary shall provide the individual or organization an opportunity to show cause, if it so requests, that the emergency action is unwarranted.”.