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Collecting Guaranteed Loss Payments From FSA Farm Loan Program Borrowers

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[Federal Register: July 1, 2002 (Volume 67, Number 126)]
[Rules and Regulations]
[Page 44015-44016]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01jy02-1]

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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 762
RIN 0560-AG44
 
Collecting Guaranteed Loss Payments From FSA Farm Loan Program 
Borrowers

AGENCY: Farm Service Agency, USDA.
ACTION: Final rule.

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SUMMARY: This action revises the regulations governing the Farm Service 
Agency's (FSA) guaranteed farm loan programs by adding a provision 
clarifying that any amounts paid by FSA on account of the liabilities 
of the guaranteed loan borrower will constitute a Federal debt owing to 
FSA by the guaranteed loan borrower. FSA may use all remedies available 
to it, including offset under the Debt Collection Improvement Act of 
1996, to collect the debt from the borrower. This action will affect 
only those guaranteed loan borrowers after a final loss claim is paid 
by FSA to the lender from whom they received a guaranteed loan.

DATES: This rule is effective on July 1, 2002.

FOR FURTHER INFORMATION CONTACT: Polly M. Anderson, Senior Loan 
Officer, Farm Service Agency; telephone: 202-720-2558; Facsimile: 202-
690-1196; E-mail: Polly_Anderson@wdc.fsa.usda.gov

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be significant and was reviewed by 
the Office of Management and Budget under Executive Order 12866.

Regulatory Flexibility Act

    The Agency certifies that this rule will not have a significant 
economic effect on a substantial number of small entities, because it 
does not require actions on the part of the borrower or the lenders. 
The Agency, therefore, is not required to perform a Regulatory 
Flexibility Analysis as required by the Regulatory Flexibility Act, 
Public Law 96-534, as amended (5 U.S.C. 601). This rule does not impact 
small entities to a greater extent than large entities.

Environmental Impact Statement

    It is the determination of FSA that this action is not a major 
Federal action significantly affecting the environment. Therefore, in 
accordance with the National Environmental Policy Act of 1969, Pub. L. 
91-190, and 7 CFR part 1940, subpart G, an Environmental Impact 
Statement is not required.

Executive Order 12988

    This rule has been reviewed in accordance with E.O. 12988, Civil 
Justice Reform. In accordance with that Executive Order: (1) All State 
and local laws and regulations that are in conflict with this rule will 
be preempted; (2) no retroactive effect will be given to this rule 
except that Agency servicing under this rule will apply to loans 
guaranteed prior to the effective date of the rule and (3) 
administrative proceedings in accordance with 7 CFR part 11 must be 
exhausted before requesting judicial review.

Executive Order 12372

    For reasons contained in the Notice related to 7 CFR part 3015, 
subpart V (48 FR 29115, June 24, 1983) the programs and activities 
within this rule are excluded from the scope of Executive Order 12372, 
which requires intergovernmental consultation with state and local 
officials.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit assessment, for proposed and final rules with 
``Federal mandates'' that may result in expenditures of $100 million or 
more in any 1 year for state, local, or tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates, as defined by title II of the UMRA, 
for State, local, and tribal governments or the private sector. 
Therefore, this rule is not subject to the requirements of sections 202 
and 205 of UMRA.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states is not required.

Paperwork Reduction Act

    The amendments to 7 CFR part 762 contained in this rule require no 
revisions to the information collection requirements that were 
previously approved by OMB under control number 0560-0155.

Federal Assistance Program

    These changes affect the following FSA programs as listed in the 
Catalog of Federal Domestic Assistance:

10.406--Farm Operating Loans
10.407--Farm Ownership Loans

Discussion of the Final Rule

    This rule clarifies the policy of the Farm Service Agency Farm Loan 
Programs concerning the statutory mandate imposed on the Agency by the 
Debt Collection Improvement Act of 1996 (31 U.S.C. 3716) (DCIA). 
Section 3701 of 31 U.S.C. defines ``claim'' or ``debt'' in part to 
include funds owed on account of loans guaranteed by the government. 
This rule puts guaranteed borrowers on notice that FSA will attempt to 
collect from guaranteed borrowers through Treasury Offset and any other 
available remedies when a final loss claim is paid to a guaranteed 
lender.
    The Federal Claims Collection Act of 1966 (Act), (31 U.S.C. 3711 et 
seq.) provides for the use of administrative, salary, and Internal 
Revenue Service (IRS) offsets by Government agencies to collect 
delinquent Federal debts. Any money that is or may become payable

[[Page 44016]]

from the United States to an individual or entity indebted to FSA may 
be offset for the collection of a debt owed to FSA. In addition, money 
may be collected from the debtor's retirement payments for delinquent 
amounts owed to the Agency if the debtor is an employee or retiree of a 
Federal agency, the U.S. Postal Service, the Postal Rate Commission, or 
a member of the U.S. Armed Forces or the Reserve. Current regulations 
published in 7 CFR part 762, do not discuss whether amounts paid by the 
Agency on guaranteed final loss claims are considered Federal debts.
    This rule is consistent with the Act and clarifies that a Federal 
debt is established when a guaranteed final loss claim is paid. The 
Agency will offset all payments available in accordance with 31 U.S.C. 
3716 and 7 CFR part 1951, subpart C. Federal Crop Insurance indemnity 
payments are prohibited from offset under section 509 of the Federal 
Crop Insurance Act (7 U.S.C. 1509). FSA also will not offset 
environmental cost-share assistance payments for establishment costs 
that are made for newly enrolled FSA Conservation Reserve Program acres 
or in other situations not in the best interests of the Government. 
FSA's current policy for direct loan debt collections will be used for 
collection of Federal debt arising from guaranteed loans.
    Some borrowers have established corporations, partnerships and 
other entities to avoid offsets and to circumvent other Agency 
regulations. Offset will be taken against the borrower's pro rata share 
of entity payments pursuant to 7 CFR 792.7(l), 1403.7(q), and 1951.106. 
A Federal debt cannot be established on debts discharged in bankruptcy. 
In a reorganization bankruptcy, a borrower will not be offset even when 
a final loss claim is paid provided the borrower successfully completes 
the confirmed plan. If a borrower's debt is discharged in a Chapter 7 
bankruptcy, offset will not be pursued when the final loss claim is 
paid.
    The Agency has revised its guaranteed loan application forms to 
include the applicant's certification and acknowledgment that any 
amounts paid by FSA on account of liabilities of the guaranteed loan 
borrower will constitute a Federal debt to FSA. The forms provide 
direct notice to interested applicants of FSA's debt collection policy 
and memorialize their understanding and acknowledgment of FSA's 
collection policy.
    The guaranteed farm loan program has been in existence since 1973. 
Currently, there are 40,559 guaranteed farm loan borrowers with 67,540 
loans. Approximately 1,200 loss claims are paid on guaranteed loans per 
year. Approximately 100 of the 1,200 loans are discharged in 
bankruptcy, leaving about 1,100 loans that could be considered for 
offset and other collection methods. Sixty days after a final loss 
claim is paid, Agency loan officials will notify the guaranteed 
borrowers with a Notice of Intent to Collect by Administrative Offset 
that any FSA payment that they may be scheduled to receive will be 
offset. The notice will advise such borrowers of their options to 
either pay the claim off, relinquish some or all of the payment to FSA, 
or seek administrative review or appeal.
    This rule is not published for notice and comment because it 
implements statutory and regulatory provisions which are binding on the 
Agency. Since the Agency does not have discretion in this matter, 
public comment would not be able to affect the provisions of the rule. 
Therefore the rule is published as final and effective upon 
publication.

List of Subjects in 7 CFR Part 762

    Agriculture, Loan programs--Agriculture.

    Accordingly, 7 CFR chapter VII is amended as follows:

PART 762--GUARANTEED FARM LOANS

    1. The authority citation for part 762 continues to read as 
follows:

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989.
    2. Amend Sec. 762.149 by adding paragraph (m), to read as follows:

Sec. 762.149  Liquidation.

* * * * *
    (m) Establishment of Federal debt. Any amounts paid by the Agency 
on account of liabilities of the guaranteed loan borrower will 
constitute a Federal debt owing to the Agency by the guaranteed loan 
borrower. In such case, the Agency may use all remedies available to 
it, including offset under the Debt Collection Improvement Act of 1996, 
to collect the debt from the borrower. Interest charges will be 
established at the note rate of the guaranteed loan on the date the 
final loss claim is paid.

    Signed in Washington, DC, on June 25, 2002.
James R. Little,
Administrator, Farm Service Agency.
[FR Doc. 02-16474 Filed 6-28-02; 8:45 am]
BILLING CODE 3410-05-P

 
 

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