§1946 — Title 7 Agriculture | U.S. Code

Summary

Loans are made so the borrower is fully personally responsible and must give whatever collateral the Secretary requires. The Secretary sets most interest rates, but they cannot be higher than the current average market yield on similar U.S. Treasury obligations plus up to 1% more, rounded to the nearest one‑eighth of a percent. That extra charge goes into the Rural Development Insurance Fund or the Agricultural Credit Insurance Fund. Interest on guaranteed loans is what the borrower and lender agree to, but not higher than a rate the Secretary allows. Microloans to beginning or veteran farmers, and other non‑guaranteed loans to low‑income, limited‑resource borrowers, cannot charge more than (half of the current 5‑year yield plus up to 1%) and cannot be below 5% per year. Loans must be paid back within seven years. The Secretary can combine or reschedule loans for up to seven years (or up to fifteen years for farm operating loans) from the date of consolidation. Consolidated loans’ rates (except guaranteed loans) can be changed up to the current rate for new loans. Loans may be made as a line of credit that ends no later than five years. Each year a farmer draws on a line of credit counts as one year of receiving an operating loan. If a borrower misses a payment, they cannot draw more unless the Secretary finds the missed payment was due to unusual events beyond the borrower’s control and the borrower will bring the balance down by the end of the production cycle or marketing period. Lines of credit may finance commodities that are currently eligible for Department of Agriculture price support, or that were eligible on April 3, 1996.

Title 7, §1946

Agriculture — Source: USLM XML via OLRC

(a)(1)The Secretary shall make all loans under this subchapter upon the full personal liability of the borrower and upon such security as the Secretary may prescribe. The interest rates on such loans, except for guaranteed loans and loans as provided in paragraphs (2) and (3),11 See References in Text note below. shall be as determined by the Secretary, but not in excess of the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of such loans, plus an additional charge not to exceed 1 per centum as determined by the Secretary, which charge shall be deposited in the Rural Development Insurance Fund or the Agricultural Credit Insurance Fund, as appropriate, and adjusted to the nearest one-eighth of 1 per centum. The interest rate on any guaranteed loan made under this subchapter shall be such rate as may be agreed upon by the borrower and lender, but not in excess of a rate as may be determined by the Secretary.

(2)The interest rate on a microloan to a beginning farmer or rancher or veteran farmer or rancher (as defined in section 2279(e) 1 of this title), or any loan (other than a guaranteed loan) to a low income, limited resource borrower under this subchapter shall not be—

(A)greater than the sum of—

(i)an amount that does not exceed one-half of the current average market yield on outstanding marketable obligations of the United States with maturities of 5 years; and

(ii)an amount not exceeding 1 percent per year, as the Secretary determines is appropriate; or

(B)less than 5 percent per year.

(b)Loans made under this subchapter shall be payable in not to exceed seven years. The Secretary may consolidate or reschedule outstanding loans for payment over a period not to exceed seven years (or, in the case of loans for farm operating purposes, fifteen years) from the date of such consolidation or rescheduling, and the amount of unpaid principal and interest of the prior loans so consolidated or rescheduled shall not create a new charge against any loan levels authorized by law. A new loan may be included in a consolidation. Such new loan shall be charged against any loan level authorized by law. Except as otherwise provided for farm loans under section 1981b of this title, the interest rate on such consolidated or rescheduled loans, other than guaranteed loans, may be changed by the Secretary to a rate not to exceed the rate being charged for loans made under this subchapter at the time of the consolidation or rescheduling. The interest rate on any guaranteed loan under this subchapter that may be consolidated or rescheduled for payment shall be such rate as may be agreed upon by the borrower and the lender, but not in excess of a rate as may be determined by the Secretary.

(c)(1)A loan made or guaranteed by the Secretary under this subchapter may be in the form of a line-of-credit loan.

(2)A line-of-credit loan under paragraph (1) shall terminate not later than 5 years after the date that the loan is made or guaranteed.

(3)For purposes of determining eligibility for a farm operating loan under this subchapter, each year during which a farmer or rancher takes an advance or draws on a line-of-credit loan the farmer or rancher shall be considered to have received an operating loan for 1 year.

(4)If a borrower does not pay an installment on a line-of-credit loan on schedule, the borrower may not take an advance or draw on the line-of-credit, unless the Secretary determines that—

(A)the borrower’s failure to pay on schedule was due to unusual conditions that the borrower could not control; and

(B)the borrower will reduce the line-of-credit balance to the scheduled level at the end of—

(i)the production cycle; or

(ii)the marketing of the borrower’s agricultural products.

(5)A line-of-credit loan may be used to finance the production or marketing of an agricultural commodity that—

(A)is eligible for a price support program of the Department of Agriculture; or

(B)was eligible for a price support program of the Department of Agriculture on the day before April 4, 1996.

Notes & Related Subsidiaries

Editorial Notes

References in Text

Paragraph (3), referred to in subsec. (a)(1), was repealed by Pub. L. 104–127, title VI, § 661(g), Apr. 4, 1996, 110 Stat. 1107. section 2279(e) of this title, referred to in subsec. (a)(2), was redesignated section 2279(a) of this title by section 12301(b)(3) of Pub. L. 115–334.

Amendments

2014—Subsec. (a)(2). Pub. L. 113–79 inserted “a microloan to a beginning farmer or rancher or veteran farmer or rancher (as defined in section 2279(e) of this title), or” after “The interest rate on”. 1996—Subsec. (a)(3). Pub. L. 104–127, § 661(g), struck out par. (3) which read as follows: “The interest rate on any loan (other than a guaranteed loan) made or insured under clause (5) of section 1942(a) of this title for activities that involve the use of prime farmland as defined in section 1927(a)(6)(C) of this title shall be the interest rate otherwise applicable under this section increased by 2 per centum per annum.” Subsec. (c). Pub. L. 104–127, § 614, added subsec. (c). 1990—Subsec. (a)(2). Pub. L. 101–624 amended par. (2) generally. Prior to amendment, par. (2) read as follows: “The interest rate on any loan (other than a guaranteed loan) to a low-income, limited resource borrower under this subchapter shall be the interest rate otherwise applicable under this section reduced by 3 per centum per annum.” 1984—Subsec. (b). Pub. L. 98–258 inserted “(or, in the case of loans for farm operating purposes, fifteen years)” and substituted “Except as otherwise provided for farm loans under section 1981b of this title, the interest rate” for “The interest rate”. 1981—Subsec. (a). Pub. L. 97–35 redesignated existing provisions as par. (1), inserted reference to loans guaranteed under pars. (2) and (3), and added pars. (2) and (3). 1978—Pub. L. 95–334 designated existing provisions as subsec. (a), inserted provisions relating to depositing of charges and provisions relating to interest rates on guaranteed loans, struck out provisions relating to payment and renewal of loans, and added subsec. (b). 1968—Pub. L. 90–488 substituted provisions for determination of interest rate by taking into consideration current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the average maturities of the loans, adjusted to the nearest one-eighth of 1 per centum, plus not to exceed 1 per centum per annum as determined by the Secretary, for former prohibition of an interest rate exceeding 5 per centum per annum.

Statutory Notes and Related Subsidiaries

Effective Date

of 1981 AmendmentAmendment by Pub. L. 97–35 applicable to loans made after Sept. 30, 1981, see section 160(c) of Pub. L. 97–35, set out as a note under section 1927 of this title.

§1946 Liability of Borrower