Handling Payments From the Farm Service Agency (FSA) to Delinquent FSA Farm Credit Program Borrowers

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1951

RIN 0560-AE93

Handling Payments From the Farm Service Agency (FSA) to

Delinquent FSA Farm Credit Program Borrowers

AGENCY: Farm Service Agency, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to revise regulations which establish the

requirements for the use of administrative offset to collect delinquent

debts due under programs formerly administered by the Farmers Home

Administration. The proposed action will eliminate the existing

provisions contained in the regulation and the Rural Housing Service,

Rural Business-Cooperative Service, Rural Utilities Service and Farm

Service

[[Page 45908]]

Agency (the Agencies) will instead adhere to the requirements in the

existing United States Department of Agriculture administrative offset

regulations. This revision will eliminate the requirement that a

borrower's account must be accelerated prior to offset of payments to

delinquent borrowers.

DATES: Comments on the proposed rule, or comments on alternatives to

this proposal, must be received on or before September 16, 1996. The

comment period was reduced to allow for publication of a final rule

prior to the distribution of income supplementation and enhancement

program payments by the Farm Service Agency in September 1996. Comments

on the information collection requirements of this rule must be

received on or before October 29, 1996 to be assured of consideration.

ADDRESSES: Send comments on the proposed rule to: Director, Farm Credit

Programs Loan Servicing and Property Management Division (LSPMD), Farm

Service Agency (FSA), U.S. Department of Agriculture (USDA), room 5449-

S, P.O. Box 2415, Stop 0523, Washington, D.C. 20013-2415. Comments on

the information collection requirements of this proposed rule must be

sent to the Office of Management and Budget (OMB) at the address listed

in the Paperwork Reduction Act section of this preamble and to the

Department address listed after the OMB address.

FOR FURTHER INFORMATION CONTACT: Phillip Elder, Senior Loan Officer,

USDA, FSA, Farm Credit Programs Loan Servicing Division, P.O. Box 2415,

Stop 0523, Washington, D.C. 20013-2415, telephone (202) 720-9053.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been reviewed under Executive Order 12866 has been

determined to be a significant regulatory action, and has been reviewed

by the Office of Management and Budget.

Executive Order 12372

The programs to which this Executive Order may apply are listed in

the Catalog of Federal Domestic Assistance under the following:

10.104 Emergency Loans

10.405 Farm Labor Housing Loans

10.406 Farm Operating Loans

10.407 Farm Ownership Loans

10.410 Low Income Housing Loans

10.411 Rural Housing Site Loans

10.414 Resource Conservation Development Loans

10.415 Rural Rental Housing Loans

10.416 Soil and Water Loans

10.417 Very Low-Income Housing repair Loans and Grants

10.418 Water and Waste Disposal Systems for Rural Communities

10.419 Watershed Protection and Flood Prevention Loans

10.420 Rural Self-Help Housing Loans

10.421 Indian Tribes and tribal Corporation Loans

10.422 Business and Industry Loans

10.423 Community Facility Loans

10.427 Rural rental Housing Assistance Grants

10.428 Economic Emergency Loans

10.433 Housing Preservation Grants

10.434 Nonprofit Organizations

10.435 Agricultural Loan Mediation Program

Programs listed under numbers 10.404, 10.406, 10.407, 10.410,

10.417, 10.421, 10.428, and 10.435 are not subject to the provisions of

Executive Order 12372 which requires intergovernmental consultation

with State and local officials. (7 CFR Part 3015, subpart V, 48 FR

29115, June 24, 1983).

Programs listed under the numbers 10.405, 10.411, 10.414, 10.415,

10.416, 10.418, 10.419, 10.420, 10.422, 10.423, 10.427, 10.433, and

10.434 are subject to and have met the provisions of Executive Order

12372. (7 CFR 3015, subpart V, 48 FR 29112, June 24, 1983; 49 FR 22675,

May 31, 1984; 50 FR 14088, April 10, 1985.)

Environmental Impact Statement

It is the determination of the issuing agencies that this action is

not a major Federal action significantly affecting the environment and,

in accordance with the National Environmental Policy Act of 1969,

Public Law 91-190, an Environmental Impact Statement is not required.

Executive Order 12778

This proposed rule has been reviewed in accordance with Executive

Order 12778, Civil Justice Reform. In accordance with this rule: (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: and (3) administrative proceedings in accordance with 7 CFR parts

11 and 780 must be exhausted before bringing suit in court challenging

action taken under this rule unless those regulations specifically

allow bringing suit at an earlier time.

Regulatory Flexibility Act

The issuing Agencies are not required by 5 U.S.C. 553, or any other

provision of law, to publish a notice of proposed rulemaking to effect

these administrative changes.

Paperwork Reduction Act

The amendments to 7 CFR part 1951 set forth in this proposed rule

involve a change in existing information collection requirements which

were previously approved by OMB under the provisions of 44 U.S.C. 35

and assigned OMB Control Number 0575-0119. The regulations containing

the information collection approved under 0575-0119 are jointly owned

by the Agencies issuing this rule as aresult of the recent

reorganization of USDA. A review of 0575-0119 has resulted in a

division of the information collection requirements currently approved

and a request for approval of the revised collection has been submitted

to OMB.

OMB Control Number: 0560--New.

Title: Offsets of Federal Payments to FmHA Borrowers.

Type of Request: Revision of Currently Approved Information

Collection.

Abstract: 7 CFR part 1951, subpart C, requires that a borrower's

account be accelerated and the borrower's appeal rights exhausted

before offsetting any payments to be received by the borrower. The

Department of Agriculture Reorganization Act combined the farm credit

functions of FmHA and the former Agricultural Stabilization and

Conservation Service (ASCS), into the Farm Service Agency (FSA). This

results in FSA making payments generated from participation in the

former ASCS programs to the same farmer or rancher that is delinquent

on his debts to the Agency. Acceleration of a borrower's account is one

of the last steps FSA takes before liquidating the account. This

process may take years while the borrower continues to receive payments

from FSA.

This rule proposes to remove the existing administrative offset

regulation which was used by the Agencies when they were a part of the

former Farmers Home Administration (FmHA). The Department of

Agriculture has an existing administrative offset regulation at 7 CFR

part 3, subpart B and the administrative offset regulation of the

former FmHA in 7 CFR part 1951, subpart C is redundant. The Department

of Agriculture regulation complies with the requirements of 31 U.S.C.

3716, as amended by the Debt Collection Improvement Act of 1996, ch. 10

of Pub. L. 104-134 (April 26, 1996).

One intended effect of using the existing Department of Agriculture

administrative offset procedure is that the Department procedure does

not contain the restrictive provision of the former FmHA offset

regulation which

[[Page 45909]]

requires the debt to have been accelerated prior to using

administrative offset. There is no statutory basis for delaying offset

until after a loan has been accelerated and the Department

administrative offset procedure will permit offset to be utilized for

debts which are past due. The information collection requirements for

this type of internal agency offset will decrease, due to the

development of a shortened notification letter, streamlining of the

offset appeal process, and the reduction of the number of notices and

number of meetings offered. However, the easing of offset procedures

will greatly increase the number of FSA borrowers that receive notices

and accounts that are offset. For example, as of March 30, 1996, 1,588

FSA borrowers were accelerated, whereas 27,180 borrowers were past due.

Estimate of Burden: Public reporting burden for this information

collection is estimated to average 2.35 hours per response.

Respondents: FSA Farm Credit Programs borrowers that are over 30

days past due.

Estimated Number of Respondents: 13,000.

Estimated Number of Responses per Respondent: 1.

Estimated Total Annual Burden on Respondents: 30,500 hours.

Estimated Annual Cost to the Public: $377,000.

Comments regarding the following issues should be sent to the Desk

Officer for Agriculture, Office of Information and Regulatory Affairs,

Office of Management and Budget, Washington, D.C. 20503 and to Phillip

D. Elder, Senior Loan Officer, Loan Servicing Division, Farm Service

Agency, USDA, P.O. Box 2415, Ag Box Code 0523, Washington, D.C. 20013-

2415; telephone (202) 720-9053: (a) whether the collection of

information is necessary for the proper performance of the functions of

the agency, including whether the information will have practical

utility; (b) the accuracy of the agency's estimate of burden including

the validity of the methodology and assumptions used; (c) ways to

enhance the quality, utility and clarity of the information to be

collected; (d) ways to minimize the burden of the collection of

information on those who are to respond, including through the use of

appropriate automated, electronic, mechanical, or other technological

collection techniques or other forms of information technology.

Copies of the information collection may be obtained from Phillip

Elder at the above address. All responses to this notice will be

summarized and included in the request for OMB approval. All comments

will also become a matter of public record.

OMB is required to make a decision concerning the collection of

information contained in these proposed regulations between 30 and 60

days after publication of this document in the Federal Register.

Therefore, a comment to OMB is best assured of having its full effect

if OMB receives it within 30 days of publication. This does not affect

the deadline for the public to comment to the Department on the

proposed regulations.

Unfunded Mandates

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public

Law 104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on state, local, and tribal

governments or the private sector. Under section 202 of the UMRA,

agencies generally must prepare a written statement, including a cost

benefit analysis, for proposed and final rules with ``Federal

mandates'' that may result in expenditures to State, local, and tribal

governments, in the aggregate, or to the private sector, of $100

million or more in any 1 year. When such a statement is needed for a

rule, section 205 of the UMRA generally requires agencies to identify

and consider a reasonable number of regulatory alternatives and adopt

the least costly, more cost effective or least burdensome alternative

that achieves the objectives of the rule.

The rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) for State, local, and tribal

governments or the private sector. Thus, today's rule is not subject to

the requirements of sections 202 and 205 of the UMRA.

Discussion of Proposed Rule

The proposed changes involve the credit programs formerly

administered by FmHA. Under the authority of the Department of

Agriculture Reorganization Act of 1994, Pub. L. 10-354 (October 10,

1994), FmHA was abolished on October 20, 1994, and its functions were

transferred to the Agencies.

This rule proposes to remove the existing administrative offset

regulation which was used by the Agencies when they were a part of the

former FmHA. The Department of Agriculture has an existing

administrative offset regulation at 7 CFR part 3, subpart B and the

administrative offset regulation of the former FmHA in 7 CFR part 1951,

subpart C is redundant. The Department of Agriculture regulation

complies with the requirements of 31 U.S.C. 3716, as amended by the

Debt Collection Improvement Act of 1996, chapter 10 of Pub. L. 104-134

(April 26, 1996) and satisfies the administrative offset needs of the

Agencies.

Section 1951.103(b) of Title 7 of the Code of Federal Regulations,

which is part of the existing administrative offset procedure which the

Agencies are proposing to remove, requires a borrower's account to have

been accelerated prior to the use of administrative offset to collect

part of the past due debt. One of the intended effects of this proposed

rule is to eliminate the acceleration prerequisite to the use of

administrative offset. The Department of Agriculture administrative

offset regulation does not impose such a prerequisite. There is no

statutory requirement that a past due account must have been

accelerated prior to offsetting a borrower's federal payments.

Specifically, the acceleration prerequisite to administrative

offset means that a FSA farm credit program borrower's account has to

be accelerated and the borrower's appeal rights exhausted before FSA

can offer any contract payments received by the borrower from programs

of the former Agricultural Stabilization and Conservation Service

(ASCS) (contract payments). Acceleration is one of the last steps FSA

takes before liquidating a farm credit program borrower's account. This

process may take years while the borrower continues to receive contract

payments. After the reorganization of ASCS and FmHA into FSA, an

acceleration prerequisite results in the incongruous situation of FSA

having to make substantial contract payments to a farmer or rancher

that is seriously delinquent on his or her farm program debts to FSA.

FSA proposes to remove the acceleration barrier to administrative

offset in order to enhance collection of delinquent debts thereby

reducing losses. While FSA could have revised the existing

administrative offset procedure in 7 CFR part 1951, subpart C, this

would mean continuing a regulation which is redundant with the existing

Department of Agriculture administrative offset regulation. Removing

unnecessary regulations is a goal of the National Performance Review,

so the Agencies have determined that the adoption of the Department of

Agriculture administrative offset regulation will serve the dual

purpose of eliminating redundancy and removing the acceleration

prerequisite to administrative offset.

[[Page 45910]]

While section 534 of the Housing Act of 1949 requires that

regulations issued pursuant to title V of the Housing Act of 1949

generally must be published for a 60-day comment period, this

regulation is being proposed to implement 31 U.S.C. 3716, not the

Housing Act of 1949. Therefore, the notice and comment provisions of

section 534 are inappropriate to this regulation.

List of Subjects in 7 CFR Part 1951

Accounting, Accounting Servicing, Credit, Loan Programs--

Agriculture, Loan Programs--Housing and community development, Low and

moderate income housing loans--Servicing.

Accordingly, 7 CFR part 1951 is proposed to be amended as follows:

PART 1951--GENERAL

1. The authority citation for part 1951 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

2. The title of part 1951, subpart C is revised to read as follows:

Subpart C--Offsets of Federal Payments to Agency Borrowers

3. Section 1951.102 is revised to read as follows:

Sec. 1951.102 Administrative offset.

Action to effect administrative offset to recover delinquent claims

may be taken in accordance with the procedures in 7 CFR part 3, subpart

B.

4. Sections 1951.103 through 1951.105 are removed and reserved.

Signed in Washington, DC, on August 23, 1996.

Jill Long Thompson,

Under Secretary for Rural Development.

Eugene Moos,

Under Secretary for Farm and Foreign Agriculture Services.

[FR Doc. 96-22160 Filed 8-29-96; 8:45 am]

BILLING CODE 3410-05-P