Providing Notice to Delinquent Farm Loan Program Borrowers of the Potential for Cross-Servicing

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1951

RIN 0560--AF89

Providing Notice to Delinquent Farm Loan Program Borrowers of the

Potential for Cross-Servicing

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,

Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Debt Collection Improvement Act of 1996 requires Federal

agencies to transfer delinquent nontax debt to the Department of the

Treasury for debt collection action, known as cross-servicing. The Farm

Service Agency is revising to provide notice to delinquent Farm Loan

Program borrowers of the potential for referral of their debt for

cross-servicing. The revisions also establish time limits for applying

for debt settlement in order to implement the Government wide cross-

servicing program.

EFFECTIVE DATE: November 18, 1999.

FOR FURTHER INFORMATION CONTACT: David Spillman, Chief, Direct Loan

Servicing Branch, telephone (202) 720-0900, electronic mail:

[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been reviewed under Executive Order 12866 and has

been determined to be not significant and has not been reviewed by OMB.

Regulatory Flexibility Act

In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-

602), the undersigned has determined and certified by signature of this

document that this rule will not have a significant economic impact on

a substantial number of small entities. New provisions included in this

rule will not impact small entities to a greater extent than large

entities. Therefore, a regulatory flexibility analysis was not

performed.

Executive Order 12612

It has been determined that under section 6(a) of Executive Order

12612, Federalism, that this rule does not have sufficient federalism

implications to warrant the preparation of a Federalism Assessment. The

provisions contained in this rule will not have a substantial direct

effect on States or their political subdivisions or on the distribution

of power and responsibilities among the various levels of government.

Environmental Evaluation

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, 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 Executive Order

12988, Civil Justice Reform. In accordance with this order: (1) all

State and local laws and regulations that are in conflict with this

rule will be preempted; (2) except as specifically stated in this rule,

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 seeking 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 within this rule

are excluded from the scope of Executive Order 12372, which requires

intergovernmental consultation with State and local officials.

The Unfunded Mandates Reform Act of 1995

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

requires Federal agencies to assess the effects of their regulatory

actions on State, local, and tribal governments or 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 requires FSA to prepare a written

statement, including a cost benefit assessment, for proposed and final

rules with ``Federal mandates'' that may result in such expenditures

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 under Title II

of the UMRA, for State, local, and tribal governments or the private

sector. Thus, this rule is not subject to the requirements of sections

202 and 205 of UMRA.

Paperwork Reduction Act

The amendments to 7 CFR part 1951, subpart S contained in this rule

require no revisions to the information collection requirements that

were previously approved by OMB (0560-0161) under the provisions of 44

U.S.C. chapter 35.

Federal Assistance Program

These changes affect the following FSA programs as listed in the

Catalog of Federal Domestic Assistance:

10.404--Emergency Loans

10.406--Farm Operating Loans

10.407--Farm Ownership Loans

Background

Section 331D of the Consolidated Farm and Rural Development Act

(CONACT), requires the Farm Service Agency (FSA) to provide delinquent

Farm Loan Program (FLP) borrowers with a summary of FSA's delinquency

loan servicing and debt settlement programs and an explanation of all

filing requirements and deadlines. Section 331D(c) of the CONACT

requires this notice to be published in the agency's regulations.

Attachment 1 to Exhibit A of 7 CFR part 1951, subpart S was issued to

meet these statutory

[[Page 62972]]

requirements. Attachment 1 to Exhibit A of 7 CFR part 1951, subpart S

is sent to FLP borrowers who are at least 90 days past due or who are

in nonmonetary default.

The Department of the Treasury (Treasury) has promulgated

regulations in 31 CFR part 285 (64 FR 22906, April 28, 1999)

implementing the Debt Collection Improvement Act of 1996. The Treasury

rule is based on 31 U.S.C. 3711(g)(1)(A) which requires executive

agencies to transfer delinquent nontax debt to Treasury for action to

collect the debt or terminate the claim.

Cross-servicing is a new Government wide program, administered by

Treasury, which will also impact the final collection and resolution of

delinquent FLP debt. Sections V and VII of Attachment 1 of Exhibit A of

part 1951, subpart S, are being revised to state that borrowers must

apply for debt settlement within 30 days of receiving an additional

debt settlement notice. A cross reference to the section discussing

cross-servicing has been added. Attachment 3 of Exhibit A of this

subpart has been similarly revised. Section IX of Attachment 1 is being

revised to address the provisions of cross-servicing. As revised, FLP

borrowers are informed of the conditions for account referral for

cross-servicing and information on Treasury's cross-servicing

activities.

The conditions for referral of debt for cross-servicing have been

established by Treasury in 31 CFR 285.12(c) and (d). Based on

Treasury's requirements, in order for a delinquent FLP account to be

referred for cross-servicing, all security must have been liquidated

and the debt must be legally enforceable. In addition, delinquent FLP

borrowers will be notified that they have 30 days to submit an

acceptable debt settlement offer to FSA. If a satisfactory debt

settlement is not submitted or FSA rejects a debt settlement offer, the

account will be referred to Treasury for collection by cross-servicing

after all appeal rights are exhausted. Referral of debt to Treasury for

cross-servicing is not an appealable action because it is required by

statute.

Treasury has outlined cross-servicing activities in 31 CFR 285.12.

As revised, section IX of Attachment 1 briefly describes Treasury's

collection activities under cross-servicing. If debt is referred for

cross-servicing, Treasury may take action to collect the debt by offset

or garnishment, refer the debt to a private collection agency for

collection, or refer the debt for collection by the U.S. Department of

Justice (DOJ). Collection fees may be charged to the borrower when

collection is made. In addition, FSA will report the debt to a credit

bureau. After an account is referred to Treasury, any debt settlement

offer must be submitted to Treasury, or its private collection agency

contractor. If the account is referred to DOJ for collection, the

settlement offer must be submitted to DOJ.

Good Cause Statement: FSA is publishing this rule as a final rule

without notice and opportunity for public comment based on its finding

that notice and public comment are unnecessary and contrary to the

public interest. Referral of all agencies', including FSA's, nontax

debt or claims, to Treasury for cross-servicing is required by 31

U.S.C. 3711(g)(1)(A), which requires Treasury referral of all nontax

debt or claims due the United States for a period of 180 days. Treasury

published an interim final rule with a request for comments on April 2,

1998, at 63 FR 16353. Treasury's interim final rule was effective

immediately based on its good cause finding that the requirement to

transfer debt to Treasury for debt collection became effective on April

26, 1996, the date of enactment of the Debt Collection Improvement Act.

On April 28, 1999, at 64 FR 22906, Treasury promulgated the final rule.

Therefore, FSA's compliance with the Government wide requirements that

took effect on April 2, 1998, make additional public comment

unnecessary. It would not be in the public interest for FSA to provide

incomplete information about the debt settlement program if its loan

servicing notice did not immediately discuss Treasury cross-servicing

and its impact on FSA's debt settlement programs. For the reasons

stated above, FSA for good cause also finds that making this rule

immediately effective serves the public interest.

List of Subjects in 7 CFR Part 1951

Accounting Servicing, Credit, Debt Restructuring, Loan Programs-

Agriculture, Loan Programs-Housing and Community Development.

Accordingly, 7 CFR part 1951 is amended as follows:

PART 1951--SERVICING AND COLLECTIONS

1. The authority citation for part 1951 continues to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1932; 7 U.S.C. 1989; 42 U.S.C.

1480.

Subpart S--Farm Loan Programs Account Servicing Policy

2. Revise the first paragraph of Section V of Attachment 1 to

Exhibit A to Subpart S to read as follows:

Exhibit A--Notice of the Availability of Loan Servicing and Debt

Settlement Programs for Delinquent Farm Borrowers

* * * * *

Attachment 1 * * *

V. Debt Settlement Programs

Purpose

These programs apply after it has been determined that primary

loan service programs cannot help you. You may be eligible for both

debt settlement and homestead protection. If you do not have FSA

collateral you will need to apply for debt settlement only. Under

these programs, the debt you owe FSA may be settled for less than

the amount you owe. Please apply for debt settlement from FSA by

submitting an application for debt settlement on Form RD 1956-1

within 30 days of receiving an additional debt settlement notice.

See section IX. These programs are subject to the discretion of the

agency and are not a matter of entitlement or right.

* * * * *

3. Revise the eighth paragraph of section VII of Attachment 1 to

Exhibit A to Subpart S to read as follows:

* * * * *

Attachment 1 * * *

VII. * * *

Consideration for Debt Settlement Programs

If you wish to be considered for debt settlement, you will need

to request and return a completed Form RD 1956-1. You may request

debt settlement from FSA within 30 days of receiving an additional

debt settlement notice. See section IX. Usually, the most

appropriate time for making this request is when FSA has determined

that Primary Loan Servicing options will not provide the best net

recovery to the Government and you are requesting preservation loan

servicing. If you no longer have any security remaining for the

outstanding FSA loans, you may want to request debt settlement

instead of primary and preservation loan servicing.

* * * * *

4. Revise section IX of Attachment 1 to Exhibit A to Subpart S to

read as follows:

* * * * *

Attachment 1 * * *

IX. Acceleration and Foreclosure

If you do not appeal an adverse determination or if you are

denied relief on appeal, FSA will accelerate your loan account and

make demand for payment of the whole debt. FSA will stop allowing

you to use any of your crop, livestock, and milk checks, on which

they have a claim, to pay for living and operating expenses. FSA

will repossess the collateral or start legal foreclosure or

liquidation proceedings to take and sell the collateral, including

your equipment, livestock, crops, and land. FSA will continue to

take by administrative offset, money which FSA and other Federal

Government agencies owe you.

[[Page 62973]]

FSA may refrain from taking these actions if you agree to do

one, or a combination of the following actions, within an agreed

upon time, with FSA's approval:

(1) Sell all the collateral for the loan at market value.

(2) Convey (legally transfer) the collateral to FSA. You may

apply or reapply for homestead protection jointly with this action,

even if you applied before and were not accepted.

(3) Apply to transfer the collateral to someone else and have

that person assume all or part of the FSA debt. (This is called

transfer and assumption.)

If any of these options, or foreclosure, result in payment of

less than you legally owe, the servicing official will send you a

notice providing you with 30 days to submit a debt settlement

application. If you do not respond in a timely manner, your account

will be sent to the U.S. Department of the Treasury (Treasury) for

collection through cross-servicing. If you submit a debt settlement

application within the required time frame, and the application is

rejected, your debt will be referred to Treasury for cross-servicing

after all appeal rights on the debt settlement application are

exhausted. Referral of debt to Treasury for cross-servicing is not

an appealable action. If your debt is referred for cross-servicing,

Treasury may:

(1) Take action to collect the debt by offset or garnishment,

including offset of tax refunds and garnishment of salary,

(2) Refer the debt to a private collection agency for

collection, or

(3) Refer the debt for collection by the U.S. Department of

Justice (DOJ).

Collection fees may be charged to you when collections are made.

In addition, FSA will report the debt to a credit bureau. After your

account is referred to Treasury, any debt settlement offer must be

submitted to Treasury, or its private collection agency contractor.

If your account is referred to DOJ for collection, your offer must

be made to DOJ.

* * * * *

5. Revise the seventh paragraph of Attachment 3 to Exhibit A to

Subpart S to read as follows:

* * * * *

Attachment 3 * * *

Purpose of Debt Settlement Programs

These programs apply after it has been determined that primary

loan service programs cannot help you. You may be eligible for both

debt settlement and preservation loan service programs. If you no

longer have FSA collateral you will need to apply for debt

settlement only. Under these programs, the debt you owe FSA may be

settled for less than the amount you owe. You may apply for debt

settlement from FSA by requesting and submitting an application for

debt settlement on Form RD 1956-1 within 30 days of receiving an

additional debt settlement notice. See section IX of 1951-S, Exhibit

A, Attachment 1, which is included with this notice.

* * * * *

Signed in Washington, D.C., on November 4, 1999.

August Schumacher, Jr.,

Under Secretary for Farm and Foreign Agricultural Services.

[FR Doc. 99-29866 Filed 11-17-99; 8:45 am]

BILLING CODE 3410-05-P