[Federal Register Volume 64, Number 222 (Thursday, November 18, 1999)]
[Rules and Regulations]
[Pages 62971-62973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29866]



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 Rules and Regulations
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  Federal Register / Vol. 64, No. 222 / Thursday, November 18, 1999 / 
Rules and Regulations  

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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.

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    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