[Federal Register Volume 70, Number 66 (Thursday, April 7, 2005)]
[Proposed Rules]
[Pages 17616-17618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6869]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4279

RIN 0570-AA54


Business and Industry Guaranteed Loan Program

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Business-Cooperative Service (RBS) proposes to amend 
its regulation for the Business and Industry (B&I) Guaranteed Loans by 
modifying the regulations regarding personal and corporate guarantors. 
This action will standardize the guarantor process. The Agency will 
create a guarantor form which will be used to obtain the personal or 
corporate guarantee of anyone owning greater than 20 percent interest 
in the borrower. The effect of this rule is to allow the Agency to use 
all remedies available to pursue collection from guarantors, including 
offset under the Debt Collection Improvement Act.

DATES: Written or e-mail comments must be received on or before June 6, 
2005, to be assured of consideration.

ADDRESSES: You may submit comments to this rule by any of the following 
methods:
     Agency Web site: http://rdinit.usda.gov/regs/. Follow 
instructions for submitting comments on the Web site.
     E-Mail: [email protected]. Include RIN No. 0570-AA54 in 
the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20205-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at 300 7th Street, SW., 7th Floor, address listed 
above.

FOR FURTHER INFORMATION CONTACT: David Lewis, Business and Industry 
Loan Servicing Branch, Rural Business-Cooperative Service, U.S. 
Department of Agriculture, STOP 3224, 1400 Independence Avenue, SW., 
Washington, DC 20250-3224, telephone (202) 690-0797, or by e-mail to 
[email protected].

SUPPLEMENTARY INFORMATION:

Classification

    This proposed rule has been reviewed under Executive Order 12866 
and determined not to be significant and has not been reviewed by the 
Office of Management and Budget (OMB).

Programs Affected

    The Catalog of Federal Domestic Assistance number for the program 
impacted by this action is 10.768, Business and Industry Loans.

Intergovernmental Review

    Business and Industry Guaranteed Loans are subject to the 
provisions of Executive Order 12372, which require intergovernmental 
consultation with State and local officials. RBS will conduct 
intergovernmental consultation in the manner delineated in and 7 CFR 
part 3015, subpart V, ``Intergovernmental Review of Rural Development 
Programs and Activities.''

Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
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 this rule; and (3) 
administrative proceedings of the National Appeals Division (7 CFR

[[Page 17617]]

part 11) must be exhausted before bringing suit in court challenging 
action taken under this rule.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' RBS has determined that this 
action does not constitute a major Federal action significantly 
affecting the quality of the human environment, and in accordance with 
the National Environmental Policy Act (NEPA) of 1969, 42 U.S.C. 4321 et 
seq, this regulation is a Categorical Exclusion. Loan applications will 
be reviewed individually to determine compliance with NEPA.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of, Pub. 
L. 104-4 of 1995, establishes requirements for Federal Agencies to 
assess the effects of their regulatory actions on State, local, and 
tribal governments and the private sector. Under section 202 of the 
UMRA, RBS 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, or 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 UMRA generally requires RBS 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. This 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, this 
rule is not subject to the requirements of sections 202 and 205 of the 
UMRA.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act, RBS has 
determined that this action would not have a significant economic 
impact on a substantial number of small entities, because the action 
will not affect a significant number of small entities, as defined by 
the Regulatory Flexibility Act (5 U.S.C. 601). RBS made this 
determination based on the fact that this regulation only impacts those 
who choose to participate in the program. Small entity applicants will 
not be impacted to a greater extent than large entity applicants.

Executive Order 13132

    It has been determined that, under Executive Order 13132, 
Federalism, 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.

Executive Order 13175

    Executive Order 13175, Consultation and Coordination with Indian 
Tribal Governments, imposes requirements on USDA in the development of 
regulatory policies that have tribal implications or preempt tribal 
laws. USDA has determined that the proposed regulation does not have a 
substantial direct effect on one or more Indian tribe or on either the 
relationship or the distribution of powers and responsibilities between 
the Federal Government and the Indian tribes. Thus, the proposed rule 
is not subject to the requirements of Executive Order 13175.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the Agency 
will seek OMB approval of the reporting requirements contained in this 
regulation. These reporting and recordkeeping requirements have been 
previously approved under OMB control number 0570-0017. The estimate of 
burden is as follows:
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 30 minutes per response.
    Respondents: Lenders and business owners.
    Estimated Number of Respondents: 142 (based on 1 year).
    Estimated Number of Responses per Respondent: 1.
    Estimated Number of Responses: 142.
    Estimated Total Annual Burden of Respondents: 71 hours.
    Copies of this information collection can be obtained from Cheryl 
Thompson, Regulations and Paperwork Management Branch, Support Services 
Division at (202) 692-0043.
    Comments: Comments are invited on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of RBS, including whether the information will have 
practical utility; (b) the accuracy of RBS's estimate of the burden of 
the proposed collection of information including the validity of the 
methodology and assumptions used; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; and (d) ways 
to minimize the burden of the collection of the 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. Comments may be sent to Cheryl 
Thompson, Regulations and Paperwork Management Branch, Support Services 
Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 
1400 Independence Ave., SW., Washington DC 20550. All responses to the 
notice will be summarized and included in the request for OMB approval. 
All comments will also become a matter of public record.

Discussion

    Pursuant to the Debt Collection Improvement Act of 1996 (DCIA), the 
Agency is required to send debt owed to the Government to the 
Department of the Treasury (Treasury) for collection. The DCIA covers 
both guaranteed and direct loans made by the Agency. Some ambiguity has 
existed regarding the Agency's ability to collect from guarantors of 
the borrower's loan. This rule will end that ambiguity by clearly 
making guarantors personally liable for any claims paid by the 
Government.
    The Agency proposes to establish more uniformity in the guarantees 
being obtained by lenders. This should result in the program being 
administered more consistently and the Government recovering more of 
its loss claims. Currently, guaranteed lenders prepare non-uniform, 
personal, or corporate guarantees. When there is a loss on the 
guaranteed loan, the lender pursues these guarantees with mixed 
recovery results. By implementing this rule, the Agency will treat all 
guarantors consistently, collect more money on its loss claims, and 
rectify any ambiguities regarding its ability to refer these debts to 
Treasury.

List of Subjects in 7 CFR Part 4279

    Loan programs--business and industry--rural development assistance, 
Rural areas.

    Therefore, chapter XLII, title 7, Code of Federal Regulations, is 
amended as follows:

PART 4279--GUARANTEED LOANMAKING

    1. The authority citation for part 4279 continues to read as 
follows:

    Authority: 7 U.S.C 1989.

[[Page 17618]]

Subpart B--Business and Industry Loans

    2. Section 4279.149 is revised to read as follows:


Sec.  4279.149  Personal and Corporate Guarantee.

    (a) Unconditional personal and corporate guarantees are part of the 
collateral for the loan but are not considered in determining whether a 
loan is adequately secured for loanmaking purposes. Agency approved 
personal and corporate guarantees for the full term of the loan and at 
least equal to the guarantor's percent interest in the borrower, times 
the loan amount are required from those owning greater than a 20 
percent interest in the borrower, unless the lender documents to the 
Agency's satisfaction that collateral, equity, cashflow, and 
profitability indicate an above-average ability to repay the loan. The 
guarantors will execute Form RD 4279-14, ``Unconditional Guarantee.'' A 
signature section must be created and in accordance with applicable 
law. The signature block must include the legal name of the individual 
or entity signing the Guarantee and, where applicable, the name and 
title of the authorized representative who will execute the document on 
its behalf. For instructions on how to complete an enforceable 
signature block that complies with applicable state law, consult with 
the Regional Attorney. When warranted by an Agency assessment of 
potential financial risk, Agency approved guarantees may also be 
required of parent, subsidiaries, or affiliated companies (owning less 
than a 20 percent interest in the borrower) and require security for 
any guarantee provided under this section.
    (b) Exceptions to the requirement for personal guarantees must be 
requested by the lender and concurred by the Agency approval official 
on a case-by-case basis. The lender must document that collateral, 
equity, cashflow, and profitability indicate an above-average ability 
to repay the loan.

    Dated: March 24, 2005.
Peter J. Thomas,
Administrator, Rural Business--Cooperative Service.
[FR Doc. 05-6869 Filed 4-6-05; 8:45 am]
BILLING CODE 3410-XY-P