[Federal Register Volume 71, Number 223 (Monday, November 20, 2006)]
[Rules and Regulations]
[Pages 67032-67034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9262]


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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: Final rule.

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SUMMARY: Rural Business-Cooperative Service (RBS) amends its 
regulations for the Business and Industry (B&I) Guaranteed Loan Program 
by modifying the regulation regarding personal and corporate 
guarantors. This action will standardize the guarantor process. The 
Agency has created 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: This rule is effective December 20, 2006.

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 final 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 requires intergovernmental 
consultation with State and local officials. Intergovernmental 
consultation is required in the manner delineated in RD Instruction 
1940-J and 7 CFR part 3015, subpart V, ``Intergovernmental Review of 
Rural Development Programs and Activities.''

Civil Justice Reform

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

[[Page 67033]]

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 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 
one 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 (5 U.S.C. 601-
602), RBS has determined that this action would not have a significant 
economic impact on a substantial number of small entities. 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 pre-empt tribal 
laws. USDA has determined that the 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, this rule is not 
subject to the requirements of Executive Order 13175.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the 
information collection requirements contained in this regulation has 
been approved by OMB control number 0570-0017.

E-Government Act Compliance

    The Rural Business-Cooperative Service is committed to complying 
with the E-Government Act, to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

Discussion

    Pursuant to the Debt Collection Improvement Act of 1996 (DCIA), the 
Agency is required to send the 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 will 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.

Comments on the Proposed Rule and Responses

    A proposed rule was published on April 7, 2005, [70 FR 17616-17618] 
and no comments were received.

List of Subjects in 7 CFR Part 4279

    Loan programs--Business and industry--Rural development assistance, 
Rural areas.


0
Therefore, chapter XLII, title 7, Code of Federal Regulations, is 
amended as follows:

PART 4279--GUARANTEED LOANMAKING

0
1. The authority citation for part 4279 continues to read as follows:

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

Subpart B--Business and Industry Loans

0
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 an Agency approved unconditional guarantee 
form. 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.


[[Page 67034]]


    Dated: October 4, 2006.
William F. Hagy III,
Acting Administrator, Rural Business-Cooperative Service.
[FR Doc. 06-9262 Filed 11-17-06; 8:45 am]
BILLING CODE 3410-XY-P