§ 1946. — Liability of borrower.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC1946]
TITLE 7--AGRICULTURE
CHAPTER 50--AGRICULTURAL CREDIT
SUBCHAPTER II--OPERATING LOANS
Sec. 1946. Liability of borrower
(a) Determination of interest rates
(1) The Secretary shall make all loans under this subchapter upon
the full personal liability of the borrower and upon such security as
the Secretary may prescribe. The interest rates on such loans, except
for guaranteed loans and loans provided in paragraphs (2) and (3),\1\
shall be as determined by the Secretary, but not in excess of the
current average market yield on outstanding marketable obligations of
the United States with remaining periods to maturity comparable to the
average maturities of such loans, plus an additional charge not to
exceed 1 per centum as determined by the Secretary, which charge shall
be deposited in the Rural Development Insurance Fund or the Agricultural
Credit Insurance Fund, as appropriate, and adjusted to the nearest one-
eighth of 1 per centum. The interest rate on any guaranteed loan made
under this subchapter shall be such rate as may be agreed upon by the
borrower and lender, but not in excess of a rate as may be determined by
the Secretary.
---------------------------------------------------------------------------
\1\ See References in Text note below.
---------------------------------------------------------------------------
(2) The interest rate on any loan (other than a guaranteed loan) to
a low income, limited resource borrower under this subchapter shall not
be--
(A) greater than the sum of--
(i) an amount that does not exceed one-half of the current
average market yield on outstanding marketable obligations of
the United States with maturities of 5 years; and
(ii) an amount not exceeding 1 percent per year, as the
Secretary determines is appropriate; or
(B) less than 5 percent per year.
(b) Payment period; consolidation and rescheduling of loans
Loans made under this subchapter shall be payable in not to exceed
seven years. The Secretary may consolidate or reschedule outstanding
loans for payment over a period not to exceed seven years (or, in the
case of loans for farm operating purposes, fifteen years) from the date
of such consolidation or rescheduling, and the amount of unpaid
principal and interest of the prior loans so consolidated or rescheduled
shall not create a new charge against any loan levels authorized by law.
A new loan may be included in a consolidation. Such new loan shall be
charged against any loan level authorized by law. Except as otherwise
provided for farm loans under section 1981b of this title, the interest
rate on such consolidated or rescheduled loans, other than guaranteed
loans, may be changed by the Secretary to a rate not to exceed the rate
being charged for loans made under this subchapter at the time of the
consolidation or rescheduling. The interest rate on any guaranteed loan
under this subchapter that may be consolidated or rescheduled for
payment shall be such rate as may be agreed upon by the borrower and the
lender, but not in excess of a rate as may be determined by the
Secretary.
(c) Line-of-credit loans
(1) In general
A loan made or guaranteed by the Secretary under this subchapter
may be in the form of a line-of-credit loan.
(2) Term
A line-of-credit loan under paragraph (1) shall terminate not
later than 5 years after the date that the loan is made or
guaranteed.
(3) Eligibility
For purposes of determining eligibility for a farm operating
loan under this subchapter, each year during which a farmer or
rancher takes an advance or draws on a line-of-credit loan the
farmer or rancher shall be considered to have received an operating
loan for 1 year.
(4) Termination of delinquent loans
If a borrower does not pay an installment on a line-of-credit
loan on schedule, the borrower may not take an advance or draw on
the line-of-credit, unless the Secretary determines that--
(A) the borrower's failure to pay on schedule was due to
unusual conditions that the borrower could not control; and
(B) the borrower will reduce the line-of-credit balance to
the scheduled level at the end of--
(i) the production cycle; or
(ii) the marketing of the borrower's agricultural
products.
(5) Agricultural commodities
A line-of-credit loan may be used to finance the production or
marketing of an agricultural commodity that--
(A) is eligible for a price support program of the
Department of Agriculture; or
(B) was eligible for a price support program of the
Department of Agriculture on the day before April 4, 1996.
(Pub. L. 87-128, title III, Sec. 316, Aug. 8, 1961, 75 Stat. 311; Pub.
L. 90-488, Sec. 10, Aug. 15, 1968, 82 Stat. 771; Pub. L. 95-334, title
I, Sec. 117, Aug. 4, 1978, 92 Stat. 426; Pub. L. 97-35, title I,
Sec. 160(b), Aug. 13, 1981, 95 Stat. 377; Pub. L. 98-258, title VI,
Sec. 604(b), Apr. 10, 1984, 98 Stat. 139; Pub. L. 101-624, title XVIII,
Sec. 1803(b), Nov. 28, 1990, 104 Stat. 3818; Pub. L. 104-127, title VI,
Secs. 614, 661(g), Apr. 4, 1996, 110 Stat. 1089, 1107.)
References in Text
Paragraph (3), referred to in subsec. (a)(1), was repealed by Pub.
L. 104-127, title VI, Sec. 661(g), Apr. 4, 1996, 110 Stat. 1107.
Amendments
1996--Subsec. (a)(3). Pub. L. 104-127, Sec. 661(g), struck out par.
(3) which read as follows: ``The interest rate on any loan (other than a
guaranteed loan) made or insured under clause (5) of section 1942(a) of
this title for activities that involve the use of prime farmland as
defined in section 1927(a)(6)(C) of this title shall be the interest
rate otherwise applicable under this section increased by 2 per centum
per annum.''
Subsec. (c). Pub. L. 104-127, Sec. 614, added subsec. (c).
1990--Subsec. (a)(2). Pub. L. 101-624 amended par. (2) generally.
Prior to amendment, par. (2) read as follows: ``The interest rate on any
loan (other than a guaranteed loan) to a low-income, limited resource
borrower under this subchapter shall be the interest rate otherwise
applicable under this section reduced by 3 per centum per annum.''
1984--Subsec. (b). Pub. L. 98-258 inserted ``(or, in the case of
loans for farm operating purposes, fifteen years)'' and substituted
``Except as otherwise provided for farm loans under section 1981b of
this title, the interest rate'' for ``The interest rate''.
1981--Subsec. (a). Pub. L. 97-35 redesignated existing provisions as
par. (1), inserted reference to loans guaranteed under pars. (2) and
(3), and added pars. (2) and (3).
1978--Pub. L. 95-334 designated existing provisions as subsec. (a),
inserted provisions relating to depositing of charges and provisions
relating to interest rates on guaranteed loans, struck out provisions
relating to payment and renewal of loans, and added subsec. (b).
1968--Pub. L. 90-488 substituted provisions for determination of
interest rate by taking into consideration current average market yield
on outstanding marketable obligations of the United States with
remaining periods to maturity comparable to the average maturities of
the loans, adjusted to the nearest one-eighth of 1 per centum, plus not
to exceed 1 per centum per annum as determined by the Secretary, for
former prohibition of an interest rate exceeding 5 per centum per annum.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97-35 applicable to loans made after Sept. 30,
1981, see section 160(c) of Pub. L. 97-35, set out as a note under
section 1927 of this title.
