Servicing and Collections-Unauthorized Recipients of Financial Assistance, 75851-75854 [06-9763]
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75851
Rules and Regulations
Federal Register
Vol. 71, No. 243
Tuesday, December 19, 2006
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 1951
Servicing and Collections—
Unauthorized Recipients of Financial
Assistance
Rural Housing Service, Rural
Business-Cooperative Service, Rural
Utilities Service, Farm Service Agency,
USDA.
ACTION: Final rule.
AGENCY:
This action amends the
servicing regulations that apply when it
is determined that unauthorized
recipients have received financial
assistance under USDA Business,
Cooperative, and Community Facility
loan and grant programs. The changes
make clear that the first demand letter
notifying the recipient of the Agency’s
determination serves as the initial step
in the Agency’s collection efforts, and
that it may serve as the basis for the
recipient’s appeal rights. The terms of
the first demand letter remain in full
force and effect, unless the demand
letter is subsequently amended in
writing by the Agency after discussions
with the recipient or modified as a
result of judicial proceedings.
DATES: Effective Date: This rule is
effective on December 19, 2006.
FOR FURTHER INFORMATION CONTACT: Bill
Hagy, Deputy Administrator, Rural
Development Business Programs,
USDA, Stop 3220, Room 5811, 1400
Independence Ave., SW., Washington,
DC 20250, telephone (202) 720–7287, or
internet e-mail
‘‘bill.hagy@wdc.usda.gov’’.
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SUMMARY:
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SUPPLEMENTARY INFORMATION:
Classification
This action is not subject to the
provisions of Executive Order 12866
because it pertains to internal Agency
management only. Accordingly, public
notice and comment are not warranted,
and this action is published as a final
rule rather than as a proposed
rulemaking.
Programs Affected
The Catalog of Federal Domestic
Assistance Program numbers assigned to
these programs are: 10.352 Value-Added
Producer Grants, 10.353 National Rural
Development Partnership, 10.767
Intermediary Relending Program,
10.768, Business and Industrial Loans,
10.769 Rural Business Enterprise
Grants, 10.771 Rural Cooperative
Development Grants, 10.772
Empowerment Zones Program, 10.773
Rural Business Opportunity Grants,
10.775 Renewable Energy Systems and
Energy Efficiency Improvements
Program, 10.776 Agriculture Innovation
Centers, 10.854 Rural Economic
Development Loans and Grants, and
10.766 Community Facilities Loans and
Grants,
Paperwork Reduction Act
This rule is not subject to the
Paperwork Reduction Act.
Environmental Impact Statement
This document has been reviewed in
accordance with 7 CFR part 1940,
Subpart G, Environmental Program. It is
the determination of the Rural Business
and Cooperative Services that this
action does not constitute a major
Federal action significantly affecting the
environment. Therefore, in accordance
with the National Environmental Policy
Act of 1969, an Environmental Impact
Statement is not required.
Executive Order 12988
This rule has been reviewed in
accordance with E.O. 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 to this
rule; and (3) administrative proceedings
in accordance with 7 CFR part 11 must
be exhausted before bringing suit in
court challenging action taken under
this rule unless those regulations
PO 00000
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specifically allow bringing suit at an
earlier time.
The Unfunded Mandates Reform Act of
1995
Title II of the Unfunded Mandates
Reform Act of 1995 (UMRA) 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, USDA
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 USDA 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. Therefore, this rule is
not subject to the requirements of
sections 202 and 205 of UMRA.
Regulatory Flexibility Act
In compliance with the Regulatory
Flexibility Act (5 U.S.C. 601–612), 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. The
Regulatory Flexibility Act is intended to
encourage Federal agencies to utilize
innovative administrative procedures in
dealing with individuals, small
businesses, small organizations, and
small governmental bodies that would
otherwise be unnecessarily adversely
affected by Federal regulations. No
regulatory flexibility analysis under the
Regulatory Flexibility Act is necessary.
Executive Order 13132, Federalism
The policies contained in this rule do
not have any substantial direct effect on
States, the relationship between the
national government and the States, or
the distribution of power and
responsibilities among the various
levels of government. Nor does this rule
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Federal Register / Vol. 71, No. 243 / Tuesday, December 19, 2006 / Rules and Regulations
impose substantial direct compliance
costs on State and local governments.
Therefore, consultation with the States
is not required.
Discussion
This rule revises the servicing
regulations that apply when it has been
determined that an unauthorized
recipient has received financial
assistance under the USDA Rural
Development Business and Industry
Direct Loan program, all other
applicable grant and loan programs, and
the USDA Rural Development
Community Facilities Loan and Grant
programs. Those parts of the Code of
Federal Regulations that relate solely to
internal Agency processes are removed,
and procedures that apply to Agency
notification to the recipient and
decisionmaking with respect the
Agency’s determination(s) are clarified
to state that an account receivable will
be established to recover the amounts
claimed by the Agency.
List of Subjects 7 CFR Part 1951
Accounting, Account servicing,
Credit, Debt, Loan programs—
agriculture, Low and moderate income
housing loans—servicing, Rent
subsidies.
I Accordingly, chapter VXIII, title 7 of
the Code of Federal Regulations, is
amended as follows:
PART 1951—SERVICING AND
COLLECTIONS
1. The authority citation for part 1951
continues to read as follows:
I
Authority: 5 U.S.C. 301; 7 U.S.C. 1932
Note; 7 U.S.C. 1989; 31 U.S.C. 3716; 42
U.S.C. 1480.
2. Subpart O of part 1951 is revised to
read as follows:
I
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Subpart O—Servicing Cases Where
Unauthorized Loan(s) or Other
Financial Assistance Was Received—
Community and Insured Business
Programs.
Sec.
1951.701 Purpose.
1951.702 Definitions.
1951.703 Policy.
1951.704–1951.705 [Reserved].
1951.706 Initial determination that
unauthorized assistance was received.
1951.707 Determination of the amount of
unauthorized assistance.
1951.708 Notification to recipient.
1951.709 Decision on servicing actions.
1951.710 [Reserved].
1951.711 Servicing options in lieu of
liquidation or legal action to collect.
1951.712–1951.716 [Reserved].
1951.717 Exception authority.
1951.718–1951.750 [Reserved].
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§ 1951.701
Purpose.
This subpart prescribes the policies
and procedures for servicing
Community and Business Program loans
and/or grants made by Rural
Development when it is determined that
the borrower or grantee was not eligible
for all or part of the financial assistance
received in the form of a loan, grant, or
subsidy granted, or any other direct
financial assistance. It does not apply to
guaranteed loans. Loans sold without
insurance by Rural Development to the
private sector will be serviced in the
private sector and will not be serviced
under this subpart. The provisions of
this subpart are not applicable to such
loans. Future changes to this subpart
will not be made applicable to such
loans.
§ 1951.702
Definitions.
As used in this subpart, the following
definitions apply:
Active borrower. A borrower who has
an outstanding account in the records of
the Office of the Deputy Chief Financial
Officer (ODCFO), including collectiononly or an unsatisfied account balance
where a voluntary conveyance was
accepted without release from liability
of foreclosure did not satisfy the
indebtedness.
Assistance. Finance assistance in the
form of a loan, grant, or subsidy
received.
Debt instrument. Used as a collective
term to include promissory note,
assumption agreement, grant agreement,
or bond.
False information. Information,
known to be incorrect, provided with
the intent to obtain benefits which
would not have been obtainable based
on correct information.
Inaccurate information. Incorrect
information provided inadvertently
without intent to obtain benefits
fraudulently.
Inactive borrower. A former borrower
whose loan(s) has been paid in full or
assumed by another party(ies) and who
does not have an outstanding account in
the records of the ODCFO.
Recipient. ‘‘Recipient’’ refers to an
individual or entity that received a loan,
or portion of a loan, an interest subsidy,
a grant, or a portion of a grant which
was unauthorized.
Rural Development. A mission area
within the U.S. Department of
Agriculture consisting of the Office of
the Under Secretary for Rural
Development, Office of Community
Development, Rural BusinessCooperative Service, Rural Housing
Service, and Rural Utilities Service and
their successors.
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Unauthorized assistance. Any loan,
interest subsidy, grant, or portion
thereof received by a recipient for which
there was no regulatory authorization or
for which the recipient was not eligible.
Interest subsidy includes subsidy
benefits received because a loan was
closed at a lower interest rate than that
to which the recipient was entitled,
whether the incorrect interest rate was
selected erroneously by the approval
official or the documents were prepared
in error.
§ 1951.703
Policy.
When unauthorized assistance has
been received, an expeditious effort
must be made to collect from the
recipient the sum which is determined
to be unauthorized, regardless of
amount.
§§ 1951.704–1951.705
[Reserved].
§ 1951.706 Initial determination that
unauthorized assistance was received.
Unauthorized assistance may be
identified through audits conducted by
the USDA Office of Inspector General
(OIG), through reviews made by Rural
Development personnel, or through
other means such as information
provided by a private citizen who
documents that unauthorized assistance
has been received by a recipient of Rural
Development assistance.
§ 1951.707 Determination of the amount of
unauthorized assistance.
(a) Unauthorized loan amount. The
unauthorized loan amount will be the
unauthorized principal plus any interest
accruing on the unauthorized principal
at the note interest rate until the date
paid unless otherwise agreed in writing
by Rural Development.
(b) Unauthorized grant amount. The
unauthorized amount will be the
unauthorized grant amount actually
expended under the grant agreement
plus interest accrued beginning on the
date of the demand letter at the interest
rate stipulated in the applicable grant
agreement, or, if none is stated, the
default rate established by the U.S.
Department of the Treasury, until the
date paid unless otherwise agreed in
writing by Rural Development.
§ 1951.708
Notification to recipient.
(a) Upon determination that
unauthorized assistance was received,
Rural Development will send a demand
letter to the recipient that:
(1) Specifies the amount of
unauthorized assistance, including any
accrued interest to be repaid, and the
standards for imposing accrued interest;
(2) States the amount of penalties and
administrative costs to be paid, the
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standards for imposing them, and the
date on which they will begin to accrue;
(3) Provides detailed reason(s) why
the assistance was determined to be
unauthorized;
(4) States the amount is immediately
due and payable to Rural Development;
(5) Describes the rights the recipient
has for seeking review of Rural
Development’s determination pursuant
to 7 CFR part 11;
(6) Describes the Agency’s available
remedies regarding enforced collection,
including referral of debt delinquent
more than 180 days for Federal salary,
benefit, and tax offset under the
Department of Treasury Offset Program
(TOP); and
(7) Provides an opportunity for the
recipient to meet with Rural
Development to provide facts, figures,
written records, or other information
which might refute Rural Development’s
determination.
(b) If the recipient meets with Rural
Development, Rural Development will
outline to the recipient why the
assistance was determined to be
unauthorized. The recipient will be
given an opportunity to provide
information to refute Rural
Development’s findings. When
requested by the recipient, Rural
Development may grant additional time
for the recipient to assemble
documentation. Such extension of time
for payment will be valid only if Rural
Development documents the extension
in writing and specifies the period in
days during which period the payment
obligation created by the demand letter
(but not the ongoing accrual of interest)
will be suspended. Interest and other
charges will continue to accrue
pursuant to the demand letter during
any extension period unless the terms of
the demand letter are modified in
writing by Rural Development.
(c) Unless Rural Development
modifies the original demand, it will
remain in full force and effect.
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§ 1951.709
Decision on servicing actions.
(a) Payment in full. If the recipient
agrees with Rural Development’s
determination or will pay the amount in
question, Rural Development may allow
a reasonable period of time (usually not
to exceed 90 days) for the recipient to
arrange for repayment. The amount due
will be determined according to
§ 1951.707.
(b) Continuation with recipient. If the
recipient agrees with Rural
Development’s determination or is
willing to pay the amount in question
but cannot repay the unauthorized
assistance within a reasonable period of
time, continuation is authorized and
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servicing actions outlined in § 1951.711
may be taken provided all of the
following conditions are met:
(1) The recipient did not provide false
information as defined in § 1951.702.
(2) It would be highly inequitable to
require prompt repayment of the
unauthorized assistance.
(3) Failure to collect the unauthorized
assistance in full will not adversely
affect Rural Development’s financial
interest.
(c) Appeals. Appeals resulting from
the letter prescribed in § 1951.708 will
be handled according to 7 CFR Part 11.
All appeal provisions will be concluded
before proceeding with further actions.
(d) Liquidation of loan(s) or legal
action to enforce collection. When a
case cannot be handled according to the
provisions of paragraph (a) or (b) of this
section, or if the recipient refuses to
execute the documents necessary to
establish an obligation to repay the
unauthorized assistance as provided in
§ 1951.711, one or more of the following
actions will be taken:
(1) Active borrower with a secured
loan. (i) Rural Development will attempt
to have the recipient liquidate
voluntarily. If the recipient does not
agree to voluntary liquidation, or agrees
but it cannot be accomplished within a
reasonable period of time (usually not
more than 90 days), forced liquidation
action will be initiated in accordance
with applicable provisions of subpart A
of part 1955 of this chapter unless:
(A) The amount of unauthorized
assistance outstanding, including
principal, accrued interest, and any
recoverable costs charged to the
account, is less than $1,000; or
(B) It would not be in the best
financial interest of the Government to
force liquidation.
(ii) When all of the conditions of
paragraph (a) or (b) of this section are
met, but the recipient does not repay or
refuses to execute documents to effect
necessary account adjustments
according of the provisions of
§ 1951.711, forced liquidation action
will be initiated as provided in
paragraph (d)(1)(i) of this section.
(iii) When forced liquidation would
be initiated, except that the loan is being
handled in accordance with paragraph
(d)(1)(i)(A) or (d)(1)(i)(B) of this section,
continuation with the loan on existing
terms may be provided.
(iv) If the debt is not otherwise
resolved, Rural Development will take
appropriate debt collection actions in
accordance with 7 CFR Part 3, subparts
B and C, and the Federal Claims
Collection Standards at 31 CFR Chapter
IX, Parts 900–904.
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75853
(2) Grantee, inactive borrower, or
active borrower with unsecured loan
(such as collection-only, or unsatisfied
balance after liquidation). Rural
Development may pursue all reasonable
legal remedies.
§ 1951.710
[Reserved].
§ 1951.711 Servicing options in lieu of
liquidation or legal action to collect.
When the conditions outlined in
§ 1951.709(b) are met, the servicing
options outlined in this section will be
considered.
(a) Continuation on modified terms.
When the recipient has the legal and
financial capabilities, the case will be
serviced according to one of the
following, as appropriate.
(1) Unauthorized loan. A loan for the
unauthorized amount determined
according to § 1951.707(a) will remain
accelerated per the demand letter sent
in accordance with § 1951.708 unless
modified terms are timely reached with
the recipient and accrued at the interest
rate specified in the outstanding debt
instrument or at the present market
interest rate, whichever is greater, for
the respective Community and Business
program area. The loan will be
amortized per a repayment schedule
satisfactory to Rural Development, but
in no event may the revised repayment
schedule exceed a period of fifteen (15)
years, the remaining term of the original
loan, or the remaining useful life of the
facility, whichever is shorter.
(2) Unauthorized grant. The
unauthorized grant amount determined
according to § 1951.707(b) will be
converted to an account receivable, with
interest payable at the market interest
rate for the respective Community
Facilities or Business and Industry
Program area in effect on the date the
financial assistance was provided. In all
cases, the receivable will be amortized
per a repayment schedule satisfactory to
Rural Development, but in no event may
the amortization period exceed fifteen
(15) years. The recipient will be
required to execute a debt instrument to
evidence this receivable, and the best
security position available to adequately
protect Rural Development’s interest
during the repayment period will be
taken as security.
(3) Unauthorized subsidy benefits
received. When the recipient was
eligible for the loan but should have
been charged a higher interest rate than
that in the debt instrument, which
resulted in the receipt of unauthorized
subsidy benefits, the case will be
handled as follows:
(i) The recipient will be given the
option to submit a written request that
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the interest rate be corrected to the
lower of the rate for which they were
eligible that was in effect at the date of
loan approval or loan closing.
(ii) Any accrued unauthorized
subsidy will be handled in accordance
with § 1951.709.
(b) Continuation on existing terms.
When the recipient does not have the
legal and/or financial capabilities for the
options outlined in paragraph (a)(1),
(a)(2), or (a)(3) of this section, the
recipient may be allowed to continue to
meet the loan obligations outlined in the
existing loan instruments. Rural
Development will not continue with
unauthorized grants on existing terms.
§§ 1951.712–1951.716
§ 1951.717
[Reserved].
Exception authority.
The Administrator may, in individual
cases, make an exception to any
requirement or provision of this subpart,
provided that any such exception is not
inconsistent with any applicable law or
opinion of the Comptroller General, and
provided further, the Administrator
determines that the application of the
requirement or provision would
adversely affect the Government’s
interest.
§§ 1951.718–1951.750
[Reserved].
Dated: December 11, 2006.
Jackie J. Gleason,
Administrator, Rural Business-Cooperative
Service.
Dated: December 13, 2006.
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. 06–9763 Filed 12–18–06; 8:45 am]
BILLING CODE 3410–XY–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2006–26502; Directorate
Identifier 2006–NE–37–AD; Amendment 39–
14859; AD 2006–26–01]
RIN 2120–AA64
Airworthiness Directives; CFM
International, S.A. CFM56 Series
Turbofan Engines
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Final rule; request for
comments.
cprice-sewell on PROD1PC66 with RULES
AGENCY:
FAA’s Determination and Requirements
of This AD
The FAA is adopting a new
airworthiness directive (AD) for certain
CFM International CFM56 Series
SUMMARY:
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14:56 Dec 18, 2006
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turbofan engines. This AD requires
replacing certain fuel filters
manufactured under parts manufacturer
approvals (PMA). This AD results from
12 reports of failed fuel filters. We are
issuing this AD to prevent the loss of
engine thrust that could result in loss of
control during takeoff or landing.
DATES: This AD becomes effective
January 3, 2007.
We must receive any comments on
this AD by February 20, 2007.
ADDRESSES: Use one of the following
addresses to comment on this AD:
• DOT Docket Web site: Go to
https://dms.dot.gov and follow the
instructions for sending your comments
electronically.
• Government-wide rulemaking Web
site: Go to https://www.regulations.gov
and follow the instructions for sending
your comments electronically.
• Mail: Docket Management Facility;
U.S. Department of Transportation, 400
Seventh Street, SW., Nassif Building,
Room PL–401, Washington, DC 20590–
0001.
• Fax: (202) 493–2251.
• Hand Delivery: Room PL–401 on
the plaza level of the Nassif Building,
400 Seventh Street, SW., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT:
Samuel Lee, Aerospace Engineer, Los
Angeles Aircraft Certification Office,
FAA, Transport Airplane Directorate,
3960 Paramount Blvd., Lakewood, CA
90712–4137; telephone (562) 627–5262;
fax (562) 627–5210.
SUPPLEMENTARY INFORMATION: We have
received reports of 12 PMA fuel filters,
fuel filters part numbers WF337661 and
WF337017, manufactured by Western
Filter, and part numbers 7595983–101
and 7588133, manufactured by PTI
Technologies, that have failed in service
on CFM56–7B engines since March
2006. These filters use a deeper pleat
and are more susceptible to collapse or
deterioration of the filter media than the
original equipment manufacturer filters.
A collapsed or deteriorated fuel filter
can allow unfiltered fuel contamination
in fuel components, including fuel
nozzles, with no indication of fuel filter
bypass to the flight crew. This
condition, if not corrected, could result
in the loss of engine thrust that could
result in loss of control during takeoff or
landing.
The unsafe condition described
previously is likely to exist or develop
on other CFM International CFM56
series engines of the same type design.
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For that reason, we are issuing this AD
to prevent the potential loss of thrust
that could result in loss of control
during takeoff or landing.
FAA’s Determination of the Effective
Date
Since an unsafe condition exists that
requires the immediate adoption of this
AD, we have found that notice and
opportunity for public comment before
issuing this AD are impracticable, and
that good cause exists for making this
amendment effective in less than 30
days.
Comments Invited
This AD is a final rule that involves
requirements affecting flight safety and
was not preceded by notice and an
opportunity for public comment;
however, we invite you to send us any
written relevant data, views, or
arguments regarding this AD. Send your
comments to an address listed under
ADDRESSES. Include ‘‘AD Docket No.
FAA–2006–26502; Directorate Identifier
2006–NE–37–AD’’ in the subject line of
your comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of the rule that might suggest a
need to modify it.
We will post all comments we
receive, without change, to https://
dms.dot.gov, including any personal
information you provide. We will also
post a report summarizing each
substantive verbal contact with FAA
personnel concerning this AD. Using the
search function of the DMS Web site,
anyone can find and read the comments
in any of our dockets, including the
name of the individual who sent the
comment (or signed the comment on
behalf of an association, business, labor
union, etc.). You may review the DOT’s
complete Privacy Act Statement in the
Federal Register published on April 11,
2000 (65 FR 19477–78) or you may visit
https://dms.dot.gov.
Examining the AD Docket
You may examine the docket that
contains the AD, any comments
received, and any final disposition in
person at the Docket Management
Facility Docket Office between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. The Docket
Office (telephone (800) 647–5227) is
located on the plaza level of the
Department of Transportation Nassif
Building at the street address stated in
ADDRESSES. Comments will be available
in the AD docket shortly after the DMS
receives them.
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]]>Agencies
[Federal Register Volume 71, Number 243 (Tuesday, December 19, 2006)]
[Rules and Regulations]
[Pages 75851-75854]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-9763]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 71, No. 243 / Tuesday, December 19, 2006 /
Rules and Regulations
[[Page 75851]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 1951
Servicing and Collections--Unauthorized Recipients of Financial
Assistance
AGENCY: Rural Housing Service, Rural Business-Cooperative Service,
Rural Utilities Service, Farm Service Agency, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This action amends the servicing regulations that apply when
it is determined that unauthorized recipients have received financial
assistance under USDA Business, Cooperative, and Community Facility
loan and grant programs. The changes make clear that the first demand
letter notifying the recipient of the Agency's determination serves as
the initial step in the Agency's collection efforts, and that it may
serve as the basis for the recipient's appeal rights. The terms of the
first demand letter remain in full force and effect, unless the demand
letter is subsequently amended in writing by the Agency after
discussions with the recipient or modified as a result of judicial
proceedings.
DATES: Effective Date: This rule is effective on December 19, 2006.
FOR FURTHER INFORMATION CONTACT: Bill Hagy, Deputy Administrator, Rural
Development Business Programs, USDA, Stop 3220, Room 5811, 1400
Independence Ave., SW., Washington, DC 20250, telephone (202) 720-7287,
or internet e-mail ``bill.hagy@wdc.usda.gov''.
SUPPLEMENTARY INFORMATION:
Classification
This action is not subject to the provisions of Executive Order
12866 because it pertains to internal Agency management only.
Accordingly, public notice and comment are not warranted, and this
action is published as a final rule rather than as a proposed
rulemaking.
Programs Affected
The Catalog of Federal Domestic Assistance Program numbers assigned
to these programs are: 10.352 Value-Added Producer Grants, 10.353
National Rural Development Partnership, 10.767 Intermediary Relending
Program, 10.768, Business and Industrial Loans, 10.769 Rural Business
Enterprise Grants, 10.771 Rural Cooperative Development Grants, 10.772
Empowerment Zones Program, 10.773 Rural Business Opportunity Grants,
10.775 Renewable Energy Systems and Energy Efficiency Improvements
Program, 10.776 Agriculture Innovation Centers, 10.854 Rural Economic
Development Loans and Grants, and 10.766 Community Facilities Loans and
Grants,
Paperwork Reduction Act
This rule is not subject to the Paperwork Reduction Act.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
Subpart G, Environmental Program. It is the determination of the Rural
Business and Cooperative Services that this action does not constitute
a major Federal action significantly affecting the environment.
Therefore, in accordance with the National Environmental Policy Act of
1969, an Environmental Impact Statement is not required.
Executive Order 12988
This rule has been reviewed in accordance with E.O. 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 to this rule; and
(3) administrative proceedings in accordance with 7 CFR part 11 must be
exhausted before bringing suit in court challenging action taken under
this rule unless those regulations specifically allow bringing suit at
an earlier time.
The Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
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, USDA 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
USDA 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. Therefore, this rule is not subject
to the requirements of sections 202 and 205 of UMRA.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), 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. The Regulatory Flexibility Act
is intended to encourage Federal agencies to utilize innovative
administrative procedures in dealing with individuals, small
businesses, small organizations, and small governmental bodies that
would otherwise be unnecessarily adversely affected by Federal
regulations. No regulatory flexibility analysis under the Regulatory
Flexibility Act is necessary.
Executive Order 13132, Federalism
The policies contained in this rule do not have any substantial
direct effect on States, the relationship between the national
government and the States, or the distribution of power and
responsibilities among the various levels of government. Nor does this
rule
[[Page 75852]]
impose substantial direct compliance costs on State and local
governments. Therefore, consultation with the States is not required.
Discussion
This rule revises the servicing regulations that apply when it has
been determined that an unauthorized recipient has received financial
assistance under the USDA Rural Development Business and Industry
Direct Loan program, all other applicable grant and loan programs, and
the USDA Rural Development Community Facilities Loan and Grant
programs. Those parts of the Code of Federal Regulations that relate
solely to internal Agency processes are removed, and procedures that
apply to Agency notification to the recipient and decisionmaking with
respect the Agency's determination(s) are clarified to state that an
account receivable will be established to recover the amounts claimed
by the Agency.
List of Subjects 7 CFR Part 1951
Accounting, Account servicing, Credit, Debt, Loan programs--
agriculture, Low and moderate income housing loans--servicing, Rent
subsidies.
0
Accordingly, chapter VXIII, title 7 of the Code of Federal Regulations,
is amended as follows:
PART 1951--SERVICING AND COLLECTIONS
0
1. The authority citation for part 1951 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31
U.S.C. 3716; 42 U.S.C. 1480.
0
2. Subpart O of part 1951 is revised to read as follows:
Subpart O--Servicing Cases Where Unauthorized Loan(s) or Other
Financial Assistance Was Received--Community and Insured Business
Programs.
Sec.
1951.701 Purpose.
1951.702 Definitions.
1951.703 Policy.
1951.704-1951.705 [Reserved].
1951.706 Initial determination that unauthorized assistance was
received.
1951.707 Determination of the amount of unauthorized assistance.
1951.708 Notification to recipient.
1951.709 Decision on servicing actions.
1951.710 [Reserved].
1951.711 Servicing options in lieu of liquidation or legal action to
collect.
1951.712-1951.716 [Reserved].
1951.717 Exception authority.
1951.718-1951.750 [Reserved].
Sec. 1951.701 Purpose.
This subpart prescribes the policies and procedures for servicing
Community and Business Program loans and/or grants made by Rural
Development when it is determined that the borrower or grantee was not
eligible for all or part of the financial assistance received in the
form of a loan, grant, or subsidy granted, or any other direct
financial assistance. It does not apply to guaranteed loans. Loans sold
without insurance by Rural Development to the private sector will be
serviced in the private sector and will not be serviced under this
subpart. The provisions of this subpart are not applicable to such
loans. Future changes to this subpart will not be made applicable to
such loans.
Sec. 1951.702 Definitions.
As used in this subpart, the following definitions apply:
Active borrower. A borrower who has an outstanding account in the
records of the Office of the Deputy Chief Financial Officer (ODCFO),
including collection-only or an unsatisfied account balance where a
voluntary conveyance was accepted without release from liability of
foreclosure did not satisfy the indebtedness.
Assistance. Finance assistance in the form of a loan, grant, or
subsidy received.
Debt instrument. Used as a collective term to include promissory
note, assumption agreement, grant agreement, or bond.
False information. Information, known to be incorrect, provided
with the intent to obtain benefits which would not have been obtainable
based on correct information.
Inaccurate information. Incorrect information provided
inadvertently without intent to obtain benefits fraudulently.
Inactive borrower. A former borrower whose loan(s) has been paid in
full or assumed by another party(ies) and who does not have an
outstanding account in the records of the ODCFO.
Recipient. ``Recipient'' refers to an individual or entity that
received a loan, or portion of a loan, an interest subsidy, a grant, or
a portion of a grant which was unauthorized.
Rural Development. A mission area within the U.S. Department of
Agriculture consisting of the Office of the Under Secretary for Rural
Development, Office of Community Development, Rural Business-
Cooperative Service, Rural Housing Service, and Rural Utilities Service
and their successors.
Unauthorized assistance. Any loan, interest subsidy, grant, or
portion thereof received by a recipient for which there was no
regulatory authorization or for which the recipient was not eligible.
Interest subsidy includes subsidy benefits received because a loan was
closed at a lower interest rate than that to which the recipient was
entitled, whether the incorrect interest rate was selected erroneously
by the approval official or the documents were prepared in error.
Sec. 1951.703 Policy.
When unauthorized assistance has been received, an expeditious
effort must be made to collect from the recipient the sum which is
determined to be unauthorized, regardless of amount.
Sec. Sec. 1951.704-1951.705 [Reserved].
Sec. 1951.706 Initial determination that unauthorized assistance was
received.
Unauthorized assistance may be identified through audits conducted
by the USDA Office of Inspector General (OIG), through reviews made by
Rural Development personnel, or through other means such as information
provided by a private citizen who documents that unauthorized
assistance has been received by a recipient of Rural Development
assistance.
Sec. 1951.707 Determination of the amount of unauthorized assistance.
(a) Unauthorized loan amount. The unauthorized loan amount will be
the unauthorized principal plus any interest accruing on the
unauthorized principal at the note interest rate until the date paid
unless otherwise agreed in writing by Rural Development.
(b) Unauthorized grant amount. The unauthorized amount will be the
unauthorized grant amount actually expended under the grant agreement
plus interest accrued beginning on the date of the demand letter at the
interest rate stipulated in the applicable grant agreement, or, if none
is stated, the default rate established by the U.S. Department of the
Treasury, until the date paid unless otherwise agreed in writing by
Rural Development.
Sec. 1951.708 Notification to recipient.
(a) Upon determination that unauthorized assistance was received,
Rural Development will send a demand letter to the recipient that:
(1) Specifies the amount of unauthorized assistance, including any
accrued interest to be repaid, and the standards for imposing accrued
interest;
(2) States the amount of penalties and administrative costs to be
paid, the
[[Page 75853]]
standards for imposing them, and the date on which they will begin to
accrue;
(3) Provides detailed reason(s) why the assistance was determined
to be unauthorized;
(4) States the amount is immediately due and payable to Rural
Development;
(5) Describes the rights the recipient has for seeking review of
Rural Development's determination pursuant to 7 CFR part 11;
(6) Describes the Agency's available remedies regarding enforced
collection, including referral of debt delinquent more than 180 days
for Federal salary, benefit, and tax offset under the Department of
Treasury Offset Program (TOP); and
(7) Provides an opportunity for the recipient to meet with Rural
Development to provide facts, figures, written records, or other
information which might refute Rural Development's determination.
(b) If the recipient meets with Rural Development, Rural
Development will outline to the recipient why the assistance was
determined to be unauthorized. The recipient will be given an
opportunity to provide information to refute Rural Development's
findings. When requested by the recipient, Rural Development may grant
additional time for the recipient to assemble documentation. Such
extension of time for payment will be valid only if Rural Development
documents the extension in writing and specifies the period in days
during which period the payment obligation created by the demand letter
(but not the ongoing accrual of interest) will be suspended. Interest
and other charges will continue to accrue pursuant to the demand letter
during any extension period unless the terms of the demand letter are
modified in writing by Rural Development.
(c) Unless Rural Development modifies the original demand, it will
remain in full force and effect.
Sec. 1951.709 Decision on servicing actions.
(a) Payment in full. If the recipient agrees with Rural
Development's determination or will pay the amount in question, Rural
Development may allow a reasonable period of time (usually not to
exceed 90 days) for the recipient to arrange for repayment. The amount
due will be determined according to Sec. 1951.707.
(b) Continuation with recipient. If the recipient agrees with Rural
Development's determination or is willing to pay the amount in question
but cannot repay the unauthorized assistance within a reasonable period
of time, continuation is authorized and servicing actions outlined in
Sec. 1951.711 may be taken provided all of the following conditions
are met:
(1) The recipient did not provide false information as defined in
Sec. 1951.702.
(2) It would be highly inequitable to require prompt repayment of
the unauthorized assistance.
(3) Failure to collect the unauthorized assistance in full will not
adversely affect Rural Development's financial interest.
(c) Appeals. Appeals resulting from the letter prescribed in Sec.
1951.708 will be handled according to 7 CFR Part 11. All appeal
provisions will be concluded before proceeding with further actions.
(d) Liquidation of loan(s) or legal action to enforce collection.
When a case cannot be handled according to the provisions of paragraph
(a) or (b) of this section, or if the recipient refuses to execute the
documents necessary to establish an obligation to repay the
unauthorized assistance as provided in Sec. 1951.711, one or more of
the following actions will be taken:
(1) Active borrower with a secured loan. (i) Rural Development will
attempt to have the recipient liquidate voluntarily. If the recipient
does not agree to voluntary liquidation, or agrees but it cannot be
accomplished within a reasonable period of time (usually not more than
90 days), forced liquidation action will be initiated in accordance
with applicable provisions of subpart A of part 1955 of this chapter
unless:
(A) The amount of unauthorized assistance outstanding, including
principal, accrued interest, and any recoverable costs charged to the
account, is less than $1,000; or
(B) It would not be in the best financial interest of the
Government to force liquidation.
(ii) When all of the conditions of paragraph (a) or (b) of this
section are met, but the recipient does not repay or refuses to execute
documents to effect necessary account adjustments according of the
provisions of Sec. 1951.711, forced liquidation action will be
initiated as provided in paragraph (d)(1)(i) of this section.
(iii) When forced liquidation would be initiated, except that the
loan is being handled in accordance with paragraph (d)(1)(i)(A) or
(d)(1)(i)(B) of this section, continuation with the loan on existing
terms may be provided.
(iv) If the debt is not otherwise resolved, Rural Development will
take appropriate debt collection actions in accordance with 7 CFR Part
3, subparts B and C, and the Federal Claims Collection Standards at 31
CFR Chapter IX, Parts 900-904.
(2) Grantee, inactive borrower, or active borrower with unsecured
loan (such as collection-only, or unsatisfied balance after
liquidation). Rural Development may pursue all reasonable legal
remedies.
Sec. 1951.710 [Reserved].
Sec. 1951.711 Servicing options in lieu of liquidation or legal
action to collect.
When the conditions outlined in Sec. 1951.709(b) are met, the
servicing options outlined in this section will be considered.
(a) Continuation on modified terms. When the recipient has the
legal and financial capabilities, the case will be serviced according
to one of the following, as appropriate.
(1) Unauthorized loan. A loan for the unauthorized amount
determined according to Sec. 1951.707(a) will remain accelerated per
the demand letter sent in accordance with Sec. 1951.708 unless
modified terms are timely reached with the recipient and accrued at the
interest rate specified in the outstanding debt instrument or at the
present market interest rate, whichever is greater, for the respective
Community and Business program area. The loan will be amortized per a
repayment schedule satisfactory to Rural Development, but in no event
may the revised repayment schedule exceed a period of fifteen (15)
years, the remaining term of the original loan, or the remaining useful
life of the facility, whichever is shorter.
(2) Unauthorized grant. The unauthorized grant amount determined
according to Sec. 1951.707(b) will be converted to an account
receivable, with interest payable at the market interest rate for the
respective Community Facilities or Business and Industry Program area
in effect on the date the financial assistance was provided. In all
cases, the receivable will be amortized per a repayment schedule
satisfactory to Rural Development, but in no event may the amortization
period exceed fifteen (15) years. The recipient will be required to
execute a debt instrument to evidence this receivable, and the best
security position available to adequately protect Rural Development's
interest during the repayment period will be taken as security.
(3) Unauthorized subsidy benefits received. When the recipient was
eligible for the loan but should have been charged a higher interest
rate than that in the debt instrument, which resulted in the receipt of
unauthorized subsidy benefits, the case will be handled as follows:
(i) The recipient will be given the option to submit a written
request that
[[Page 75854]]
the interest rate be corrected to the lower of the rate for which they
were eligible that was in effect at the date of loan approval or loan
closing.
(ii) Any accrued unauthorized subsidy will be handled in accordance
with Sec. 1951.709.
(b) Continuation on existing terms. When the recipient does not
have the legal and/or financial capabilities for the options outlined
in paragraph (a)(1), (a)(2), or (a)(3) of this section, the recipient
may be allowed to continue to meet the loan obligations outlined in the
existing loan instruments. Rural Development will not continue with
unauthorized grants on existing terms.
Sec. Sec. 1951.712-1951.716 [Reserved].
Sec. 1951.717 Exception authority.
The Administrator may, in individual cases, make an exception to
any requirement or provision of this subpart, provided that any such
exception is not inconsistent with any applicable law or opinion of the
Comptroller General, and provided further, the Administrator determines
that the application of the requirement or provision would adversely
affect the Government's interest.
Sec. Sec. 1951.718-1951.750 [Reserved].
Dated: December 11, 2006.
Jackie J. Gleason,
Administrator, Rural Business-Cooperative Service.
Dated: December 13, 2006.
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. 06-9763 Filed 12-18-06; 8:45 am]
BILLING CODE 3410-XY-P
