USDA to roll out debt relief for socially disadvantaged farmers and ranchers

The US bailout has allotted $4 billion for the debt relief plan, but USDA can exceed that amount. The legislation says the department can spend “as much as it needs” under the program, which provides 120% debt relief.

The extra 20% is to pay tax on the payments, and Zach Ducheneaux, manager of the farm service bureau says USDA plans to partner with local community groups to provide producers with free tax advice.
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A further notice regarding guaranteed loan balances and direct loans that are out of collateral and have previously been referred to the Treasury Department for collection for settlement will be published within 120 days.

“The US bailout has enabled the USDA to provide historic debt relief to socially disadvantaged farmers and ranchers starting in June,” said Agriculture Secretary Tom Vilsack. “USDA is once again committed to earning the trust of American ranchers and ranchers using a new set of tools provided in the American Rescue Plan to enhance opportunities, promote equality and address systemic discrimination in USDA programs. “


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According to USDA, there are about 14,400 SDA borrowers with about $2.7 billion in debt, as well as another $400 million that is past due. More than 80% of borrowers have direct loans and account for about 65% of the debt – about $2 billion. The rest, guaranteed lenders, have about $1 billion.

Meanwhile, FSA finds that more producers than are on the books as socially disadvantaged are coming forward to collect the payouts.

The department doesn’t have exact numbers on how many growers have done this, but Ducheneaux and others involved in the process said they weren’t surprised, given the history of discrimination faced by farmers of color.

Ducheneaux said the fact that producers have not checked the correct box on their AD-2047 in the past will not be charged to them. Instead, they can now check that box to show they are eligible for the payouts.

“If they do that lead, they get an offer letter,” Ducheneaux said. “They will have to sign that offer letter.”

“The department in general and the Farm Service Agency have a policy of trusting the farmer,” he said.

A USDA spokesperson explained the matter. “As all loan recipients know, when you sign a document for a loan of any kind, it is a legal document that carries a legal obligation. In addition to the normal FSA due diligence on all loan programs, Section 1006 of the [American Rescue Plan] provides $5 million to the USDA Office of the Inspector General to oversee how the funds were disbursed as required by law. We expect and anticipate that the OIG will carry out its duties.”


Ducheneaux cited a VICE News story about the debt relief program earlier this month with comments from a Louisiana FSA commissioner who opposed the debt relief program, saying that minority borrowers are in debt “because they spend their money on other things. Their priorities may not be right.”

“Imagine if you could pass for white and that’s the environment you work in,” Ducheneaux said. “You bet your lowest dollar that you’re not going to check the African American or Native American box.”

“That’s the reality we’re trying to overcome,” he said. “And that’s why we’ve been very hospitable from the start. Come in, update your AD-2047. We have put it on our website.”

However, banks are concerned about the loss of expected income from interest payments on USDA-guaranteed loans when they are paid off suddenly. In a recent letter to Ag Secretary Tom Vilsack, they asked for compensation for lost future earnings.

“If USDA does not compensate lenders for such disruptions or avoid sudden loan disbursements, the likely outcome in the future will be reduced access to credit for those seeking USDA-guaranteed loans, including SDA farmers/ranchers,” according to the American Bankers Association. , Independent Community Bankers. of America and the National Rural Lenders Association in the letter. They also expressed concern about the damage to secondary markets – the brokers and lenders that buy and trade loans from the banks.

“We’re just saying look at the consequences, recognize that there will be some costs… and compensate lenders so that we don’t get hurt, because some of them have made huge pledges to help minority borrowers and young, small start-up farmers through the use of the Guaranteed Loan Program,” Mark Scanlan, senior vice president of agricultural and rural policy at ICBA, told Agri-Pulse.

USDA has the flexibility to ensure that lenders are not harmed by the way this program is run, he said, stressing that bankers are simply “making suggestions to USDA about implementation,” and not threatening to halt loans to socially disadvantaged farmers.

“Lenders are going to look at how this program is handled and see how much involvement they want with these programs – not [just] to socially disadvantaged farmers, but the guaranteed program in general,” he said.

He cited the example — also mentioned in the materials sent to USDA — of a bank in Georgia with a portfolio of more than $200 million in loans to socially disadvantaged farmers. To lose that amount of loans, the bank would have to adopt “a very different business plan.”

Ducheneaux says the banks are “an essential partner” in providing loans to farmers “because we don’t have the budgetary authority, as we work now, to cover all the credit needs that exist in agriculture and livestock.” FSA has trained itself “to better understand the relationship between the guaranteed lenders and the borrowers,” as well as the bankers’ concerns about the secondary markets.

Steve Davies contributed to this report. Wyant is president and founder of Agri-Pulse Communications Inc. For more news, visit: www.Agri-Pulse.com.

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