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ICBA Opposes USDA Proposal to Impose User Fees on Guaranteed Farm Loan Programs

Washington, D.C. (May 17, 2006)—The Independent Community Bankers of America (ICBA) today questioned the timing of a newly proposed Department of Agriculture regulation announcing new user fees on USDA guaranteed farm loan programs.

"Although Congress has sent a clear message of opposition to new user fees, the Department of Agriculture has gone ahead and quickly published a regulation proposing the fees on the guaranteed farm loan programs," said Terry J. Jorde, ICBA chairman, and president and CEO of CountryBank USA, Cando, N.D. "This action comes even though the recently adopted House Appropriations Committee's 2007 agricultural budget would block new and higher fees and even though several members of Congress have written to USDA Secretary Johanns opposing the proposal."

These fees, which would be effective beginning October 1 unless blocked by legislation, will raise the cost of borrowing for many family farmers when they can least afford it. Weather-related disasters and higher energy costs have seriously eroded the equity position on many farmers' balance sheets. When they may need the program more than ever, USDA is intent on imposing higher fees resulting in higher borrowing costs for farmers.

"This doesn't make sense when one considers that the USDA guaranteed farm loan programs are some of the most cost-efficient programs in the department, where a few million dollars can guarantee a billion dollars in loans to keep farmers afloat," Jorde said. "This efficiency should be rewarded, not penalized. We encourage Congress to continue moving forward with legislation to block USDA's proposal."

USDA has proposed imposing a new annual fee of 75 basis points on annual lines of credit and raising user fees on guaranteed farm ownership loans and non-subsidized guaranteed operating loans to 1.5%, up 50 basis points. USDA also indicates it could raise user fees further in the future by simply publishing a statement in the Federal Register.

View the USDA's proposed rule at this link: http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/E6-7326.pdf.