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[Code of Federal Regulations]
[Title 7, Volume 11, Parts 1600 to 1899]
[Revised as of January 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1785]

[Page 1003-1005]
 
PART 1785--LOAN ACCOUNT COMPUTATIONS, PROCEDURES AND POLICIES FOR ELECTRIC AND TELEPHONE BORROWERS

Subpart A  [Reserved]

  Subpart B--RUS Cushion of Credit Account Computations and Procedures

Sec.
1785.66  General.
1785.67  Definitions.
1785.68  Establishing an RUS cushion of credit payment account.
1785.69  Cushion of credit payment account computations.
1785.70  Application of RETRF cushion of credit payments.

    Authority: 7 U.S.C. 901 et seq.; Title I, Subtitle D, sec. 1403, 
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203; Pub. L. 103-
354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).

Subpart A  [Reserved]

  Subpart B--RUS Cushion of Credit Account Computations and Procedures

    Source: 54 FR 13669, Apr. 5, 1989, unless otherwise noted.

Sec. 1785.66  General.

    This subpart B sets forth policies and procedures on the RUS cushion 
of creditpayments program. The cushion of credit payments program will 
be maintained only for insured loans evidenced by obligations of the 
Fund. A subaccount within the Fund is hereby established for purposes of 
promoting rural economic development. It shall be known as the ``Rural 
Economic Development Subaccount.'' The assets of the subaccount shall be 
obtained from crediting (on a monthly basis) a sum determined by 
multiplying the outstanding cushion of credit payments made after 
October 1, 1987, by the difference (converted on a monthly basis) 
between the average weighted interest rate paid on outstanding 
certificates of beneficial ownership issued by the Fund and the 5 
percent rate of interest provided to borrowers on cushion of credit 
payments, repayment of loans made pursuant to Section 313 of the Act, 
and other sources as provided by law. This subaccount shall be used to 
provide grants or zero interest loans to borrowers under the Act for the 
purpose of promoting rural economic development.

Sec. 1785.67  Definitions.

    Accumulated (deferred) interest means interest allowed to accumulate 
up to, and including, the basis date of RUS notes covering loans 
approved before June 5, 1957. The accumulated interest

[[Page 1004]]

is payable in equal periodic installments over the remaining life of the 
notes.
    Act means the Rural Electrification Act of 1936, as amended (7 
U.S.C. 901 et. seq.).
    Advance payment means a voluntary unscheduled payment on an RUS 
note, made prior to October 2, 1987, credited to the advance payment 
account of a borrower.
    Cushion of Credit Payment means a voluntary unscheduled payment on 
an RUS note made after October 1, 1987, credited to the cushion of 
credit account of a borrower.
    Current interest means interest payable periodically as it accrues.
    Fund means the Rural Electrification and Telephone Revolving Fund 
established pursuant to the Act.
    Interest credit means interest earned on balances in advance payment 
or cushion of credit accounts. Since the periodic installments are 
established by the terms of the notes, the interest credits cannot serve 
to change the total amount of each installment; therefore, an amount 
equal to the interest credits is added to the principal installment due. 
On receipt of the full installments, amounts equal to the interest 
credits (the principal offsets) are added to the respective advance 
payment accounts.
    Prepayment means a voluntary unscheduled payment which the borrower 
instructs RUS to apply directly and immediately to the principal of an 
RUS note.
    RUS notes means those notes, bonds, or other obligations evidencing 
indebtedness created by loans made by RUS pursuant to titles I, II, or 
III of the Act.
    Subaccount means the Rural Economic Development Subaccount 
established pursuant to the Act as **part** of the Fund.

Sec. 1785.68  Establishing an RUS cushion of credit payment account.

    A cushion of credit account shall be automatically established by 
RUS for each borrower who makes a payment after October 1, 1987, in 
excess of amounts then due on an RUS note. Such account will bear 
interest at a rate of 5 percent per annum. All payments on RUS notes 
which are in excess of required payments and not otherwise designated 
shall be deposited in the borrowers' respective cushion of credit 
accounts. Payments received in the month in which an installment is due 
will be applied to the installment due. However, if the regular 
installment payment is received at a later date in the month, the first 
payment received will be applied retroactively to a cushion of credit 
account and the second will be applied to the installment due.

Sec. 1785.69  Cushion of credit payment account computations.

    (a) Deposits. Cushion of credit payments are credited to the 
borrowers' cushion of credit accounts.
    (b) Interest. Interest at the rate of 5 percent per annum shall be 
credited on a quarterly basis to cushion of credit accounts. Interest 
earned will appear as a reduction in the interest billed on the 
borrower's RUS notes and will be separately shown on RUS Form 694, 
``Statement of Interest and Principal Due.''

Sec. 1785.70  Application of RETRF cushion of credit payments.

    (a) If a maturing installment on an RUS note or a note which has 
been guaranteed by RUS is not received by its due date, funds will be 
withdrawn from the borrower's cushion of credit account and applied as 
of the installment due date beginning with the oldest of such notes as 
follows: first, to current interest then due on all notes; second, to 
the accumulated interest due, if any, on all notes; and third, to the 
principal then due on all notes. In those instances where a borrower has 
prior to October 2, 1987, maintained an advance payment account with 
RUS, its cushion of credit account will be applied in accordance with 
the provisions of this section prior to using any balance remaining in 
its advance payment account to pay interest and principal installments 
on notes. Computations required under this section have been made by RUS 
as of October 2, 1987; however, on or before May 25, 1989 any borrower 
may make a one time irrevocable election to have all such computations 
made as of April 5, 1989, by

[[Page 1005]]

filing written notice to that effect with Robert D. Ruddy, Director, 
Fiscal Accounting Division, Rural Utilities Service, Washington, DC 
20250-1500.
    (b) A borrower may reduce the balance of its cushion of credit 
account only if the amount obtained from the reduction is used to make 
scheduled payments on loans made or guaranteed under the Act.

[54 FR 13669, Apr. 5, 1989; 54 FR 17703, Apr. 25, 1989]
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