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                    Document headings vary by document type but may contain                    the following:                  
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                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
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###### Department of Agriculture

###### Rural Business-Cooperative Service 

###### Rural Utilities Service 

          - 7 CFR Part 4279 
          - RIN 0570-AA54 

# AGENCY:

Rural Business-Cooperative Service, USDA. 

# ACTION:

Final rule. 

# SUMMARY:

Rural Business-Cooperative Service (RBS) amends its regulations for the Business and Industry (B&I) Guaranteed Loan Program by modifying the regulation regarding personal and corporate guarantors. This action will standardize the guarantor process. The Agency has created a guarantor form which will be used to obtain the personal or corporate guarantee of anyone owning greater than 20 percent interest in the borrower. The effect of this rule is to allow the Agency to use all remedies available to pursue collection from guarantors, including offset under the Debt Collection Improvement Act. 

# DATES:

This rule is effective December 20, 2006. 

# FOR FURTHER INFORMATION CONTACT:

                        David Lewis, Business and Industry Loan Servicing Branch, Rural Business-Cooperative Service, U.S. Department of Agriculture, STOP 3224, 1400 Independence Avenue, SW., Washington, DC 20250-3224, telephone (202) 690-0797, or by e-mail to                         *david.lewis@wdc.usda.gov.*

# SUPPLEMENTARY INFORMATION:

## Classification 

This final rule has been reviewed under Executive Order 12866 and determined not to be significant and has not been reviewed by the Office of Management and Budget (OMB). 

## Programs Affected 

The Catalog of Federal Domestic Assistance number for the program impacted by this action is 10.768, Business and Industry Loans. 

## Intergovernmental Review 

Business and Industry Guaranteed Loans are subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials. Intergovernmental consultation is required in the manner delineated in RD Instruction 1940-J and 7 CFR part 3015, subpart V, “Intergovernmental Review of Rural Development Programs and Activities.” 

## Civil Justice Reform 

                    This rule has been reviewed under Executive Order 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 this rule; and (3) administrative proceedings of the National Appeals Division (7 CFR part 11) must be exhausted before bringing suit in court challenging action taken under this rule.                           ( print page 67033)    

## Environmental Impact Statement 

                    This document has been reviewed in accordance with 7 CFR part 1940, subpart G, “Environmental Program.” RBS has determined that this action does not constitute a major Federal action significantly affecting the quality of the human environment, and in accordance with the National Environmental Policy Act (NEPA) of 1969, 42 U.S.C. 4321*et seq.*, this regulation is a Categorical Exclusion. Loan applications will be reviewed individually to determine compliance with NEPA.                 

## Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of, Pub. L. 104-4 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, RBS generally 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 RBS 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. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA. 

## Regulatory Flexibility Act 

In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-602), RBS has determined that this action would not have a significant economic impact on a substantial number of small entities. RBS made this determination based on the fact that this regulation only impacts those who choose to participate in the program. Small entity applicants will not be impacted to a greater extent than large entity applicants. 

## Executive Order 13132

It has been determined that, under Executive Order 13132, Federalism, this rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in this rule will not have a substantial direct effect on States or their political subdivisions or on the distribution of power and responsibilities among the various levels of government. 

## Executive Order 13175

Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, imposes requirements on USDA in the development of regulatory policies that have tribal implications or pre-empt tribal laws. USDA has determined that the regulation does not have a substantial direct effect on one or more Indian tribe or on either the relationship or the distribution of powers and responsibilities between the Federal Government and the Indian tribes. Thus, this rule is not subject to the requirements of Executive Order 13175. 

## Paperwork Reduction Act 

In accordance with the Paperwork Reduction Act of 1995, the information collection requirements contained in this regulation has been approved by OMB control number 0570-0017. 

## E-Government Act Compliance 

The Rural Business-Cooperative Service is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes. 

## Discussion 

Pursuant to the Debt Collection Improvement Act of 1996 (DCIA), the Agency is required to send the debt owed to the Government to the Department of the Treasury (Treasury) for collection. The DCIA covers both guaranteed and direct loans made by the Agency. Some ambiguity has existed regarding the Agency's ability to collect from guarantors of the borrower's loan. This rule will end that ambiguity by clearly making guarantors personally liable for any claims paid by the Government. 

The Agency will establish more uniformity in the guarantees being obtained by lenders. This should result in the program being administered more consistently and the Government recovering more of its loss claims. Currently, guaranteed lenders prepare non-uniform, personal, or corporate guarantees. When there is a loss on the guaranteed loan, the lender pursues these guarantees with mixed recovery results. By implementing this rule, the Agency will treat all guarantors consistently, collect more money on its loss claims, and rectify any ambiguities regarding its ability to refer these debts to Treasury. 

## Comments on the Proposed Rule and Responses 

A proposed rule was published on April 7, 2005, [70 FR 17616-17618] and no comments were received. 

# List of Subjects in 7 CFR Part 4279

      - Loan programs—Business and industry—Rural development assistance
      - Rural areas

Therefore, chapter XLII, title 7, Code of Federal Regulations, is amended as follows: 

# PART 4279—GUARANTEED LOANMAKING 

1. The authority citation for part 4279 continues to read as follows: 

Authority:5 U.S.C. 301; 7 U.S.C. 1989.   

# Subpart B—Business and Industry Loans 

2. Section 4279.149 is revised to read as follows: 

§ 4279.149 

(a) Unconditional personal and corporate guarantees are part of the collateral for the loan, but are not considered in determining whether a loan is adequately secured for loanmaking purposes. Agency approved personal and corporate guarantees for the full term of the loan and at least equal to the guarantor's percent interest in the borrower, times the loan amount are required from those owning greater than a 20 percent interest in the borrower, unless the lender documents to the Agency's satisfaction that collateral, equity, cashflow, and profitability indicate an above-average ability to repay the loan. The guarantors will execute an Agency approved unconditional guarantee form. When warranted by an Agency assessment of potential financial risk, Agency approved guarantees may also be required of parent, subsidiaries, or affiliated companies (owning less than a 20 percent interest in the borrower) and require security for any guarantee provided under this section. 

(b) Exceptions to the requirement for personal guarantees must be requested by the lender and concurred by the Agency approval official on a case-by-case basis. The lender must document that collateral, equity, cashflow, and profitability indicate an above-average ability to repay the loan.   

      ( print page 67034)    
Dated: October 4, 2006. 

William F. Hagy III, 

Acting Administrator, Rural Business-Cooperative Service. 

[FR Doc. 06-9262 Filed 11-17-06; 8:45 am] 

BILLING CODE 3410-XY-P