This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

29143 

Vol. 74, No. 117 

Friday, June 19, 2009 

1 12 U.S.C. 2199(a)(4). ‘‘Qualified lenders’’ 

include Farm Credit System lenders (except for a 

bank for cooperatives), and non-System lenders 

(other financing institutions (OFIs)) for loans that 

OFIs make with funding from a Farm Credit bank. 

See 12 U.S.C. 2202a(a)(6). 

2 ‘‘Administered’’ and ‘‘adjustable’’ rates are 

synonymous terms that describe the types of 

variable rates offered by System institutions. 

3FCA considers the nationally published 

commercial bank Prime Rate and the London 

Interbank Offered Rate (LIBOR) to be the primary 

examples of widely publicized external indexes. 

Other rates may also meet the criteria, but the 

qualified lender must ensure that the rate is 

published in a source readily available to its 

borrowers. See 68 FR 5587 (Feb. 4, 2003). 

4See the Federal Farm Credit Bank Funding 

Corporation’s annual report to investors at http:// 

www.farmcredit-ffcb.com. 

FARM CREDIT ADMINISTRATION 

12 CFR Part 617 

RIN 3052–AC45 

Borrower Rights; Effective Interest 

Rates 

AGENCY: Farm Credit Administration. 

ACTION: Proposed rule. 

SUMMARY: The Farm Credit 

Administration (FCA) proposes to 

amend two sections of its borrower 

rights regulations governing what initial 

and subsequent disclosures a qualified 

lender must make to a borrower when 

the borrower’s interest rate is directly 

tied to a widely publicized external 

index. The proposed revisions would 

require qualified lenders to provide 

additional disclosure to borrowers at 

loan closing on how and where to track 

the external index, and allow qualified 

lenders, who are required to provide the 

additional disclosure, to send written 

notices of subsequent rate changes to 

borrowers no later than the borrower’s 

first regularly scheduled billing 

statement after the effective date of the 

change. 

DATES: You may send comments on or 

before August 18, 2009. 

ADDRESSES: We offer a variety of 

methods for you to submit your 

comments. For accuracy and efficiency 

reasons, commenters are encouraged to 

submit comments by e-mail or through 

the FCA’s Web site. As facsimiles (fax) 

are difficult for us to process and 

achieve compliance with section 508 of 

the Rehabilitation Act, we are no longer 

accepting comments submitted by fax. 

Regardless of the method you use, 

please do not submit your comment 

multiple times via different methods. 

You may submit comments by any of 

the following methods: 

• E-mail: Send us an e-mail at regcomm@fca.gov. 

• FCA Web site: http://www.fca.gov. 

Select ‘‘Public Commenters,’’ then 

‘‘Public Comments,’’ and follow the 

directions for ‘‘Submitting a Comment.’’ 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Gary K. Van Meter, Deputy 

Director, Office of Regulatory Policy, 

Farm Credit Administration, 1501 Farm 

Credit Drive, McLean, VA 22102–5090. 

You may review copies of comments 

we receive at our office in McLean, 

Virginia, or from our Web site at http:// 

www.fca.gov. Once you are in the Web 

site, select ‘‘Public Commenters,’’ then 

‘‘Public Comments,’’ and follow the 

directions for ‘‘Reading Submitted 

Public Comments.’’ We will show your 

comments as submitted but, for 

technical reasons, we may omit items 

such as logos and special characters. 

Identifying information that you 

provide, such as phone numbers and 

addresses, will be publicly available. 

However, we will attempt to remove email addresses to help reduce Internet 

spam. 

FOR FURTHER INFORMATION CONTACT: 

Jacqueline R. Melvin, Policy Analyst, 

Office of Regulatory Policy, Farm 

Credit Administration, McLean, VA, 

(703) 883–4414, TTY (703) 883–4434; 

or 

Robert Taylor, Attorney, Office of 

General Counsel, Farm Credit 

Administration, McLean, VA 22102– 

5090, (703) 883–4020, TTY (703) 883– 

4020. 

SUPPLEMENTARY INFORMATION: 

I. Objective 

The objective of this proposed rule is 

to ensure that borrowers with loans 

directly tied to a widely publicized 

external index receive appropriate 

disclosure of interest rate changes in 

accordance with statutory requirements 

while minimizing regulatory burden on 

Farm Credit System (FCS or System) 

institutions. 

II. What Does the Statute Require? 

Section 4.13(a)(4) of the Farm Credit 

Act of 1971, as amended (Act), requires 

qualified lenders to provide borrowers, 

for all loans not subject to the Truth in 

Lending Act (15 U.S.C. 1601 et seq.), 

‘‘meaningful and timely disclosure’’ of 

any change in the interest rate 

applicable to the borrower’s loan within 

a ‘‘reasonable time after the effective 

date’’ of a change.1

III. Why did Congress Establish this 

Requirement? 

At the time of the 1985 adoption of 

the interest rate notice requirements, 

almost all FCS loans were 

administered 2 rate loans and there were 

few, if any, FCS loans directly tied to an 

external index.3 Administered rates 

require definitive action at the 

discretion of the lending bank or 

association to change the interest rate 

charged. Administered rates are usually 

based on an institution’s internal index 

or other standard and take into account 

the lending institution’s costs. 

Administered rates may also reflect 

management’s assessments of whether 

rate changes are warranted or feasible in 

view of competitive market conditions; 

therefore, the actual interest rates 

charged on administered rate loans may 

not mirror the movement of market 

interest rates.4

Prior to adopting the interest rate 

notice requirements (during the farm 

crisis of the 1980s), Congress and FCA 

received a number of complaints and 

inquiries from borrowers about interest 

rate changes made on administered rate 

loans without adequate explanation to 

borrowers. Therefore, it appears that the 

new notice provisions were necessary to 

protect borrower rights because of the 

lack of transparency associated with the 

System’s administered rate loans. While 

Congress may not have anticipated that 

the interest rate notice provisions cover 

widely publicized external index loans, 

these loans are not excluded from the 

reach of the Act. 

IV. Section-by-Section Analysis 

What initial disclosures must a qualified 

lender make to a borrower? [§ 617.7130] 

The proposed revision to 

§ 617.7130(b) would add a paragraph 


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29144 Federal Register / Vol. 74, No. 117 / Friday, June 19, 2009 / Proposed Rules 

5Historical data compiled from 1999 to 2008 in 

the Federal Farm Credit Banks Funding Corporation 

annual report to investors available at http:// 

www.farmcredit-ffcb.com. 

(6), requiring, when the borrower’s 

interest rate is directly tied to a widely 

publicized external index, that a 

qualified lender must provide 

information on how and where the 

borrower may track changes to the index 

and when the borrower will receive 

written notice of changes to the 

borrower’s interest rate. 

This additional information would be 

included in the initial disclosure to 

ensure that borrowers have adequate 

knowledge, at loan closing, of how and 

where they may access information to 

monitor changes in the interest rate. 

Further, the borrower would be fully 

informed as to how billing or other 

statements would reflect changes in the 

loan’s interest rate. 

What subsequent disclosures must a 

qualified lender make to a borrower? 

[§ 617.7135] 

Section 4.13(a)(4) of the Act requires 

qualified lenders to provide, no later 

than loan closing, notice to borrowers 

that change in the interest rate 

applicable to the borrower’s loan may be 

made within a reasonable time after the 

effective date of increase or decrease. 

Current § 617.7135(a)(2) requires that 

the qualified lender provide the 

borrower whose loan is directly tied to 

a widely publicized external index a 

notice within 45 days after the effective 

date of the rate change. 

We propose amending the regulation 

to require the qualified lender to 

provide written notice to the borrower 

of a rate change applicable to the 

borrower’s loan no later than the 

borrower’s first regularly scheduled 

billing statement after the effective date 

of the change, so long as the qualified 

lender provided the disclosures 

required by proposed § 617.7130(b)(6) 

no later than the time of loan closing. 

There have been several trends in the 

use of external indexes and enhanced 

information availability that have 

caused us to now believe that the billing 

statement option is reasonable and 

justifiable. For example, between 1999 

and 2008, the volume of administered 

rate loans has declined by 16 percent as 

more borrowers opt to use their 

knowledge and understanding of index 

loans to meet their operating needs.5

Further, advances in technology, such 

as broad band Internet access in rural 

communities, increased usage of mobile 

phones and personal computers for 

accessing the Internet and receiving 

information via e-mails and text 

messages, provide borrowers 

instantaneous information regarding any 

changes in external index rates. 

Moreover, most System associations 

now offer borrowers online access to 

their loan balances, rate changes, and 

other information. Therefore, when a 

qualified lender provides the initial 

disclosure proposed for § 617.7130(b), 

we believe that written notice of 

subsequent rate changes to the 

borrower, no later than the first 

regularly scheduled billing statement 

after the effective date of the change, 

protects borrower rights in accordance 

with the statute regarding ‘‘meaningful 

and timely disclosure.’’ Also, 

institutions do not incur the burden of 

additional mailing costs, which may be 

passed on to their borrowers. 

The new notice requirements would 

not apply to rate changes applicable to 

a borrower’s loan closed prior to the 

effective date of the final rule (the 

borrowers would not have received the 

enhanced initial disclosures). Therefore, 

the current 45-day notice requirement 

would still apply to interest rate 

changes on those loans. 

V. Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.), the FCA hereby certifies that the 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. Each of the 

banks in the System, considered 

together with its affiliated associations, 

has assets and annual income in excess 

of the amounts that would qualify them 

as small entities. Therefore, System 

institutions are not ‘‘small entities’’ as 

defined in the Regulatory Flexibility 

Act. 

List of Subjects in 12 CFR Part 617 

Agriculture, Banks, banking, Rural 

areas. 

For the reasons stated in the 

preamble, part 617 of chapter VI, title 12 

of the Code of Federal Regulations is 

proposed to be amended as follows: 

PART 617—BORROWER RIGHTS 

1. The authority citation for part 617 

continues to read as follows: 

Authority: Secs. 4.13, 4.13A, 4.13B, 4.14, 

4.14A, 4.14C, 4.14D, 4.14E, 4.36, 5.9, 5.17 of 

the Farm Credit Act (12 U.S.C. 2199, 2200, 

2201, 2202, 2202a, 2202c, 2202d, 2202e, 

2219a, 2243, 2252). 

Subpart B—Disclosure of Effective 

Interest Rates 

2. Amend § 617.7130 by revising 

introductory text of paragraph (b) and 

adding a new paragraph (b)(6) to read as 

follows: 

§ 617.7130 What initial disclosures must a 

qualified lender make to a borrower? 

* * * * * 

(b) Adjustable rate loans. A qualified 

lender must provide the following 

information for adjustable rate loans in 

addition to the requirements of 

paragraph (a) of this section: 

* * * * * 

(6) If the borrower’s interest rate is 

directly tied to a widely publicized 

external index, a qualified lender must 

provide: 

(i) How and where the borrower may 

track changes to the index; and 

(ii) When the borrower will receive 

written notice of changes to the 

borrower’s interest rate. 

3. Amend § 617.7135 by revising 

paragraph (a)(2) to read as follows: 

§ 617.7135 What subsequent disclosures 

must a qualified lender make to a borrower? 

* * * * * 

(a) * * * 

(2) If the borrower’s interest rate is 

directly tied to a widely publicized 

external index, a qualified lender must 

provide written notice to the borrower 

of the rate change no later than the 

borrower’s first regularly scheduled 

billing statement after the effective date 

of the change, except that a qualified 

lender must provide written notice to 

the borrower of the rate change within 

45 days after the effective date of the 

change if the loan closed before the 

disclosures required under 

§ 617.7130(b)(6). 

* * * * * 

Dated: June 16, 2009. 

Roland E. Smith, 

Secretary, Farm Credit Administration Board. 

[FR Doc. E9–14484 Filed 6–18–09; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2009–0563; Directorate 

Identifier 2008–NM–180–AD] 

RIN 2120–AA64 

Airworthiness Directives; Fokker 

Model F28 Mark 0070 and 0100 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 


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