§ 948. — Lending power.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC948]
TITLE 7--AGRICULTURE
CHAPTER 31--RURAL ELECTRIFICATION AND TELEPHONE SERVICE
SUBCHAPTER IV--RURAL TELEPHONE BANK
Sec. 948. Lending power
(a) Loans for prescribed purposes; requisite conditions
The Governor of the telephone bank shall make loans on behalf of the
telephone bank, to the extent that there are qualifying applications
therefor, subject only to limitations as to amounts authorized for loans
and advances as may be imposed by law enacted by the Congress of the
United States for loans to be made in any one year, and in conformance
with policies approved by the Telephone Bank Board, to corporations and
public bodies which have received a loan or loan commitment pursuant to
section 922 of this title, or which have been certified by the Secretary
to be eligible for such a loan or loan commitment, (1) for the same
purposes and under the same limitations for which loans may be made
under section 922 of this title, (2) for the acquisition, purchase, and
installation of telephone lines, systems, and facilities (other than
buildings used primarily for administrative purposes, vehicles not used
primarily in construction, and customer premise equipment) related to
the furnishing, improvement, or extension of rural telecommunications
service, and (3) for the purchase of class B stock required to be
purchased under section 946(d) of this title but not for the purchase of
class C stock, subject, as to the purposes set forth in (2) hereof, to
the following provisos: That in the case of any such loan for the
acquisition of telephone lines, facilities, or systems, the acquisition
shall be approved by the Secretary, the location and character thereof
shall be such as to improve the efficiency, effectiveness, or financial
stability of the telephone system of the borrower, and in respect of
exchange facilities for local services, the size of each acquisition
shall not be greater than the borrower's existing system at the time it
receives its first loan from the telephone bank, taking into account the
number of subscribers served, miles of line, and plant investment. Loans
and advances made under this section shall not be included in the totals
of the budget of the United States Government and shall be exempt from
any general limitation imposed by statute on expenditures and net
lending (budget outlays) of the United States.
(b) Terms and conditions of loans; restrictions on loans
Loans under this section shall be on such terms and conditions as
the Governor of the telephone bank shall determine, subject, however, to
the following restrictions:
(1) Amortization period
All loans made under this section shall be fully amortized over
a period not to exceed fifty years.
(2) Preference in loans; election of loans for telephone
system with certain subscriber density per mile
Funds to be loaned under this chapter to any borrower shall be
loaned under this section in preference to section 922 of this title
if the borrower is eligible for such a loan and funds are available
therefor. Notwithstanding the foregoing or any other provision of
law, all loans made pursuant to this chapter for facilities for
telephone systems with an average subscriber density of three or
fewer per mile shall be made under section 922 of this title; but
this provision shall not preclude the making of such loans from the
telephone bank at the election of the borrower.
(3) Interest rate
(A) Loans under this section shall bear interest at the ``cost
of money rate''. The cost of money rate is defined as the average
cost of moneys to the telephone bank as determined by the Governor,
but not less than 5 per centum per annum.
(B) On and after December 22, 1987, advances made on or after
December 22, 1987, under loan commitments made on or after October
1, 1987, shall bear interest at the rate determined under
subparagraph (C), but in no event at a rate that is less than 5
percent per annum.
(C) The rate determined under this subparagraph shall be--
(i) for the period beginning on the date the advance is made
and ending at the close of the fiscal year in which the advance
is made, the average yield (on the date of the advance) on
outstanding marketable obligations of the United States having a
final maturity comparable to the final maturity of the advance;
and
(ii) after the fiscal year in which the advance is made, the
cost of money rate for such fiscal year, as determined under
subparagraph (D).
(D) Within 30 days after the end of each fiscal year, the
Governor shall determine to the nearest 0.01 percent the cost of
money rate for the fiscal year, by calculating the sum of the
results of the following calculations:
(i) The aggregate of all amounts received by the telephone
bank during the fiscal year from the issuance of class A stock,
multiplied by the rate of return payable by the telephone bank
during the fiscal year, as specified in section 946(c) of this
title, to holders of class A stock, which product is divided by
the aggregate of the amounts advanced by the telephone bank
during the fiscal year.
(ii) The aggregate of all amounts received by the telephone
bank during the fiscal year from the issuance of class B stock,
multiplied by the rate at which dividends are payable by the
telephone bank during the fiscal year, as specified in section
946(d) of this title, to holders of class B stock, which product
is divided by the aggregate of the amounts advanced by the
telephone bank during the fiscal year. For purposes of the
calculation under this subparagraph, such rate shall be zero.
(iii) The aggregate of all amounts received by the telephone
bank during the fiscal year from the issuance of class C stock,
multiplied by the rate at which dividends are payable by the
telephone bank during the fiscal year, under section 946(e) of
this title, to holders of class C stock, which product is
divided by the aggregate of the amounts advanced by the
telephone bank during the fiscal year.
(iv)(I) The sum of the results of the calculations described
in subclause (II).
(II) The amounts received by the telephone bank during the
fiscal year from each issue of telephone debentures and other
obligations of the telephone bank, multiplied, respectively, by
the rates at which interest is payable during the fiscal year by
the telephone bank to holders of each issue, each of which
products is divided, respectively, by the aggregate of the
amounts advanced by the telephone bank during the fiscal year.
(v)(I) The amount by which the aggregate of the amounts
advanced by the telephone bank during the fiscal year exceeds
the aggregate of the amounts received by the telephone bank from
the issuance of class A stock, class B stock, class C stock, and
telephone debentures and other obligations of the telephone bank
during the fiscal year, multiplied by the historic cost of money
rate as of the close of the fiscal year immediately preceding
the fiscal year, which product is divided by the aggregate of
the amounts advanced by the telephone bank during the fiscal
year.
(II) For purposes of this clause, the term ``historic cost
of money rate'', with respect to the close of a preceding fiscal
year, means the sum of the results of the following
calculations: The amounts advanced by the telephone bank in each
fiscal year during the period beginning with fiscal year 1974
and ending with the preceding fiscal year, multiplied,
respectively, by the cost of money rate for the fiscal year (as
set forth in the table in subparagraph (E)) for fiscal years
1974 through 1987, and as determined by the Governor under this
subparagraph for fiscal years after fiscal year 1987), each of
which products is divided, respectively, by the aggregate of the
amounts advanced by the telephone bank during the period.
(E) For purposes of subparagraph (D)(II), the cost of money rate
for the fiscal years in which each advance was made shall be as set
forth in the following table:
The cost of money
For advances made in--rate shall be--
Fiscal year 1974.................................... 5.01 percent
Fiscal year 1975.................................... 5.85 percent
Fiscal year 1976.................................... 5.33 percent
Fiscal year 1977.................................... 5.00 percent
Fiscal year 1978.................................... 5.87 percent
Fiscal year 1979.................................... 5.93 percent
Fiscal year 1980.................................... 8.10 percent
Fiscal year 1981.................................... 9.46 percent
Fiscal year 1982.................................... 8.39 percent
Fiscal year 1983.................................... 6.99 percent
Fiscal year 1984.................................... 6.55 percent
Fiscal year 1985.................................... 5.00 percent
Fiscal year 1986.................................... 5.00 percent
Fiscal year 1987..................................... 5.00
percent.
For purposes of this paragraph, the term ``fiscal year'' means the
12-month period ending on September 30 of the designated year.
(F)(i) Notwithstanding subparagraph (B), if a borrower holds a
commitment for a loan under this section made on or after October 1,
1987, and before December 22, 1987, part or all of the proceeds of
which have not been advanced as of December 22, 1987, the borrower
may, until the later of the date the next advance under the loan
commitment is made or 90 days after December 22, 1987, elect to have
the interest rate specified in the loan commitment apply to the
unadvanced portion of the loan in lieu of the rate which (but for
this clause) would apply to the unadvanced portion under this
paragraph. If any borrower makes an election under this clause with
respect to a loan, the Governor shall adjust the interest rate which
applies to the unadvanced portion of the loan accordingly.
(ii)(I) If the telephone bank, pursuant to section 947(b) of
this title, issues telephone debentures on any date to refinance
telephone debentures or other obligations of the telephone bank, the
telephone bank shall, in addition to any interest rate reduction
required by any other provision of this paragraph, for the period
applicable to the advance, reduce the interest rate charged on each
advance made under this section during the fiscal year in which the
refinanced debentures or other obligations were originally issued by
the amount applicable to the advance.
(II) For purposes of subclause (I), the term ``the period
applicable to the advance'' means the period beginning on the issue
date described in subclause (I) and ending on the earlier of the
date the advance matures or is completely prepaid.
(III) For purposes of subclause (I), the term ``the amount
applicable to the advance'' means an amount which fully reflects
that percentage of the funds saved by the telephone bank as a result
of the refinancing which is equal to the percentage representation
of the advance in all advances described in subclause (I).
(IV) Within 60 days after any issue date described in subclause
(I), the Governor shall amend the loan documentation for each
advance described in subclause (I), as necessary, to reflect any
interest rate reduction applicable to the advance by reason of this
clause, and shall notify each affected borrower of the reduction.
(G) Within 30 days after the publication of any determination
made under subparagraph (D), any affected borrower may obtain review
of the determination, or any other equitable relief as may be
determined appropriate, by the United States court of appeals for
the judicial circuit in which the borrower does business by filing a
written petition requesting the court to set aside or modify such
determination. On receipt of such a petition, the clerk of the court
shall transmit a copy of the petition to the Governor. On receipt of
a copy of such a petition from the clerk of the court, the Governor
shall file with the court the record on which the determination is
based. The court shall have jurisdiction to affirm, set aside, or
modify the determination.
(H) Within 5 days after determining the cost of money rate for a
fiscal year, the Governor shall--
(i) cause the determination to be published in the Federal
Register in accordance with section 552 of title 5; and
(ii) furnish a copy of the determination to the Comptroller
General of the United States.
(I) The telephone bank shall not sell or otherwise dispose of
any loan made under this section, except as provided in this
paragraph.
(4) Required qualifications of applicants
The Governor of the telephone bank may make a loan under this
section only to an applicant for the loan who meets the following
requirements:
(A) The average number of subscribers per mile of line in
the service area of the applicant is not more than 15, or the
applicant is capable of producing net income or margins before
interest of not less than 100 percent (but not more than 500
percent) of the interest requirements on all of the outstanding
and proposed loans of the applicant.
(B) The Secretary has approved, under section 935(d)(3) of
this title, a telecommunications modernization plan for the
State in which the applicant is located and, if the plan was
developed by telephone borrowers under subchapter III of this
chapter, the applicant is a participant in the plan.
(5) Certificate of convenience and necessity required from
State regulatory agency or statement of telephone
bank's Governor of nonduplication of lines,
facilities, or systems
No loan shall be made in any State which now has or may
hereafter have a State regulatory body having authority to regulate
telephone service and to require certificates of convenience and
necessity to the applicant unless such certificate from such agency
is first obtained. In a State in which there is no such agency or
regulatory body legally authorized to issue such certificates to the
applicant, no loan shall be made under this section unless the
Governor of the telephone bank shall determine (and set forth his
reasons therefor in writing) that no duplication of lines,
facilities, or systems, providing reasonably adequate services will
result therefrom.
(6) Definitions: telephone service; telephone lines,
facilities, or systems
As used in this section, the term telephone service shall have
the meaning prescribed for this term in section 924(a) of this
title, and the term telephone lines, facilities, or systems shall
mean lines, facilities, or systems used in the rendition of such
telephone service.
(7) Sale or disposal of property, rights, or franchises
prior to repayment of loan
No borrower of funds under this section shall, without approval
of the Governor of the telephone bank under rules established by the
Telephone Bank Board, sell or dispose of its property, rights, or
franchises, acquired under the provisions of this chapter, until any
loan obtained from the telephone bank, including all interest and
charges, shall have been repaid.
(8) Prepayment without penalty
(A) A borrower with a loan from the Rural Telephone Bank may
prepay such loan (or any part thereof) by paying the face amount
thereof without being required to pay the prepayment penalty set
forth in the note covering such loan, except for any prepayment
penalty provided for in a loan agreement entered into before
November 1, 1993.
(B) If a borrower prepays part or all of a loan made under this
section, then, notwithstanding section 947(b) of this title, the
Governor of the telephone bank shall--
(i) use the full amount of the prepayment to repay
obligations of the telephone bank issued pursuant to section
947(b) of this title before October 1, 1991, to the extent any
such obligations are outstanding; and
(ii) in repaying the obligations, first repay the advances
bearing the greatest rate of interest.
(9) Applications considered under this section and section
935(d)(2)
On request of any applicant for a loan under this section during
any fiscal year, the Governor of the telephone bank shall--
(A) consider the application to be for a loan under this
section and a loan under section 935(d)(2) of this title; and
(B) if the applicant is eligible for a loan, make a loan to
the applicant under this section in an amount equal to the
amount that bears the same ratio to the total amount of loans
for which the applicant is eligible under this section and under
section 935(d)(2) of this title, as the amount made available
for loans under this section for the fiscal year bears to the
total amount made available for loans under this section and
under section 935(d)(2) of this title for the fiscal year.
(10) Applications considered under section 935(d)(2)
On request of any applicant who is eligible for a loan under
this section for which funds are not available, the applicant shall
be considered to have applied for a loan under section 935(d)(2) of
this title.
(c) Payment schedule; adjustment; loan period
The Governor of the telephone bank is authorized under rules
established by the Telephone Bank Board to adjust, on an amortized
basis, the schedule of payments of interest or principal of loans made
under this section upon his determination that with such readjustment
there is reasonable assurance of repayment: Provided, however, That no
adjustment shall extend the period of such loans beyond fifty years.
(d) Borrowers to determine amortization period for rural telephone bank
loans
(1) Except as provided in paragraph (2), the term of any loan made
under this subchapter shall be determined by the borrower at the time
the application for the loan is submitted.
(2) The term of any loan made under this subchapter shall not exceed
the maximum term for which a loan may be made under section 904 of this
title.
(e) Interest on loans and advances
Loans and advances made under this section on or after November 5,
1990, shall bear interest at a rate determined under this section,
taking into account all assets and liabilities of the telephone bank.
This subsection shall not apply to loans obligated before November 1,
1993. Funds are not authorized to be appropriated to carry out this
subsection until the funds are appropriated in advance to carry out this
subsection.
(May 20, 1936, ch. 432, title IV, Sec. 408, as added Pub. L. 92-12,
Sec. 2, May 7, 1971, 85 Stat. 35; amended Pub. L. 93-32, Secs. 8, 9, May
11, 1973, 87 Stat. 70, 71; Pub. L. 100-203, title I, Secs. 1411(b)(1),
(c), 1412, Dec. 22, 1987, 101 Stat. 1330-22, 1330-23, 1330-26; Pub. L.
101-624, title XXIII, Secs. 2365, 2366, 2367(b), Nov. 28, 1990, 104
Stat. 4044; Pub. L. 103-129, Sec. 2(a)(2), Nov. 1, 1993, 107 Stat. 1361;
Pub. L. 103-354, title II, Sec. 235(a)(13), Oct. 13, 1994, 108 Stat.
3221; Pub. L. 104-66, title I, Sec. 1011(y), Dec. 21, 1995, 109 Stat.
711.)
Amendments
1995--Subsec. (b)(3)(I), (J). Pub. L. 104-66 redesignated subpar.
(J) as (I) and struck out former subpar. (I) which read as follows:
``The Comptroller General shall review, on an expedited basis, each
determination a copy of which is received from the Governor and, within
15 days after the date of such receipt, furnish Congress a report on the
accuracy of the determination.''
1994--Subsecs. (a), (b)(4)(B). Pub. L. 103-354 substituted
``Secretary'' for ``Administrator''.
1993--Subsec. (a)(2). Pub. L. 103-129, Sec. 2(a)(2)(A), substituted
``acquisition, purchase, and installation of telephone lines, systems,
and facilities (other than buildings used primarily for administrative
purposes, vehicles not used primarily in construction, and customer
premise equipment) related to the furnishing, improvement, or extension
of rural telecommunications service'' for ``purposes of financing, or
refinancing, the construction, improvement, expansion, acquisition, and
operation of telephone lines, facilities, or systems, in order to
improve the efficiency, effectiveness, or financial stability of
borrowers financed under section 922 of this title and this section''.
Subsec. (b)(4). Pub. L. 103-129, Sec. 2(a)(2)(B)(i), added par. (4)
and struck out former par. (4) which related to adequacy of security and
capacity for repayment of loans made under this section.
Subsec. (b)(8)(A). Pub. L. 103-129, Sec. 2(a)(2)(B)(ii), designated
existing provisions as subpar. (A), substituted ``except for any
prepayment penalty provided for in a loan agreement entered into before
November 1, 1993'' for ``if such prepayment is not made later than
September 30, 1988'', and added subpar. (B).
Subsec. (b)(9), (10). Pub. L. 103-129, Sec. 2(a)(2)(B)(iii), added
pars. (9) and (10).
Subsec. (e). Pub. L. 103-129, Sec. 2(a)(2)(C), added subsec. (e).
1990--Subsec. (a). Pub. L. 101-624, Sec. 2365, substituted ``shall
make loans on behalf of the telephone bank, to the extent that there are
qualifying applications therefor, subject only to limitations as to
amounts authorized for loans and advances as may be imposed by law
enacted by the Congress of the United States for loans to be made in any
one year, and'' for ``is authorized on behalf of the telephone bank to
make loans,''.
Subsec. (b)(3)(B). Pub. L. 101-624, Sec. 2367(b)(1), substituted
``the date of enactment of this subparagraph'' for ``the date of
enactment of this paragraph'' in the original text before ``advances'',
which was translated as ``December 22, 1987'', requiring no change in
text.
Subsec. (b)(3)(D)(ii). Pub. L. 101-624, Sec. 2367(b)(2), inserted
``For purposes of the calculation under this subparagraph, such rate
shall be zero.''
Subsec. (b)(3)(E). Pub. L. 101-624, Sec. 2367(b)(3), substituted
``paragraph'' for ``subparagraph'' after ``of this''.
Subsec. (d). Pub. L. 101-624, Sec. 2366, added subsec. (d).
1987--Subsec. (b)(3). Pub. L. 100-203, Sec. 1411(c), designated
existing provisions as subpar. (A) and added subpars. (B) to (J).
Subsec. (b)(4). Pub. L. 100-203, Sec. 1412, inserted at end ``For
purposes of determining the creditworthiness of a borrower for a loan
under this paragraph, the Governor shall assume that the loan, if made,
would bear interest at a rate equal to the average yield (on the date of
the determination) on outstanding marketable obligations of the United
States having a final maturity comparable to the final maturity of the
loan.''
Subsec. (b)(8). Pub. L. 100-203, Sec. 1411(b)(1), added par. (8).
1973--Subsec. (a). Pub. L. 93-32, Sec. 8, inserted ``or which have
been certified by the Administrator to be eligible for such a loan or
loan commitments,'' preceding cl. (1) and inserted provision that loans
and advances not be included in the totals of the budget of the United
States Government and that such loans and advances be exempt from any
general limitation imposed by statute expenditures and net lending
(budget outlays) of the United States.
Subsec. (b)(3). Pub. L. 93-32, Sec. 9, substituted provisions for a
``cost of money rate'' of interest with a ``not less than 5 per centum
per annum'' limit on such rate, for provisions for interest ``at the
highest rate which meets the requirements set forth in paragraph (4),
consistent with the borrower's ability to pay such interest rate and
with achievement of the objectives of this chapter'' with a ``not less
than 4 per centum per annum'' limit on such rate.
Effective Date of 1990 Amendment
Amendment by section 2367(b) of Pub. L. 101-624 effective as if
included in chapter 2 [Secs. 1411-1414] of subtitle D of title I of the
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, see section
2368(b) of Pub. L. 101-624, set out as a note under section 946 of this
title.
Effective Date of 1973 Amendment
Amendment by Pub. L. 93-32 effective May 11, 1973, see section 12 of
Pub. L. 93-32, set out as an Effective Date note under section 930 of
this title.
Effective Date
Section effective May 7, 1971, see section 7 of Pub. L. 92-12, set
out as a note under section 921a of this title.
Congressional Findings Covering Interest Rates and Loan Prepayments
Section 1411(a) of Pub. L. 100-203 provided that: ``Congress finds
that--
``(1) overcharging of Rural Telephone Bank borrowers has
resulted in $179,000,000 in excess profits and has imperiled
borrowers by raising costs to ratepayers;
``(2) borrowers will be able to seek redress under section
408(b)(3)(G) of the Rural Electrification Act of 1936 [subsec.
(b)(3)(G) of this section], as added by subsection (c), or may leave
the Rural Telephone Bank, but in no case may the Governor of the
Bank issue regulations requiring any penalty from borrowers seeking
to retire debt prior to maturity; and
``(3) any reduction in Federal Government expenditures in the
operation of the Rural Telephone Bank, from borrowers' conduct
resulting from the implementation of the amendments made by
subsections (b) and (c) [amending this section], should be included
in all calculations of the budget of the United States Government,
authorized under the Balanced Budget and Emergency Deficit Control
Reaffirmation Act of 1987 [title I of Pub. L. 100-119, see Short
Title of 1987 Amendment note set out under section 901 of Title 2,
The Congress].''
Prepayment Regulations
Section 1411(b)(2) of Pub. L. 100-203 provided that: ``The Governor
of the Rural Telephone Bank shall issue regulations to carry out the
amendment made by paragraph (1) [amending this section] within 30 days
after the date of enactment of this Act [Dec. 22, 1987]. Such
regulations shall implement the amendment made by paragraph (1) without
the addition of any restrictions not set forth in such amendment.''
Section Referred to in Other Sections
This section is referred to in sections 927, 928, 935, 939, 941,
946, 950, 950b of this title.
