Farm Credit System (FCS) lenders don’t play by the rules. The FCS’s loans speak for themselves: they lend to publicly-traded Real Estate Investment Trusts (REITs), golf courses, foreign companies, telecoms – the list could go on and on. FCS lenders, time and again, have decided that they can act outside the spirit of the law to make a quick buck.
No one should be surprised that the FCS is lending outside of its mission – that’s par for the course.
MidAtlantic Farm Credit has decided to continue this time-honored tradition of flouting the spirit of the Farm Credit Act through its new “Equipment Leasing Program.”
Sound weird to you? It should.
MidAtlantic Farm Credit is now offering “Farm Credit EXPRESS, [an] easy equipment financing program.” Never mind the fact that there’s already a program, AgDirect, which effectively does the same thing.
This is a program to get equipment into any hands – not necessarily the hands of farmers. Farm Credit Express boasts, and prominently displays the real draw of the program:
Bonus: Because Farm Credit is a cooperative lender, you will have all the advantages of being a cooperative member, including participation in our unique patronage program. While other lenders share their profits with their stockholders, our borrowers ARE our stockholders, and are eligible to share in our profits. Your equipment dealer can explain the benefits of ownership.
The draw of the program is that customers – not necessarily farmers – can receive patronage payments from their Farm Credit Association. As soon as those prospective customers enter into a financing agreement, they are customer-owners of the Farm Credit association from which they received the loan. They will be loyal customers of that association and they will receive patronage payments.
But what counts as farm equipment, and how expensive does that equipment have to be to qualify for a loan? Could someone receive financing for a weed trimmer? Where does Farm Credit draw the line?
This is a disturbing trend in Farm Credit’s lending practices – the criteria for loan eligibility for certain loans are undefined or incredibly lax. This is especially true with housing loans. To qualify for a loan, at least one of the following criteria must be met:
· The property must be at least 5 acres;
· The town where the property is located must have a population of 2,500 or less;
· The potential owner must have the intent to farm;
· The property must yield at least $500 in gross farm income.
So, in order to become a Farm Credit customer, one must only have the intent to farm. What counts as farming? Could an herb garden count as farming? Could someone looking for an equipment loan use the same lax standards?
These lax criteria – and the potential for other financing opportunities to also have lax criteria – show that today’s FCS is about ever-increasing profits and skirting the system.
Congress needs to act. The FCS has shown, repeatedly, that it cares more about profits than it does farmers, especially young, beginning and small farmers. Congress, take action: keep the FCS in line by cracking down and making sure that a certain percentage of loans are for small, young and beginning farmers. Future Americans will thank you.