Deposits by Any Other Name

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The Farm Credit Administration’s (FCA) mission is “to ensure a safe, sound, and dependable source of credit and related services for agriculture and rural America.” But we’ve seen how much the FCA and the Farm Credit System (FCS) help America’s farmers.

Are they taking too much liberty in how they follow their own rules?

Farm Credit Services of America, an FCS institution operating in Nebraska, makes a point of noting that “Farm Credit institutions do not take deposits.” The Farm Credit Council also puts a fine point on the policy, “Farm Credit institutions do not take deposits from local communities.”

If only that were the whole story.

Farm Credit Services of America, based in Nebraska, is the proud operator of AgriPoint®, a system that allows borrowers to access their financial information online. That seems fair enough, but one element shines light on questionable features, “this overview chart consolidates your loans, leases, insurance and other information including cash-back dividends, AgriBuy® Rewards, cash plus accounts, and funds held accounts [emphasis added].” What exactly is Farm Credit Services of America offering cash-back dividends on? Are funds in funds held accounts accruing these dividends?

Meanwhile, some institutions forgo any ambiguity and admit to operating accounts that function exactly like a checking or savings account at a regular bank. Farm Credit of Western Arkansas advertises that “Farm Credit members can take advantage of our unique FUNDS HELD account and earn interest on funds equal to the interest rate on their loan…Giving you not only a savings vehicle, but more flexibility in managing your payments!”

Chairman Conaway of the House Committee on Agriculture made sure to touch on this subject at the FCS Oversight hearing earlier this month, but his inquiry was met with limp responses from the FCA’s Director of the Office of Examination, Robert Coleman.

Chairman: Ok. Do they write, can they write checks on that? How does that customer access that advance payment?

Coleman: They would have to come back to the institution and request that those funds be released.

Chairman: Come back, ok. Do you pay them interest on that? On those deposits? Does the System pay interest?

Coleman: On that advanced conditional payment account there would be funds paid, correct.

Of course, Coleman’s first response is incorrect; AgriPoint® “offers you the freedom to manage your accounts on online.”

The FCS is saying one thing and doing another, against the spirit of the law. When will the FCA tell FCS institutions that enough is enough? The FCA needs to do this soon; if not, then Congress needs to make sure that the FCA does its job and keeps the FCS playing by the rules.