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Legal Opinion Summary
Topic:Related Services: May Farm Credit System associations offer related services to eligible farm-related businesses, non-farm rural homeowners, and former farmers?
ID Number:98-08
Issue Date:12/16/1998

An association asked whether section 2.5 of the Farm Credit Act (Act) (12 U.S.C. 2076) can be interpreted to allow Farm Credit System (FCS) associations to offer related services to eligible farm-related businesses, non-farm rural homeowners, and former farmers. An existing regulation, 12 C.F.R. 618.8005, does not permit rural homeowners and farm-related businesses to receive related services from System associations. OGC’s review of section 2.5 and its legislative history confirms that Congress did not intend the FCS to offer related services to customers who are not involved in agricultural or aquatic production.

The plain language of section 2.5 authorizes associations to offer related services that are appropriate to the on-farm or aquatic operations of the individual borrower, applicant, or member who receives them. Congress apparently adopted the “on-farm” amendment to ensure that the FCS would provide only financial and technical services that are related to the agricultural and aquatic operations of its customers. Rural homeowners who are not farmers, ranchers, or aquatic producers cannot obtain related services from the FCS because they have no agricultural or aquatic operations. Also, former farmers who have completely severed their ties to agriculture by ceasing agricultural production and by selling off all of their farm assets no longer have on-farm operations, and therefore they do not qualify for related services from the FCS.

However, the Act might be susceptible to an interpretation that permits FCS associations to furnish related services to certain farm-related businesses. Section 1.1(a) of the Act appears to indicate that Congress intended to authorize related services to “selected” farm-related businesses if such services are “necessary for efficient farm operations.” Congress rejected a proposal by a commercial bank trade association that would have expressly limited eligibility for related services to farmers. Many farm-related businesses are intimately connected with agricultural operations because they often perform the same tasks that farmers and ranchers perform for themselves. Under these circumstances, the FCA may form a basis for amending 618.8005(a) so the FCS could offer related services to farm-related businesses.

(December 16, 1998)