[Code of Federal Regulations]
[Title 7 Volume 11]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1785]
[Page 1146-1147]
TITLE 7--AGRICULTURE
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1785_LOAN ACCOUNT COMPUTATIONS, PROCEDURES AND POLICIES FOR ELECTRIC AND
TELEPHONE BORROWERS--Table of Contents
Subpart A [Reserved]
Subpart B_RUS Cushion of Credit Account Computations and Procedures
Sec.
1785.66 General.
1785.67 Definitions.
1785.68 Establishing an RUS cushion of credit payment account.
1785.69 Cushion of credit payment account computations.
1785.70 Application of RETRF cushion of credit payments.
Authority: 7 U.S.C. 901 et seq.; Title I, Subtitle D, sec. 1403,
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203; Pub. L. 103-
354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).
Subpart A [Reserved]
Subpart B_RUS Cushion of Credit Account Computations and Procedures
Source: 54 FR 13669, Apr. 5, 1989, unless otherwise noted.
Sec. 1785.66 General.
This subpart B sets forth policies and procedures on the RUS cushion
of creditpayments program. The cushion of credit payments program will
be maintained only for insured loans evidenced by obligations of the
Fund. A subaccount within the Fund is hereby established for purposes of
promoting rural economic development. It shall be known as the ``Rural
Economic Development Subaccount.'' The assets of the subaccount shall be
obtained from crediting (on a monthly basis) a sum determined by
multiplying the outstanding cushion of credit payments made after
October 1, 1987, by the difference (converted on a monthly basis)
between the average weighted interest rate paid on outstanding
certificates of beneficial ownership issued by the Fund and the 5
percent rate of interest provided to borrowers on cushion of credit
payments, repayment of loans made pursuant to Section 313 of the Act,
and other sources as provided by law. This subaccount shall be used to
provide grants or zero interest loans to borrowers under the Act for the
purpose of promoting rural economic development.
Sec. 1785.67 Definitions.
Accumulated (deferred) interest means interest allowed to accumulate
up to, and including, the basis date of RUS notes covering loans
approved before June 5, 1957. The accumulated interest is payable in
equal periodic installments over the remaining life of the notes.
Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et. seq.).
Advance payment means a voluntary unscheduled payment on an RUS
note, made prior to October 2, 1987, credited to the advance payment
account of a borrower.
Cushion of Credit Payment means a voluntary unscheduled payment on
an RUS note made after October 1, 1987, credited to the cushion of
credit account of a borrower.
Current interest means interest payable periodically as it accrues.
Fund means the Rural Electrification and Telephone Revolving Fund
established pursuant to the Act.
Interest credit means interest earned on balances in advance payment
or cushion of credit accounts. Since the periodic installments are
established by the terms of the notes, the interest credits cannot serve
to change the total amount of each installment; therefore, an amount
equal to the interest credits is added to the principal installment due.
On receipt of the full installments, amounts equal to the interest
credits (the principal offsets) are added to the respective advance
payment accounts.
Prepayment means a voluntary unscheduled payment which the borrower
instructs RUS to apply directly and immediately to the principal of an
RUS note.
[[Page 1147]]
RUS notes means those notes, bonds, or other obligations evidencing
indebtedness created by loans made by RUS pursuant to titles I, II, or
III of the Act.
Subaccount means the Rural Economic Development Subaccount
established pursuant to the Act as part of the Fund.
Sec. 1785.68 Establishing an RUS cushion of credit payment account.
A cushion of credit account shall be automatically established by
RUS for each borrower who makes a payment after October 1, 1987, in
excess of amounts then due on an RUS note. Such account will bear
interest at a rate of 5 percent per annum. All payments on RUS notes
which are in excess of required payments and not otherwise designated
shall be deposited in the borrowers' respective cushion of credit
accounts. Payments received in the month in which an installment is due
will be applied to the installment due. However, if the regular
installment payment is received at a later date in the month, the first
payment received will be applied retroactively to a cushion of credit
account and the second will be applied to the installment due.
Sec. 1785.69 Cushion of credit payment account computations.
(a) Deposits. Cushion of credit payments are credited to the
borrowers' cushion of credit accounts.
(b) Interest. Interest at the rate of 5 percent per annum shall be
credited on a quarterly basis to cushion of credit accounts. Interest
earned will appear as a reduction in the interest billed on the
borrower's RUS notes and will be separately shown on RUS Form 694,
``Statement of Interest and Principal Due.''
Sec. 1785.70 Application of RETRF cushion of credit payments.
(a) If a maturing installment on an RUS note or a note which has
been guaranteed by RUS is not received by its due date, funds will be
withdrawn from the borrower's cushion of credit account and applied as
of the installment due date beginning with the oldest of such notes as
follows: first, to current interest then due on all notes; second, to
the accumulated interest due, if any, on all notes; and third, to the
principal then due on all notes. In those instances where a borrower has
prior to October 2, 1987, maintained an advance payment account with
RUS, its cushion of credit account will be applied in accordance with
the provisions of this section prior to using any balance remaining in
its advance payment account to pay interest and principal installments
on notes. Computations required under this section have been made by RUS
as of October 2, 1987; however, on or before May 25, 1989 any borrower
may make a one time irrevocable election to have all such computations
made as of April 5, 1989, by filing written notice to that effect with
Robert D. Ruddy, Director, Fiscal Accounting Division, Rural Utilities
Service, Washington, DC 20250-1500.
(b) A borrower may reduce the balance of its cushion of credit
account only if the amount obtained from the reduction is used to make
scheduled payments on loans made or guaranteed under the Act.
[54 FR 13669, Apr. 5, 1989; 54 FR 17703, Apr. 25, 1989]