
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 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.
