Fair Credit for Farmers Act Mandates 2-Year Payment Deferral and 0.125% Interest Rate for Struggling Producers

When you’re juggling a mortgage, rising input costs, and unpredictable weather, a two-year break on your loan payments sounds like a fantasy. But for farmers struggling financially, the Fair Credit for Farmers Act aims to make that fantasy a reality, at least for federal farm loans. This bill isn’t just a quick fix; it’s a major overhaul of how the USDA handles farm debt, transparency, and appeals.

The Immediate Relief: Two Years of Breathing Room

The biggest and most immediate change is found in Section 2, which targets farmers defined as “eligible borrowers”—meaning they are delinquent or otherwise financially distressed. For these folks, the Secretary of Agriculture must defer all principal and interest payments due on their direct farm loans for two years starting from the date the Act is enacted. That’s a huge pause button for anyone facing foreclosure or mounting debt stress.

But it gets better: during that 24-month deferral period, the interest rate on the remaining principal is slashed to a ridiculously low 0.125 percent. Think about that: a two-year interest holiday that effectively freezes your debt while you try to get back on your feet. The bill also requires the maturity date and repayment period for these loans to be extended by two years, meaning you don't lose that time at the end. For small operations—like a veteran rancher or a beginning farmer—this could be the difference between staying in business and selling the farm.

Protecting the Farmhouse and Leveling the Playing Field

Beyond the immediate cash relief, the bill introduces several long-term structural changes to how the Farm Service Agency (FSA) interacts with borrowers. One crucial reform (Section 3) limits the ability of the FSA to use a farmer's primary residence as collateral. The agency can only secure a direct farm loan with the "principal residence" (the home plus up to 10 acres of adjoining land) if the value of the farmer's other assets isn’t enough to fully secure the loan. And here’s the kicker: once the value of those other assets equals 100 percent of the remaining loan amount, the FSA must automatically start the process to release the residence as security. This is massive protection for farm families, ensuring that the last thing they lose is their home.

Another major win for fairness is the change to how adverse decisions are handled. If the FSA denies a loan or benefit, the determination letter must now include a description of every reason for the denial and a specific reference to the relevant regulation or handbook section (Section 3). No more vague rejection notices. Crucially, if the FSA fails to list a known reason in the first letter, they can’t use that same reason to deny you later unless your circumstances have substantially changed. This forces the agency to be transparent and get it right the first time.

Shifting the Burden of Proof for Smaller Farmers

Section 4 introduces a game-changer for administrative appeals. Normally, if you appeal an FSA decision, the burden of proof is on you, the farmer, to prove the agency was wrong. But under this bill, if the appellant’s adjusted gross income was not more than $300,000 in the previous year (or the average of the previous five years), the burden shifts. The agency now has to prove, using substantial evidence, that its adverse decision was not wrong. This levels the playing field significantly for smaller and mid-sized producers who might not have the resources to fight an extended legal battle against the government.

Finally, the bill removes a major barrier for farmers who have struggled in the past: the Secretary is prohibited from restricting a borrower's eligibility for a new loan based on a previous debt write-down or loss to the Secretary (Section 3). This is a clean slate provision, recognizing that past financial trouble shouldn't permanently sideline a producer who is ready to try again.