Only 17% of farmers win federal loan appeals

A new study has analyzed farm loan decisions passed through the USDA's National Appeals Division (NAD) and found that between 2009-2022, only 17% of farmers won their Farm Service Agency loan appeal. 

New study published in part through RAFI and Farm Aid

The study, "An Analysis of Appealed Direct Farm Loan Decisions 2009-2022 and Opportunities for Reform,"  was conducted by the Center for Agriculture and Food Systems at Vermont Law and Graduate School, and published in partnership with the Rural Advancement Foundation International (RAFI) and Farm Aid.

The FSA provides direct loans to farmers, often those who cannot get credit from other sources. Those who cannot get FSA loans are often unable to get funding at all. The National Appeals Division (NAD) conducts appeal hearings on loan denials to review program decisions.

The study's summary indicates that NAD heard 367 FSA direct loan denial appeals from farmers between January 2009 and June 2022. FSA seemed to have broad discretion in evaluation applications, often utilizing excessive scrutiny. The study claims that another key factor is "NAD deference to FSA decision-making that can result in questionable or even incorrect denials being upheld on appeal."

The top issues identified in these appeals were:

• Loan applicants have an acceptable credit history
• Applicants demonstrated managerial ability
• Applicants had a feasible plan for their operation

In these, the analysis found many actionable issues. For example -

Credit History

• Exceptions to the credit history rule are not issued consistently
• Credit history issues are not consistently discussed with appellants
• Flexibility can lead to unfair treatment of loan applicants
• Lack of good faith determinations can result in a lifetime ban on FSA loan assistance
• Debt forgiveness can affect loan eligibility

Managerial Ability

• Farming experience is reviewed unpredictably
• The requirement proves hard to meet using a combination of experience, education, and on-the-job training
• Rulings are inconsistent and often upheld by the NAD

Feasibility Plan

• Accurate and verifiable information is not utilized consistently in the loan process
• When concerns arise, the FSA often does not discuss or attempt to resolve them with the applicant
• Premium products struggle to have their prices recognized
• Microloan exceptions are inconsistently applied

Full details of the study are available free online. The report offers a number of suggestions and avenues for improvements in the appeal process.

Farm Aid Communications Director Jennifer Fahy commented, "... loan officers have significant discretion in approving or denying loans. An impartial and equitable appeals process should be part of USDA's overall effort to serve all farmers equitably."