Pub. 3 2014 Issue 1

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 16 USDA replies to North Dakota on crop-insurance rebates L AST MONTH’S FCW REPORTED ON an October 3 letter North Dakota Insurance Commission Adam Hamm sent to Brandon Willis, the head of USDA’s Risk Management Authority (RMA), regarding the FCS’s crop-insurance rebating practices. Specifically, Hamm said he was “contacting [Willis] to request your stance on [FCS] insurance [agents] offering programs and/or benefits such as tax accounting and agricultural accounting services, commodity marketing services, and favorable loan rates, among others.” Such services essentially are rebates FCS gives to those farmers who purchase crop insurance from the FCS. As Commissioner Hamm pointed out in his letter, “offering financial services and other incentives to clients and/or potential clients would be viewed by the North Dakota Insurance Department as rebating violations under North Dakota law.” As FCW has reported, insurance commissioners in other states also have criticized the FCS’ crop-insurance rebating practices. On November 14, Mr. Willis responded to Commissioner Hamm, stating that “the practice of rebating was prohibited in the . . . Act [the 2008 Farm Bill].” Specifically, the Act “precludes providing any benefit, either directly or indirectly, as an inducement to purchase insurance.” Willis stated that the RMA “has interpreted this section to be an absolute prohibition of rebating, except for very limited exceptions...” [underlining supplied] Furthermore, the Act “preempts State law that is in conflict with the Act. However, in almost all instances, a rebating determination by a State would be supported by the Federal prohibition, except for rare instances in which rebating is explicitly excepted.” Willis noted that “if certain financial services are offered to customers for free if they purchase insurance from an entity but for a fee if they do not, then a violation has occurred since there is an inducement to purchase insurance through the entity.” BERT ELY’S FARM CREDIT WATCH ® SHEDDING LIGHT ON THE FARM CREDIT SYSTEM, AMERICA’S LEAST KNOWN GSE By Bert Ely