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We currently offer agricultural operating lines of credit. We are considering offering a credit line check (similar to a HELOC check) on these lines. Can we offer checks for the customer to access the funds from these lines? – IBA Compliance Connection

IBA Compliance Connection

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We currently offer agricultural operating lines of credit. We are considering offering a credit line check (similar to a HELOC check) on these lines. Can we offer checks for the customer to access the funds from these lines?

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We are not aware of any limitations on offering checks (sometimes known as “drafts”) drawn on a line of credit issued for agricultural purposes. Additionally, because the credit lines are issued for agricultural purposes, we do not believe that Regulation Z’s disclosure requirements will apply.

For resources related to our guidance, please see:

  • Regulation Z, 12 CFR 1026.3(a) (“The following transactions are not subject to this part or, if the exemption is limited to specified provisions of this part, are not subject to those provisions: (a) Business, commercial, agricultural, or organizational credit. (1) An extension of credit primarily for a business, commercial or agricultural purpose.”)
  • Regulation Z, Official Interpretations, Paragraph 3(a), Comment 8 (“Agricultural purpose. An agricultural purpose includes the planting, propagating, nurturing, harvesting, catching, storing, exhibiting, marketing, transporting, processing, or manufacturing of food, beverages (including alcoholic beverages), flowers, trees, livestock, poultry, bees, wildlife, fish, or shellfish by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees, or wildlife. The exemption also applies to a transaction involving real property that includes a dwelling (for example, the purchase of a farm with a homestead) if the transaction is primarily for agricultural purposes.”)