Two banking groups announced plans Tuesday to sue the Farm Credit Administration for allowing its members to finance farm-related services.

The American Bankers Association and the Independent Bankers Association of America are upset over a rule that took effect this week, allowing Farm Credit System lenders to offer loans to businesses that supply products to farmers, such as equipment dealers. Currently, member institutions only offer loans directly to farmers, who use the proceeds to buy seed, livestock, equipment, and land.

"This is an unauthorized expansion of the Farm Credit System," said John Blanchfield, the ABA's manager of agricultural banking. "It goes beyond what they are statutorily able to do."

"Congress gave the Farm Credit System a subsidy in 1916 to serve a specific market, namely the farmer, and they should stick to that market," said Bill McQuillan, president-elect of the IBAA and chief executive of the City National Bank, Greeley, Neb.

The groups plan to file within the next several weeks. Farm Credit Council president William R. Weber said the charges are groundless. "The Farm Credit System clearly has the legal authority to meet the credit needs of farm-related businesses," he said.

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