Two banking trade groups sued the Farm Credit Administration last week for allowing its members to finance farm-related services.
The Independent Bankers Association of America and the American Bankers Association said in their suit that the agency had violated "the plain language and clear congressional intent" of the Farm Credit Act when it gave member institutions permission to lend money to equipment dealers and other companies that supply farmers.
The two trade groups had pledged in March to sue the agency over its Jan. 30 rule. The groups charge that the tax-exempt, government-sponsored Farm Credit lenders unfairly compete with banks, which must pay taxes.
Before the agency issued its rule, member institutions could only lend money directly to farmers, who used the proceeds the buy seed, livestock, and equipment.
The Farm Credit Administration defended its rule in a prepared statement. "The FCA is confident that the amendments to the customer eligibility regulations comply with the act in all respects and the lower court will hold that the FCA was well within its statutory authority," it said.