Federal regulations · Through 2026-08-25 · Newer source version available

12 CFR 617.7125: How should a qualified lender determine the effective interest rate?

(a) A qualified lender must calculate the effective interest rate on a loan using the discounted cash flow method showing the effect of the time value of money.
(b) For all loans, the cash flow stream used for calculating the effective interest rate of a loan must include:
(1) Principal and interest;
(2) The cost of stock or participation certificates that a borrower is required to purchase in connection with the loan; and
(3) Loan origination charges described in § 617.7115.
(c) A qualified lender must establish policies and procedures for EIR disclosures that clearly show the effect of the cost of borrower stock (or participation certificates) and loan origination charges on the interest rate of a loan. A qualified lender must also establish policies and procedures for determining major assumptions used in calculating the effective interest rate, e.g., criteria on how the cost of borrower stock (or participation certificates) and loan origination charges are assigned or allocated among multiple loans obtained by a borrower simultaneously.

Where this section sits in the code

Title 12—Banks and Banking
CHAPTER VI—FARM CREDIT ADMINISTRATION
SUBCHAPTER B—FARM CREDIT SYSTEM
PART 617—BORROWER RIGHTS
Subpart B—Disclosure of Effective Interest Rates

(a) A qualified lender must calculate the effective interest rate on a loan using the discounted cash flow method showing the effect of the time value of money.

(b) For all loans, the cash flow stream used for calculating the effective interest rate of a loan must include:

(1) Principal and interest;

(2) The cost of stock or participation certificates that a borrower is required to purchase in connection with the loan; and

(3) Loan origination charges described in § 617.7115.

(c) A qualified lender must establish policies and procedures for EIR disclosures that clearly show the effect of the cost of borrower stock (or participation certificates) and loan origination charges on the interest rate of a loan. A qualified lender must also establish policies and procedures for determining major assumptions used in calculating the effective interest rate, e.g., criteria on how the cost of borrower stock (or participation certificates) and loan origination charges are assigned or allocated among multiple loans obtained by a borrower simultaneously.

Collected 2026-08-27T02:24:16Z. Source file · JSON

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