Five Men, a Phone, and the Risks to Agricultural Credit
This article was written by UC Berkeley ARE PhD student Liz Saunders. It is the third of several excellent articles written by students in my ARE 242 class this spring that I will publish here.
The Consumer Financial Protection Bureau (CFPB) isn’t typically associated with agriculture, but it should be. When Americans think of the CFPB, if they think of it at all, they may note its astounding return of over $21 billion to consumers harmed by creditors’ illegal practices. Less visible CFPB undertakings include capping credit card late fees, strictly regulating debt collector harassment, cracking down on overdraft fees, and ensuring prompt responses to millions of consumer complaints each year.
The CFPB has been highly-politicized since its creation in the wake of the 2008 financial crisis. It has already been the subject of multiple Supreme Court cases, but with the new administration it faces an existential threat unlike any it has faced before. Elon Musk’s DOGE wasted no time in gutting the agency, going so far as to say their ultimate goal is to reduce the agency of over 1500 staff to just a room with "five men and a phone in it."
This action would not only endanger past CFPB actions but also works-in-progress, which include removing certain medical debt from credit reports, establishing oversight authority over Big Tech companies who provide payment/credit services, and, most importantly for this blog’s audience, addressing banking deserts and predatory agricultural credit in rural communities.
Access to fair credit is important for a farm’s success, since without it small farms in particular may struggle to afford better equipment, irrigation systems, and additional land. Agricultural loans obtained from commercial banks to finance production doubled between 1985 and 2024, from about $40 billion to $80 billion, as seen in the figure below. Without this credit access, it’s likely that many farmers would be unable to invest in the necessary land, equipment, and labor to raise their profits, increase food supply, and reduce agriculture’s negative impacts on the environment.
Recognizing the importance of agricultural community access to credit, the CFPB announced in 2022 a new effort focusing on these issues. The agency documents the existence of rural banking deserts — census tracts that have no physical banks located within 10 miles — as well as reported instances of discriminatory and exploitative agricultural lending. It highlights these as major issues limiting the credit accessibility and long-term financial health of farmers.
Since launching this initiative, the agency has taken concrete steps to address rural banking challenges, including meeting with farmers to better understand the issues and publishing a report on rural banking access. However, most notably, in March 2023 it finalized regulations implementing Section 1071 of the Dodd-Frank Act, which required lenders to report detailed information on small business loans, including those to small farms.
Farm Credit System lenders who meet the broader rule’s loan volume threshold are explicitly included in these reporting requirements. The Bureau dedicated significant discussion in the final rule to its deliberate inclusion of agricultural lending, emphasizing that the resulting data would enable fair lending oversight and enforcement in agricultural credit markets. Previously, the CFPB lacked access to the data necessary to supervise or litigate predatory lending in agriculture. Due to litigation-related delays, the rule was scheduled to become effective in summer 2025.
A dysfunctional CFPB would render this deadline moot and prevent the CFPB — and other agencies and researchers — from obtaining the data needed to even begin to protect the nation’s small farms from predatory lenders and address damaging banking deserts. To illustrate the scope of the latter problem, the figure below maps all banking deserts (urban, suburban, and rural) in California.
It’s reasonable to wonder why the lack of a physical branch would be a barrier to credit given the proliferation of online banks. However, as the CFPB noted in its 2022 report, 70% of all commercial agricultural lending comes from smaller community banks, who farmers say are able to understand and adapt to the unique rhythms of an agricultural community in a way that larger and online-only banks aren’t equipped to handle. Without the local knowledge and longstanding relationships that community banks have, outside banks often cannot accurately assess farmers’ creditworthiness and may not find it profitable to invest in developing that local expertise.
Agricultural lending is distinct from other rural small business lending because it relies on specialized, farm-level knowledge of management practices and local environmental factors that are difficult to capture remotely. Community banks are uniquely positioned to assess such risks, especially when they have a personal relationship with the farmer.
Lending deserts likely harm small farms the most given these farmers likely are more idiosyncratic and could therefore benefit from access to lenders with local knowledge. Small farms are also more likely to lack the resources to secure a fair loan from a non-local bank. As seen in the figure below, there are many credit deserts in counties with higher percentages of farms that are individually-owned.
The potential for unfair lending practices is high in banking deserts. The figure below presents a histogram of what I’ll call the interest burden of agricultural loans in the community, defined as the ratio of interest paid to total farm production expenses, shown separately for banking deserts and non-deserts. Higher interest burdens indicate more costly loans.
The figure shows that farms in banking deserts tend to have higher interest burdens than those in non-deserts. While this certainly does not establish a causal link between credit desert status and high interest rates, it does provide compelling reason to pay close attention to these agricultural communities to ensure they are being treated fairly.
The CFPB’s goal in focusing on rural communities is simply to ensure the fair, lawful supply of credit to a vulnerable group of Americans, but the stakes go far beyond individual farmers; weakening the CFPB could ripple across the entire agricultural system. Without the threat of CFPB oversight, lenders could escalate any existing discriminatory and predatory lending practices, leading to additional equity and welfare concerns for the country’s farmers. Furthermore, without the CFPB’s efforts to address rural banking deserts, more farmers may be forced to forgo necessary upgrades to their systems and expansions to their lands that would ultimately increase yields.
A healthy CFPB isn’t just critical for Americans fighting junk fees or applying for mortgages. Its continued functioning matters for our agricultural sector and food supply — both of which would suffer if the agency is reduced to a room with five men and a phone.