7 C.F.R. § 765.304 – Unapproved disposition.

(a) If a borrower disposes of chattel security without Agency approval, or misuses proceeds, the borrower must:
1. (1) Make restitution to the Agency within 30 days of Agency notification; or
2. (2) Provide disposition or use information to enable the Agency to consider post-approval within 30 days of Agency notification.
(b) Failure to cure the first unauthorized disposition in accordance with paragraph (a) of this section, or a second unauthorized disposition, whether or not cured, constitutes a non-monetary default, will be considered by the Agency when making eligibility determinations for future requests for assistance, may adversely impact such requests, and may result in civil or criminal action.