[Federal Register: October 7, 2004 (Volume 69, Number 194)]
[Rules and Regulations]
[Page 60077-60081]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc04-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
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having general applicability and legal effect, most of which are keyed
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The Code of Federal Regulations is sold by the Superintendent of Documents.
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[[Page 60077]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 747
Civil Monetary Penalty Inflation Adjustment
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: Congress, in the Federal Civil Penalties Inflation Adjustment
Act of 1990, as amended by the Debt Collection Improvement Act of 1996,
required all federal agencies with the authority to impose civil
monetary penalties (CMPs) to regularly evaluate those CMPs to ensure
that they continue to maintain their deterrent value. In order to
comply with Congress' mandate to adjust CMPs for inflation at least
every four years, NCUA is issuing this final rule to implement the
required adjustments to the CMPs authorized by the Federal Credit Union
Act and other relevant laws.
DATES: Effective November 1, 2004.
FOR FURTHER INFORMATION CONTACT: Allan Meltzer, Associate General
Counsel, or Jon Canerday, Trial Attorney, Office of General Counsel,
NCUA, 1775 Duke Street, Alexandria, Virginia 22314, or telephone (703)
518-6540.
SUPPLEMENTARY INFORMATION:
A. Background
The Debt Collection Improvement Act of 1996 \1\ (DCIA) amended the
Federal Civil Penalties Inflation Adjustment Act of 1990 \2\ (FCPIA
Act) to require every Federal agency to enact regulations that adjust
each civil monetary penalty (CMP) \3\ provided by law under its
jurisdiction by the rate of inflation pursuant to the inflation
adjustment formula in section 5(b) of the FCPIA Act. Each Federal
agency was required to issue these implementing regulations by October
23, 1996, and at least once every 4 years thereafter. Section 6 of the
amended FCPIA Act specifies that inflation-adjusted CMPs will only
apply to violations that occur after the effective date of the
adjustment. The inflation adjustment is based on the percentage
increase in the Consumer Price Index (CPI).\4\ Specifically, section
5(b) of the FCPIA Act defines the term ``cost-of-living adjustment'' as
``the percentage (if any) for each civil monetary penalty by which--(1)
The Consumer Price Index for the month of June of the calendar year
preceding the adjustment, exceeds (2) the Consumer Price Index for the
month of June of the calendar year in which the amount of such civil
monetary penalty was last set or adjusted pursuant to law.''
Furthermore, each CMP that has been adjusted for inflation must be
rounded to a number prescribed by section 5(a) of the FCPIA Act.\5\
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\1\ Pub. L. 104-134, 31001(s), 110 Stat. 1321-373, (Apr. 26,
1996). The Provision is codified at 28 U.S.C. 2461 note.
\2\ Pub. L. 101-410, 104 Stat. 890, (Oct. 5, 1990), also
codified at 28 U.S.C. 2461 note.
\3\ Section 3(2) of the amended FCPIA Act defines a CMP as any
penalty, fine, or other sanction that: (1) Either is for a specific
monetary amount as provided by Federal law or has a maximum amount
provided for by Federal law; (2) is assessed or enforced by an
agency pursuant to Federal law; and (3) is assessed or enforced
pursuant to an administrative proceeding or a civil action in the
Federal courts.
\4\ The CPI is published by the Department of Labor, Bureau of
Statistics, and is available at its Web site: http://data.bls.gov/cgi-bin/surveymost
.
\5\ In 2000, NCUA recognized that the rounding provision of the
FCPIA Act was capable of differing interpretations. Since then, the
Comptroller General has interpreted the rounding requirements of the
FCPIA Act the same way as NCUA did in calculating the 2000 inflation
adjustments. Comp. Gen. B-290021, 2002 U.S. Comp. Gen. LEXIS 266,
July 15, 2002.
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The CMPs which NCUA is authorized to impose were last adjusted by
NCUA in either 1996 or 2000. For those CMPs that were adjusted in 2000,
the current adjustment will be the percentage by which the CPI for the
month of June 2003 exceeds the CPI for the month of June 2000.
According to the Bureau of Labor Statistics, the CPI for the month of
June 2000 was 172.4 and the CPI for the month of June 2003 was 183.7.
The percentage by which the 2003 figure exceeds the 2000 figure is 6.55
percent. Thus, the CMPs that were last adjusted in 2000 should be
increased by 6.55 percent to arrive at the new adjusted amounts (before
required rounding).
For those CMPs that were adjusted in 1996, the current adjustment
will be the percentage by which the CPI for the month of June 2003
exceeds the CPI for the month of June 1996. According to the Bureau of
Labor Statistics, the CPI for the month of June 1996 was 156.7 and the
CPI for the month of June 2003 was 183.7. The percentage by which the
2003 figure exceeds the 1996 figure is 17.23 percent. The CMPs that
were last adjusted in 1996 should be increased by 17.23 percent to
arrive at the new adjusted amounts (before required rounding).
B. Mathematical Calculations of the Adjustments
1. 12 U.S.C. 1782a(a)(3)
NCUA is authorized to require credit unions to periodically provide
reports of condition. The failure to submit a required report or the
submission of a false or misleading report subjects a credit union to
three levels of CMPs, depending upon the reasons for noncompliance.
Calculation of the Adjustment
The CMPs authorized by 12 U.S.C. 1782a(a)(3) were last adjusted by
NCUA in 2000.\6\ Therefore, these CMPs should be multiplied by 6.55
percent to arrive at the new adjusted amounts (before required
rounding).
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\6\ The previous inflation adjustments were made to 12 U.S.C.
1782. That provision has been redesignated as 1782a.
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The maximum CMP authorized by 12 U.S.C. 1782a(a)(3) for an
inadvertent failure to submit a report or the inadvertent submission of
a false or misleading report is $2,000 for each day the failure
continues or such false or misleading information is not corrected.
After the required adjustment for inflation in 2000, the maximum
penalty was increased to $2,200 for each day. Multiplying the current
penalty of $2,200 by 6.55 percent results in an increase of $144.10.
When that number is rounded as required by the FCPIA Act,\7\ the
inflation-adjusted maximum remains $2,200.
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\7\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (3) multiple of $1,000 in the case of
penalties greater than $1,000 but less than or equal to $10,000.''
Section 5(a), FCPIA Act. Therefore, $144.10 is rounded to the
nearest multiple of $1,000 or to $0.
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[[Page 60078]]
The maximum CMP authorized by 12 U.S.C. 1782a(a)(3) for a non-
inadvertent failure to submit a report or the non-inadvertent
submission of a false or misleading report is $20,000 for each day the
failure continues or such false or misleading information is not
corrected. After the required adjustment for inflation in 2000, the
maximum penalty was increased to $22,000 for each day. Multiplying the
current penalty of $22,000 by 6.55 percent results in an increase of
$1,441. When that number is rounded as required by the FCPIA Act,\8\
the inflation-adjusted maximum remains $22,000.
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\8\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (4) multiple of $5,000 in the case of
penalties greater than $10,000 but less than or equal to $100,000.''
Section 5(a), FCPIA Act. Therefore, $1,441 is rounded to the nearest
multiple of $5,000 or to $0.
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The maximum CMP authorized by 12 U.S.C. 1782a(a)(3) for a failure
to submit a report or the submission of a false or misleading report
done knowingly or with reckless disregard is $1,000,000 or 1 percent of
the total assets of the credit union, whichever is less, for each day
the failure continues or such false or misleading information is not
corrected. After the required adjustment for inflation in 2000, the
maximum penalty was increased to $1,100,000 for each day. Multiplying
the current penalty of $1,100,000 by 6.55 percent results in an
increase of $72,050. When that number is rounded as required by the
FCPIA Act,\9\ the inflation-adjusted maximum becomes $1,175,000 or 1
percent of the total assets of the credit union, whichever is less, per
day.
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\9\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (6) multiple of $25,000 in the case of
penalties greater than $200,000.'' Section 5(a), FCPIA Act.
Therefore, $72,050 is rounded to the nearest multiple of $75,000 or
to $75,000.
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2. 12 U.S.C. 1782a(d)(2)
In a provision similar to that discussed above, NCUA is authorized
to require each credit union to provide periodic certified statements
of the amount of insured shares in the credit union, as well as to pay
required deposits into the National Credit Union Share Insurance Fund.
The failure to submit a required certified statement or the submission
of a false or misleading statement subjects a credit union to three
levels or tiers of CMPs, depending upon the reasons for noncompliance.
Calculation of the Adjustment
The CMPs authorized by 12 U.S.C. 1782a(d)(2) were last adjusted by
NCUA in 2000. Therefore, these CMPs should be multiplied by 6.55
percent to arrive at the new adjusted amounts (before required
rounding).
First Tier CMPs
The maximum CMP authorized by 12 U.S.C. 1782a(d)(2)(A) for an
inadvertent failure to timely submit a certified statement or an
inadvertent submission of a false or misleading certified statement is
$2,000 for each day the failure continues or such false or misleading
information is not corrected. After the required adjustment for
inflation in 2000, the maximum penalty was increased to $2,200 for each
day. Multiplying the current penalty of $2,200 by 6.55 percent results
in an increase of $144.10. When that number is rounded as required by
the FCPIA Act,\10\ the inflation-adjusted maximum remains $2,200.
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\10\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (3) multiple of $1,000 in the case of
penalties greater than $1,000 but less than or equal to $10,000.''
Section 5(a), FCPIA Act. Therefore, $144.10 is rounded to the
nearest multiple of $1,000 or to $0.
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Second Tier CMPs
The maximum CMP authorized by 12 U.S.C. 1782a(d)(2)(B) for a non-
inadvertent failure to timely submit a certified statement, or a non-
inadvertent submission of a false or misleading certified statement, or
the failure or refusal to pay any required deposit or premium for
insurance is $20,000 for each day the failure continues or such false
or misleading information is not corrected. After the required
adjustment for inflation in 2000, the maximum penalty was increased to
$22,000 for each day. Multiplying the current penalty of $22,000 by
6.55 percent results in an increase of $1,441. When that number is
rounded as required by the FCPIA Act,\11\ the inflation-adjusted
maximum remains $22,000.
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\11\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (4) multiple of $5,000 in the case of
penalties greater than $10,000 but less than or equal to $100,000.''
Section 5(a), FCPIA Act. Therefore, $1,441 is rounded to the nearest
multiple of $5,000 or to $0.
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Third Tier CMPs
The maximum CMP authorized by 12 U.S.C. 1782a(d)(2)(C) for a
failure to submit a report or the submission of a false or misleading
report done knowingly or with reckless disregard is $1,000,000 or 1
percent of the total assets of the credit union, whichever is less, for
each day the failure continues or such false or misleading information
is not corrected. After the required adjustment for inflation in 2000,
the maximum penalty was increased to $1,100,000 for each day.
Multiplying the current penalty of $1,100,000 by 6.55 percent results
in an increase of $72,050. When that number is rounded as required by
the FCPIA Act,\12\ the inflation-adjusted maximum becomes $1,175,000 or
1 percent of the total assets of the credit union, whichever is less,
per day.
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\12\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (6) multiple of $25,000 in the case of
penalties greater than $200,000.'' Section 5(a), FCPIA Act.
Therefore, $72,050 is rounded to the nearest multiple of $75,000 or
to $75,000.
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3. 12 U.S.C. 1785(e)(3)
Pursuant to 12 U.S.C. 1785(e)(1), NCUA is authorized to promulgate
regulations to provide minimum standards with which each insured credit
union must comply with respect to security devices and procedures to
discourage robberies, burglaries and larcenies and to assist in the
identification and apprehension of persons who commit such acts. A
credit union that violates such a regulation is subject to a CMP for
each day the violation continues.
Calculation of the Adjustment
The CMPs authorized by 12 U.S.C. 1785(e)(3) were last adjusted by
NCUA in 2000. Therefore, these CMPs should be multiplied by 6.55
percent to arrive at the new adjusted amounts (before required
rounding).
The maximum CMP authorized by 12 U.S.C. 1785(e)(3) for non-
compliance with NCUA security regulations is $100 for each day the
violation continues. After the required adjustment for inflation in
2000, the maximum penalty was increased to $110 for each day.
Multiplying the current penalty of $110 by 6.55 percent results in an
increase of $7.21. When that number is rounded as required by the FCPIA
Act,\13\ the inflation-adjusted maximum remains $110.
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\13\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (2) multiple of $100 in the case of
penalties greater than $100 but less than or equal to $1,000.''
Section 5(a), FCPIA Act. Therefore, $7.21 is rounded to the nearest
multiple of $100 or to $0.
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4. 12 U.S.C. 1786(k)(2)
NCUA is authorized to impose three levels or tiers of CMPs upon
insured credit unions or institution-affiliated parties for certain
conduct. First and second tier CMPs were not increased for inflation in
2000 because the amount of the increase was not large enough as a
result of the rounding rules. Because these CMPs were last adjusted for
inflation in 1996, they should now be increased by 17.23 percent to
arrive at the new adjusted amounts (before
[[Page 60079]]
required rounding). Third tier CMPs were increased for inflation in
2000 and therefore, should now be increased by 6.55 percent (before
required rounding).
First Tier CMPs
First tier CMPs, 12 U.S.C. 1786(k)(2)(A), may be imposed for the
violation of any law or regulation, the violation of certain final
orders or temporary orders, the violation of conditions imposed in
writing by the NCUA Board, or the violation of any written agreement
between the credit union and NCUA. The statute provides that first tier
CMPs shall not be more than $5,000 for each day the violation
continues. After the required adjustment for inflation in 1996, the
maximum penalty was increased to $5,500 for each day. Multiplying the
current penalty of $5,500 by 17.23 percent results in an increase of
$947.65. When that number is rounded as required by the FCPIA Act,\14\
the inflation-adjusted maximum for a first tier CMP becomes $6,500.
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\14\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (3) multiple of $1,000 in the case of
penalties greater than $1,000 but less than or equal to $10,000.''
Section 5(a), FCPIA Act. Therefore, $947.65 is rounded to the
nearest multiple of $1,000 or to $1,000.
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Second Tier CMPs
Second tier CMPs, 12 U.S.C. 1786(k)(2)(B), are authorized for
violations described in first tier CMPs, the reckless engaging in an
unsafe or unsound practice in conducting the affairs of a credit union,
or the breach of any fiduciary duty, when the violation, practice or
breach is part of a pattern of misconduct, or causes or is likely to
cause more than a minimal loss to the credit union, or results in
pecuniary gain or other benefit. The statute provides a maximum second
tier CMP of $25,000 for each day the violation, practice or breach
continues. After the required 1996 adjustment for inflation, the
maximum penalty was increased to $27,500 per day. Multiplying the
current penalty of $27,500 by 17.23 percent results in an increase of
$4,738.25. When that number is rounded as required by the FCPIA
Act,\15\ the inflation-adjusted maximum for a second tier CMP becomes
$32,500.
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\15\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (4) multiple of $5,000 in the case of
penalties greater than $10,000 but less than or equal to $100,000.''
Section 5(a), FCPIA Act. Therefore, $4,738.25 is rounded to the
nearest multiple of $5,000 or to $5,000.
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Third Tier CMPs
Third tier CMPs, 12 U.S.C. 1786(k)(2)(C), may be imposed for any of
the acts described in second tier CMPs that cause a substantial loss to
the credit union or a substantial pecuniary gain or other benefit. The
amount of third tier CMPs depends upon the status of the respondent
required to pay the CMP, 12 U.S.C. 1786(k)(2)(D). For a person other
than an insured credit union, under the statute, the maximum third tier
CMP is $1,000,000 for each day the violation, practice or breach
continues. For an insured credit union, the statute provides a daily
maximum CMP of the lesser of $1,000,000 or 1 percent of the total
assets of the credit union. In 2000, the maximum CMP for a person other
than an insured credit union was increased for inflation to $1,175,000
per day. At the same time, the maximum CMP for an insured credit union
was increased to the lesser of $1,175,000 or 1 percent of the total
assets of the credit union. Multiplying the current penalty of
$1,175,000 by 6.55 percent results in an increase of $76,962.50. When
that number is rounded as required by the FCPIA Act,\16\ the new
maximum inflation-adjusted third tier CMP becomes $1,250,000.
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\16\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (6) multiple of $25,000 in the case of
penalties greater than $200,000.'' Section 5(a), FCPIA Act.
Therefore, $76,962.50 is rounded to the nearest multiple of $25,000
or to $75,000.
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5. 42 U.S.C. 4012a(f)
Pursuant to 42 U.S.C. 4012a(f), NCUA is authorized to impose CMPs
against a credit union that is found to have a pattern or practice of
committing certain specified actions in violation of the National Flood
Insurance Program.
Calculation of the Adjustment
The CMPs authorized by 42 U.S.C. 4012a(f) were last adjusted by
NCUA in 2000. Therefore, these CMPs should be multiplied by 6.55
percent to arrive at the new adjusted amounts (before required
rounding).
The maximum CMP authorized by 42 U.S.C. 4012a(f) is $350 for each
violation, up to a maximum of $100,000 per calendar year. After the
required adjustments for inflation in 2000, the maximum penalty was
increased to $385 for each day, up to a maximum of $110,000 per
calendar year. Multiplying the current penalty of $385 by 6.55 percent
results in an increase of $25.22. When that number is rounded as
required by the FCPIA Act,\17\ the inflation-adjusted maximum remains
$385. Multiplying the current annual maximum of $110,000 by 6.55
percent results in an increase of $7,205. When that number is rounded
as required by the FCPIA Act,\18\ the inflation-adjusted annual maximum
penalty becomes $120,000 per calendar year.
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\17\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (2) multiple of $100 in the case of
penalties greater than $100 but less than or equal to $1,000.''
Section 5(a), FCPIA Act. Therefore, $25.22 is rounded to the nearest
multiple of $100 or to $0.
\18\ ``Any increase determined under this subsection shall be
rounded to the nearest- * * * (5) multiple of $10,000 in the case of
penalties greater than $100,000 but less than or equal to
$200,000.'' Section 5(a), FCPIA Act. Therefore, $7,205 is rounded to
the nearest multiple of $10,000 or to $10,000.
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The NCUA Board now adopts this final rule to adjust the forgoing
CMPs for the rate of inflation, as required by the FCPIA Act. As
provided in the final rule, the revised CMP amounts will only apply to
violations that occur after the effective date of the final rule.
C. Regulatory Procedures
Final Rule Under the Administrative Procedures Act
The FCPIA Act requires adjustments of CMPs for inflation to occur
at least every four years. Additionally, the FCPIA Act provides federal
agencies with no discretion in the adjustment of CMPs for inflation.
Thus, NCUA is unable to vary the amount of the adjustments to reflect
any views or suggestions provided by commenters. Further, the
regulation is ministerial and technical. For all of these reasons, the
NCUA Board finds good cause to determine that public notice and comment
for this new regulation is unnecessary, impractical and contrary to the
public interest, pursuant to the Administrative Procedure Act (APA), 5
U.S.C. 553(b)(3)(B).
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a proposed rule may have on
a substantial number of small credit unions (those under ten million
dollars in assets). The proposed rule would not have a significant
economic impact on a substantial number of small credit unions, and,
therefore, a regulatory flexibility analysis is not required.
Paperwork Reduction Act
NCUA has determined that the proposed rule would not increase
paperwork requirements under the Paperwork Reduction Act of 1995 and
regulations of the Office of Management and Budget.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their regulatory
[[Page 60080]]
actions on state and local interests. In adherence to fundamental
federalism principles, NCUA, an independent regulatory agency as
defined in 44 U.S.C. 3502(5), voluntarily complies with the Executive
Order. This final rule will apply to all federally-insured credit
unions, but it will not have substantial direct effects on the states,
on the relationship between the national government and the states, or
on the distribution of power and responsibilities among the various
levels of government. NCUA has determined the final rule does not
constitute a policy that has federalism implications for purposes of
the Executive Order.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
NCUA has determined that this rule will not affect family well-
being within the meaning of section 654 of the Treasury and General
Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681
(1998).
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-21) provides generally for congressional review of agency
rules. A reporting requirement is triggered in instances where NCUA
issues a final rule as defined by Section 551 of the Administrative
Procedures Act. 5 U.S.C. 551. The Office of Management and Budget has
reviewed this rule and has determined that for purposes of the Small
Business Regulatory Enforcement Fairness Act of 1996, it is not a major
rule.
List of Subjects in 12 CFR Part 747
Credit unions, Civil monetary penalties.
By the National Credit Union Administration Board on September
27, 2004.
Mary Rupp,
Secretary of the Board.
0
Accordingly, the NCUA amends 12 CFR part 747 as follows:
PART 747--ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF
PRACTICE AND PROCEDURE, AND INVESTIGATIONS
0
1. The authority citation for part 747 continues to read as follows:
Authority: 12 U.S.C. 1766, 1782, 1784, 1785, 1786, 1787; 42
U.S.C. 4012a; Pub. L. 101-410; Pub. L. 104-134.
0
2. Part 747, Subpart K is revised to read as follows:
Subpart K--Inflation Adjustment of Civil Monetary Penalties
Sec. 747.1001 Adjustment of civil money penalties by the rate of
inflation.
(a) NCUA is required by the Federal Civil Penalties Inflation
Adjustment Act of 1990 (Public Law 101-410, 104 Stat. 890, as amended
(28 U.S.C. 2461 note)) to adjust the maximum amount of each civil money
penalty within its jurisdiction by the rate of inflation. The following
chart displays those adjustments, as calculated pursuant to the
statute:
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U.S. Code citation CMP description New maximum amount
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(1) 12 U.S.C. 1782(a)(3).... Inadvertent failure $22,000.
to submit a report
or the inadvertent
submission of a
false or misleading
report.
(2) 12 U.S.C. 1782(a)(3).... Non-inadvertent $22,000.
failure to submit a
report or the non-
inadvertent
submission of a
false or misleading
report.
(3) 12 U.S.C. 1782(a)(3).... Failure to submit a $1,175,000 or 1
report or the percent of the
submission of a total assets of the
false or misleading credit union,
report done whichever is less.
knowingly or with
reckless disregard.
(4) 12 U.S.C. 1782(d)(2)(A). First tier.......... $2,200.
(5) 12 U.S.C. 1782(d)(2)(B). Second tier......... $22,000.
(6) 12 U.S.C. 1782(d)(2)(C). Third tier.......... $1,175,000 or 1
percent of the
total assets of the
credit union,
whichever is less.
(7) 12 U.S.C. 1785(e)(3).... Non-compliance with $110.
NCUA security
regulations.
(8) 12 U.S.C. 1786(k)(2)(A). First tier.......... $6,500.
(9) 12 U.S.C. 1786(k)(2)(B). Second tier......... $32,500.
(10) 12 U.S.C. 1786(k)(2)(C) Third tier.......... For a person other
than an insured
credit union:
$1,250,000; For an
insured credit
union $1,250,000 or
1 percent of the
total assets of the
credit union,
whichever is less.
(11) 42 U.S.C. 4012a(f)..... Per violation....... $385
Per calendar year... $120,000.
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[[Page 60081]]
(b) The adjustments displayed in paragraph (a) of this section
apply to acts occurring beginning on November 1, 2004.
[FR Doc. 04-22537 Filed 10-6-04; 8:45 am]
BILLING CODE 7535-01-P