December 16, 1997
Re: FOIA Appeal, your letter dated November 25, 1997
Dear :
After exchanging several pieces of correspondence with NCUA's
Region VI, on October 12, 1997, you submitted a Freedom of Information
Act (FOIA) request to Daniel Murphy, the Region VI Director, for
five separate items including: 1) a copy of NCUA's April 28, 1997
examination report of LAIRE Federal Credit Union; and 2) copies
of NCUA standards for home equity line of credit (HELOC) plans
and when the standards were promulgated to LAIRE Federal Credit
Union. You noted in your request that the examination report
was exempt from disclosure under the FOIA pursuant to exemption
8, 5 USC 552(b)(8), codified in Section 792.3(a)(8) of the NCUA
Rules and Regulations, 12 CFR 792.3(a)(8). You requested the
documents pursuant to the "good cause" provision found
in the §792.4(b)(3) of the NCUA Regulations. Terry McGinnis,
the Acting Region VI Director, responded to your request in a
letter dated October 29, 1997. The October 29 response was followed
by a short clarifying letter on November 14, 1997. Although some
records were provided, the examination report was withheld pursuant
to exemption 8 of the FOIA, 5 U.S.C. §552(b)(8), and was
not released pursuant to the "good cause" provision
found in §792.4(b)(3) of NCUA's Regulations. Mr. McGinnis
discussed, in general terms, risk elements for HELOC programs.
We received your November 25, 1997 FOIA appeal on November 28,
1997. You have appealed the denial of the examination report
noted in item 1) above and stated that the Acting Regional Director
did not address item 2) in his October 29 response. The denial
of your FOIA request for the examination report is upheld pursuant
to exemption 8 of the FOIA. The good cause provision described
in §792.4(b)(3) of the NCUA Regulations is not applicable
to your FOIA request. In addition, the NCUA Board recently removed
§792.4(b)(3) from the NCUA Regulations. Although you do
not seem to be questioning the examination report being withheld
pursuant to exemption 8, both exemption 8 and the good cause provision
are discussed below. We will also clarify the discussion of item
2) in the Acting Regional Director's October 29 response. The
pages of the Examiner's Guide discussing second mortgages and
HELOCs are enclosed.
Exemption 8
Exemption 8 of the FOIA (5 U.S.C. §552(b)(8)) exempts information:
Contained in or related to examination, operating,
or condition reports prepared by, on behalf of, or
for the use of an agency responsible for the
regulation or supervision of financial institutions.
The courts have discerned two major purposes for exemption 8 from
its legislative history: 1) to protect the security of financial
institutions by withholding from the public reports that contain
frank evaluations of a bank's stability; and 2) to promote cooperation
and communication between employees and examiners. See Atkinson
v. FDIC, 1 GDS 80,034, at 80,102 (D.D.C. 1980). Either purpose
is sufficient reason to withhold an examination report.
NCUA has incorporated these dual purposes into its regulation.
Section 792.3(a)(8) of the NCUA Rules and Regulations (12 C.F.R.
§792.3(a)(8)) implements exemption 8 and adds the following:
This includes all information, whether in formal or
informal report form, the disclosure of which would
harm the financial security of credit unions or would
interfere with the relationship between NCUA and credit unions.
You have requested the complete examination report, which is exactly
the type of information exempt from disclosure pursuant to exemption
8. The examination report contains information concerning the
credit union's management, safety and soundness issues, as well
as its financial security. Disclosure of the examination report
could clearly harm the financial security of a credit union as
well as interfere with the relationship between NCUA and the credit
union. Although the examination report does contain some non-financial
information, courts do not require agencies to segregate and disclose
those portions of documents that are unrelated to the financial
condition of the institution. See Atkinson. The
entire examination report continues to be withheld pursuant to
exemption 8.
Good Cause Provision
You acknowledge that NCUA may withhold the examination report
pursuant to exemption 8 of the FOIA, however, you believe it should
be released under the "good cause" language found in
the NCUA Rules and Regulations. This section states:
§792.4(b)(3)Exempt records--Disclosure to third parties.
The NCUA Board, or any person designated by it in writing,
may disclose copies of exempt records to any third party
where requested to do so in writing. The request shall:
(i) specify the record or records to which access is
requested; and (ii) give the reasons for the
request. Any NCUA employee authorized to disclose
exempt NCUA records to third parties may disclose the
records only upon determining that good cause exists
for the disclosure. The designated NCUA official shall
impose such terms and conditions as are deemed
necessary to protect the confidential nature of the
record, the financial integrity of any credit union or
other organization or person to which the records
relate, and the legitimate privacy interests of any
individual names in such records.
This provision does not provide a right of limited access to FOIA
records nor is it an exception to the FOIA exemptions. Instead,
§792.4(b)(3) has been the basis upon which NCUA may release
otherwise exempt records, subject to protective terms and conditions,
but only when sought by subpoena or similar process within
the context of litigation or formal administrative proceedings.
A release under this section is not a release under FOIA; the
FOIA does not permit imposition of conditions such as limited
disclosure. Under the FOIA, once a document is disclosed to one
requester, it is available to any requester.
Section 792.4(b)(3) was recently replaced by a new provision setting
forth revised requirements for obtaining non-public information
with the use of a subpoena. The new final rule removes §792.4(b)(3)
from the NCUA Rules and Regulations. See 62 Fed. Reg 56051,
10/29/97, enclosed. Section 792.41 of the new rule states in
part:
When does this subpart apply? This subpart applies if you
want to obtain nonpublic records or testimony of an NCUA
employee for legal proceedings. It doesn't apply to the release
of records under the Freedom of Information Act ...
In sum, FOIA does not allow for a limited "good cause"
release of exempt information to third parties. NCUA has never
released records using such a theory.
Standards for Loan Programs
In your October 12 FOIA request you asked for copies of NCUA standards
for home equity line of credit (HELOC) plans and when the standards
were promulgated to LAIRE Federal Credit Union. In your appeal
you state that the Acting Region VI Director did not address this
item in his October 29 response. NCUA has not issued such standards.
However, the risk elements for HELOC programs are discussed in
the second full paragraph of page 2 of the October 29 response
(copy enclosed). It is also noted that more specific information
and guidance about criteria used for evaluating loan programs
is found in the NCUA Examiner's Guide, which you can order. Enclosed
are copies of the provisions in the Examiner's Guide addressing
second mortgages and HELOCs. The Guide contains a much fuller
discussion of real estate lending.
Pursuant to 5 U.S.C. 552(a)(4)(B), you may seek judicial review
of this determination by filing suit to enjoin NCUA from withholding
the documents withheld and to order production of the documents.
Such a suit may be filed in the United States District Court
in the district where you reside, the District of Columbia, or
where the documents are located (the Eastern District of Virginia).
Sincerely,
Robert M. Fenner
General Counsel
GC/HMU:bhs
SSIC 3212
97-1203
Enclosures