Civil Monetary Penalty Inflation Adjustment

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 747

Civil Monetary Penalty Inflation Adjustment

AGENCY: National Credit Union Administration.

ACTION: Final rule.

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SUMMARY: Congress, in the Federal Civil Monetary Penalty 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. As a

result of these acts, the head of each agency is required, by October

23, 1996, and at least once every four years thereafter, to adjust its

CMPs for inflation. In order to comply with Congress' mandate, the

National Credit Union Administration is issuing this final rule to

implement the required adjustments to the CMPs authorized by the

Federal Credit Union Act.

EFFECTIVE DATE: November 6, 1996.

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: The Debt Collection Improvement Act of 1996

(DCIA) \1\ amended the Federal Civil Monetary Penalty Inflation

Adjustment Act of 1990 \2\ (FCMPIA Act) to require every Federal agency

to enact regulations that adjust each civil monetary penalties (CMPs)

\3\ provided by law under its jurisdiction by the rate of inflation

pursuant to the inflation adjustment formula in section 5(b) of the

FCMPIA Act. Each Federal agency is required to issue these implementing

regulations by October 23, 1996, which is 180 days after the date that

DCIA was enacted, and at least once every 4 years thereafter. Section 7

of the amended FCMPIA Act specifies that inflation-adjusted CMPs will

only apply to violations that occur after October 23, 1996.

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\1\ Pub. L. 104-134, section 31001(s), 110 Stat. 1321-358, (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).

\3\ Section 3(2) of the amended FCMPIA 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.

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The inflation adjustment is based on the percentage increase in the

Consumer Price Index (CPI) \4\ for the period from June of the calendar

year when the CMP was established or last adjusted until June of the

calendar year preceding the adjustment. Furthermore, each CMP that has

been adjusted for inflation must be rounded to a number prescribed by

section 5(a) of the FCMPIA Act.\5\ Another provision of the DCIA limits

the first adjustment of a CMP to an amount not to exceed 10 percent of

the original penalty. The amount of increase in the final regulation

would have been more if this limit did not exist.

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\4\ The CPI is published by the Department of Labor, Bureau of

Statistics.

\5\ For example, an increase that is less than $100 would be

rounded to the nearest multiple of $10, and an increase over $100

but less than $1,000 would be rounded to the nearest multiple of

$100.

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Section 206(k)(2) of the Federal Credit Union Act (12 U.S.C.

1786(k)(2)) authorizes the National Credit Union Administration (NCUA)

to impose three levels or tiers of CMPs upon insured credit unions or

institution-affiliated parties. 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 presently provides that first tier CMPs shall not be

more than $5,000 for each day the violation continues. After the

required adjustment for inflation, the maximum penalty is increased to

$5,500 for each day.

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 maximum second tier CMP is

currently $25,000 for each day the violation, practice or breach

continues. After the required adjustment for inflation, the maximum

penalty is increased to $27,500 per day.

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, the current maximum third tier CMP is

$1,000,000 for each day the violation, practice or breach continues.

For an insured credit union, the current daily maximum CMP is the

lesser of $1,000,000 or 1 percent of the total assets of the credit

union. The maximum CMP for a person other than an insured credit union

will be increased for inflation to $1,100,000 per day. The maximum CMP

for an insured credit union will be increased to the lesser of

$1,100,000 or 1 percent of the total assets of the credit union.

The NCUA now adopts this final rule which adjusts these three CMPs

for the rate of inflation, as required by the DCIA. DCIA provides

Federal agencies with no discretion in the adjustment of CMPs for

inflation, and it also requires the new regulation to take effect on

October 23, 1996. Further, the regulation that the NCUA adopts today to

implement DCIA is ministerial and technical. For these reasons, the

NCUA 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(a)(3)(B). These same reasons also provide the NCUA with good

cause to adopt an effective date for this regulation that is less than

30 days after the date of publication in the Federal Register.

Furthermore, the NCUA determines that pursuant to the requirements of

section 808 of the Small Business Regulatory Enforcement Fairness Act

of 1996, this regulation shall take effect prior to the expiration of

the 60-day Congressional waiting period for final NCUA regulatory

action due to the Congressionally-mandated effective date of October

23, 1996.

Regulatory Requirements

Regulatory Flexibility Act

The NCUA has determined and certifies that the final rule will not

have a significant impact on a substantial number of small credit

unions (primarily those under $1,000,000 in assets).

Paperwork Reduction Act

No collections of information pursuant to the Paperwork Reduction

Act (44 U.S.C. 3501 et seq.) are contained in the final rule.

Consequently, no information has been

[[Page 57291]]

submitted to the Office of Management and Budget for review.

Executive Order 12612

The NCUA Board, pursuant to Executive Order 12612, has determined

that this final rule will not have a substantial direct effect 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.

List of Subjects in 12 CFR Part 747

Administrative practice and procedure, Credit unions, Penalties.

By the National Credit Union Administration Board on October 28,

1996.

Becky Baker,

Secretary to the Board.

Accordingly, the NCUA amends 12 CFR part 747 as follows:

PART 747--ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF

PRACTICE AND PROCEDURE, AND INVESTIGATIONS

1. The authority citation for part 747 is revised to read as

follows:

Authority: 12 U.S.C. 1766, 1784, 1786, and 1787; 42 U.S.C.

4012a; Pub. L. 101-410, 104 Stat. 890; Pub. L. 104-134, 110 Stat.

1321-358 (28 U.S.C. 2461 note).

2. Part 747 is amended by adding Subpart K consisting of

Sec. 747.1001 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 pursuant to section 31001(s) of the Debt Collection

Improvement Act of 1996 (Public Law 104-134, 110 Stat. 1321-358 (28

U.S.C. 2461 note)).

(a) A first tier civil money penalty imposed pursuant to 12 U.S.C.

1786(k)(2)(A), for a violation occurring after October 23, 1996, shall

not exceed $5,500 per day for each day the violation continues.

(b) A second tier civil money penalty imposed pursuant to 12 U.S.C.

1786(k)(2)(B), for a violation, practice or breach occurring after

October 23, 1996, shall not exceed $27,500 per day for each day the

violation, practice or breach continues.

(c) A third tier civil money penalty imposed pursuant to 12 U.S.C.

1786(k)(2)(C) upon any person other than an insured credit union, for a

violation, practice or breach occurring after October 23, 1996, shall

not exceed $1,100,000 per day for each day the violation, practice or

breach continues.

(d) A third tier civil money penalty imposed pursuant to 12 U.S.C.

1786(k)(2)(C) upon an insured credit union, for a violation, practice

or breach occurring after October 23, 1996, shall not exceed the lesser

of--

(1) $1,100,000 per day for each day the violation, practice or

breach continues; or

(2) 1 percent of the total assets of such credit union for each day

the violation, practice or breach continues.

[FR Doc. 96-28189 Filed 11-5-96; 8:45 am]

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