[Federal Register Volume 61, Number 24 (Monday, February 5, 1996)]
[Proposed Rules]
[Pages 4236-4238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-2017]



 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 61, No. 24 / Monday, February 5, 1996 / 
Proposed Rules  

[[Page 4236]]


NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 741


Requirements for Insurance

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The proposed rule would amend the existing NCUA Regulation 
regarding the filing of Financial and Statistical Reports, Form 5300 
(the ``5300 Report'') by adding a provision to allow the NCUA to 
directly assess federally-insured credit unions for the actual cost of 
repeated incidents of filing inaccurate or late 5300 Reports.

DATES: Comments must be received on or before April 5, 1996.

ADDRESSES: Comments should be directed to Becky Baker, Secretary of the 
Board. Mail or hand-deliver comments to: National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax 
comments to (703) 518-6319. Post comments on NCUA's electronic bulletin 
board by dialing (703) 518-6480. Please send comments by one method 
only.

FOR FURTHER INFORMATION CONTACT:
Herbert S. Yolles, Director, Division of Risk Management, (703) 518-
6363, or Jeffrey Mooney, Staff Attorney, (703) 518-6563, at the above 
address.

SUPPLEMENTARY INFORMATION: Section 741.6 of NCUA Regulations, 12 CFR 
Sec. 741.6, requires that federally-insured credit unions with assets 
in excess of $50 million file a quarterly 5300 Report (or ``call 
report'') with NCUA and that all federally-insured credit unions file 
semiannually. Each quarter, a significant number of these reports are 
submitted late or inaccurately. As a result, NCUA is required to 
undertake review and collection efforts that include: identifying those 
federally-insured credit unions that have not submitted their call 
reports; correcting errors; sending notices to federally-insured credit 
unions advising them of errors contained in their 5300 Report; asking 
federally-insured credit unions why they have not submitted a 5300 
Report; requiring federally-insured credit unions to submit amended 
call reports or additional information; and as necessary in some cases, 
making personal contact with federally-insured credit unions through 
telephone calls and/or on-site visits to correct the errors or simply 
to obtain the 5300 Report. NCUA regional offices have indicated that 
each year an additional 4,000 hours are spent by federal examiners 
attempting to correct or obtain late call reports.
    Sections 120 of the Federal Credit Union Act provides the NCUA 
Board general rulemaking authority to ``prescribe rules and regulations 
for the administration of this chapter,'' and, under Section 209 of the 
Federal Credit Union Act to, ``prescribe such regulations as it may 
deem necessary or appropriate to carry out the provisions of this 
title.'' 12 U.S.C. 1766 and 1789. All federally-insured credit unions 
are required to file call reports with the NCUA. 12 U.S.C. 1782(a)(2) 
and 12 CFR 741.6. The Board has determined that the cost of correcting 
or obtaining repeatedly inaccurate or late reports from federally-
insured credit unions should be charged to the federally-insured credit 
unions responsible rather than borne as a shared costs by the vast 
majority of federally-insured credit unions which routinely comply with 
the filing requirement. As a result, the Board proposes to assess the 
agency's actual costs to federally-insured credit unions that cause 
this unnecessary expense.
    The costs will be calculated using the staff time and costs of 
identifying federally-insured credit unions that have not filed their 
5300 Report or corrected inaccurate information. NCUA will multiply the 
actual NCUA staff time expended to obtain or correct the 5300 Report by 
the average hourly compensation rate for field staff rate to determine 
the assessed amount.
    Prior to assessing costs for a late call report, the appropriate 
NCUA regional office will notify the federally-insured credit union in 
writing that their call report is late, that the federally-insured 
credit union has in at least one of the three reporting periods prior 
to the subject call report also filed their report late, and that the 
NCUA will assess costs on the federally-insured credit union if the 
report is not promptly received. The regional office will also inform 
the federally-insured credit union of the potential costs associated 
with processing the late submission.
    The report is deemed inaccurate if it: (1) Contains a substantive 
error requiring the federally-insured credit union to submit an amended 
5300 Report or (2) when substantive errors are found during the 5300 
Report editing process that require correction and verification by the 
federally-insured credit union, and (3) the federally-insured credit 
union has, at least twice during four continuous reporting periods to 
include the report at issue, produced a 5300 Report with substantive 
errors that require the region's direct efforts to correct. A 5300 
Report can also be considered inaccurate if numerous nonsubstantive 
errors affect the integrity of the submitted data and correction is 
required in at least two of the past four reporting periods to include 
the period at issue. A substantive error is one where a correction 
would result in changing any amount reported in the 5300 Report by one 
or more percent or $5,000, whichever is less.
    If a 5300 Report is inaccurate, the NCUA regional office will 
notify the federally-insured credit union in writing accordingly, 
describe the substantive errors and suggest steps on how to avoid 
committing similar errors, request a response, and advise the 
federally-insured credit union that the NCUA will assess costs if the 
error(s) are not promptly corrected without further NCUA involvement. 
The regional office will also inform the federally-insured credit union 
of NCUA's estimate costs associated in obtaining a corrected 
submission.
    NCUA will assess and recover the costs in the quarter immediately 
following the call report's filing date. NCUA examiners will recommend 
the assessment of costs to their supervisors by describing the facts 
and circumstances surrounding the call report's deficiencies or 
lateness. The examiner will itemize the time and expense used resolving 
the matter. The examiner will also provide any prior recent history 
where the federally-insured credit union has filed late or inaccurate 
call reports. The regional 

[[Page 4237]]
director will issue the final assessment. The regional director may 
decide to waive or abate cots after taking into account the size of a 
federally-insured credit union, the gravity of the error, the 
federally-insured credit union's efforts in correcting the error or the 
promptness in responding to the request for the late call report and 
reviewing any submissions from the federally-insured credit union that 
sets forth a reasonable basis for waiving or abating the costs. Costs 
will not be assessed unless the assessment is based on the same type of 
error, repeated numerous errors, or repeated lateness. For example, a 
federally-insured credit union may not be assessed costs if in the 
first reporting period it files a late 5300 Report and during the 
fourth reporting period it files an inaccurate 5300 Report.
    A federally-insured credit union may appeal a cost assessment by a 
regional director by submitting written reasons why the assessment 
should be abated to the NCUA Board within 30 days of receiving the 
final assessment from the region. The Board may delegate the authority 
to determine appeals. The Board or its designee will review all of the 
relevant facts, consult with the regional director involved and any 
other appropriate party including the affected federally-insured credit 
union and issue a final agency determination. There is no right to a 
hearing.
    In order to assure uniformity, the regional offices will inform the 
Director of the Office of Examination and Insurance of the facts and 
circumstances surrounding each assessment of costs during the prior 
quarter, including those circumstances that warranted waiver or 
abatement.
    These costs are not being assessed as part of an administrative 
action or civil money penalty as defined by the Federal Credit Union 
Act, 12 U.S.C. 1786(k)(2). The costs are assessed to recover the 
agency's expenses based upon the amount of additional time and 
resources that NCUA must devote to a particular federally-insured 
credit union's 5300 Report. NCUA may choose to seek civil money 
penalties or take other administrative actions against the federally-
insured credit union for violating the regulatory requirement to file 
timely and accurate call report. The purpose of the proposed rule is to 
recover the additional costs the NCUA incurs when collecting late and 
correcting inaccurate call reports.
    The NCUA requests comment on any aspect of this proposal.

Regulatory Procedures

Regulatory Flexibility Act

    The NCUA Board has determined and certifies that the proposed 
amendment, if adopted, will not have a significant economic impact on a 
substantial number of small federally-insured credit unions, primarily 
those under $1 million in assets. Accordingly, the NCUA Board has 
determined that a Regulatory Flexibility Analysis is not required.

Paperwork Reduction Act

    The collection of information requirements contained in this notice 
of proposed rulemaking will be submitted to the Office of Management 
and Budget (OMB) for review under the Paperwork Reduction Act. Written 
comments on the collection of information should be forwarded directly 
to the OMB Desk Officer indicated below at the following address: OMB 
Reports Management Branch, New Executive Office Building, Room 1020, 
Washington, DC 20503. Attn: Milo Sunderhauf. NCUA will publish a notice 
in the Federal Register once OMB action is taken on the submitted 
request.
    The collection of information requirements in this proposed 
regulation are found in 12 CFR 741.6 (c)(4)(f), (c)(6) and (c)(7). This 
information is required to proposed implementing procedures that will 
enable the federally-insured credit union to comply with the 
requirements of this section, and to challenge the assessment of costs. 
The likely respondents/recordkeepers are federally insured credit 
unions.
    Estimated number of respondents and/or recordkeepers: 630.
    Estimated average annual burden hours per respondent/recordkeeper: 
2 hours.
    Estimated total annual reporting and recordkeeping burden: 1260 
hours.
    Start up cost to respondents: $29.76.

Executive Order 12612

    The proposed change in Sec. 741.6 will apply to both federal credit 
unions and federally-insured, state chartered credit union. The NCUA 
Board, pursuant to Executive Order 12612, has determined that the 
proposed amendment will not have substantial direct effect on the 
states, on the relationship between hat national government and the 
states, or on the distribution of power and responsibilities among the 
various levels of government. Further, the proposed rule will not 
preempt provisions of state law or regulation.

List of Subjects in 12 CFR Part 741

    Bank deposit insurance, Credit unions, Reporting and recordkeeping 
requirements.

    By the National Credit Union Administration Board on January 25, 
1966.
Becky Baker,
Secretary of the Board.

    Accordingly, NCUA proposes to amend 12 CFR part 741 as follows:

PART 741--REQUIREMENTS FOR INSURANCE

    1. The authority citation for part 741 is revised to read as 
follows:

    Authority: 12 U.S.C. 1757, 1766, and 1781 through 1790.

    2. Section 741.6 is amended by adding paragraph (c):


Sec. 741.6  Financial and statistical and other reports.

* * * * *
    (c) If NCUA incurs costs due to a federally-insured credit union's 
failure to file an accurate or timely Financial and Statistical Report 
on Form 5300 (5300 Report), the federally-insured credit union involved 
will be assessed those costs if during any of the prior three reporting 
periods the federally-insured credit union has also filed its 5300 
Reports late, or during any of the prior three reporting periods the 
federally-insured credit union has also filed the 5300 Report with 
substantive or numerous inaccuracies.
    (1) A 5300 Report is considered late if it is postmarked after the 
date prescribed in paragraph (a) above.
    (2) A 5300 Report is inaccurate if it contains one or more 
substantive errors or numerous nonsubstantive errors requiring an 
amended report or when substantive errors or numerous nonsubstantive 
errors are found during the editing process that require correction and 
verification by the federally-insured credit union.
    (i) A substantive error exists if correction would result in 
changing any amount reported in the 5300 Report by more than one 
percent of the correctly reported amount or $5,000, whichever is less.
    (3) The appropriate NCUA regional office will provide written 
notice to the federally-insured credit union if the federally-insured 
credit union will be assessed a fee for late or inaccurate filing under 
this section. The NCUA will provide the federally-insured credit union 
with the following information:
    (i) whether the federally-insured credit union has filed its 5300 
Report inaccurately or late;

[[Page 4238]]

    (ii) a recent history of the accuracy or timeliness of the 
federally-insured credit union's prior 5300 Reports;
    (iii) the estimated costs to NCUA as a result of the inaccuracy or 
late filing;
    (iv) whether the errors, if any, were substantive and why and;
    (v) steps that the federally-insured credit union could take to 
avoid filing future inaccurate or late 5300 reports.
    (vi) request that the federally-insured credit union respond within 
30 days with a written proposal that describes how it intends to avoid 
submitting another late or inaccurate 5300 Report, seeks a waiver or 
abatement of the assessment or states why the federally-insured credit 
union's 5300 Reports is not inaccurate or late.
    (4) The costs for a late or inaccurate 5300 Report shall be 
calculated based on the actual hours expended by NCUA personnel 
multiplied by the average hourly cost of the salaries and benefits of 
such personnel.
    (5) Prior to making a final assessment determination, the NCUA 
regional director may waive or abate any costs assessed against a 
federally-insured credit union after taking into account the size of 
federally-insured credit union that sets forth a reasonable basis for 
waiving or abating the costs.
    (6) A federally-insured credit union may challenge a final 
assessment by submitting written reasons why the assessment should 
waived or abated to the NCUA Board within 30 days of receiving the 
final assessment from the region. The Board may delegate the authority 
to determine an appeal of an assessment. The Board or its designee 
shall consider all relevant facts and consult with any relevant parties 
prior to making a final agency determination.

[FR Doc. 96-2017 Filed 2-2-96; 8:45 am]
BILLING CODE 7535-01-M