[Federal Register Volume 61, Number 212 (Thursday, October 31, 1996)]
[Rules and Regulations]
[Pages 56118-56120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27927]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 510

[96-102]
RIN 1550-AB01


Civil Monetary Penalty Inflation Adjustment

AGENCY: Office of Thrift Supervision, Treasury.

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 statutory authority 
to impose civil monetary penalties (CMPs) to regularly evaluate those 
CMPs and adjust the maximum CMPs to reflect inflation to ensure that 
the CMPs continue to maintain their deterrent value. Consequently, OTS 
is issuing this final rule to implement the required adjustments to 
each of OTS's CMP statutes.

EFFECTIVE DATE: October 31, 1996.

FOR FURTHER INFORMATION CONTACT: Richard Blanks, Counsel (Banking and 
Finance), (202) 906-7037, Chief Counsel's Office, Regulations and 
Legislation Division, Office of Thrift Supervision, 1700 G Street, NW., 
Washington, DC 20552.

SUPPLEMENTARY INFORMATION: The Federal Civil Monetary Penalties 
Inflation Adjustment Act of 1990 (FCMPIAA) 1 provided for the 
regular evaluation of CMPs 2 to ensure that they continued to 
maintain their deterrent value and that penalty amounts due the Federal 
Government were properly accounted for and collected. Section 31,001(a) 
of the Omnibus Consolidated Rescissions and Appropriations Act of 1996 
(OCRRA) sets forth the Debt Collection Improvement Act of 1996 
(DCIA),3 which was enacted to provide more effective tools for 
governmentwide collection of delinquent debt. More specifically, 
section 31,001(s)(1) of the OCRRA amended the FCMPIAA by requiring each 
agency to make inflationary adjustments to the CMPs found in statutes 
that it administers.4 Such adjustments must be made by regulation 
published in the Federal Register. The first inflation adjustment is 
required by October 23, 1996--180 days after the enactment of the DCIA. 
Thereafter, agencies must make inflation adjustments by regulation at 
least once every four years. Any increase in a CMP applies only to 
violations that occur after the date the increase takes effect.5 
These increases in maximum CMPs will not necessarily affect the amount 
of any CMP OTS seeks in connection with a particular violation because 
OTS calculates particular CMPs on a case-by-case basis based upon a 
variety of factors (including the gravity of the violation, whether it 
was willful or recurring, and any harm to the depository institution). 
Thus, the maximums merely serve as a cap beyond which CMPs may not go.
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    \1\ Pub. L. 101-410; 28 U.S.C. 2461 note.
    \2\ Under the FCMPIAA, the term CMP means any penalty, fine, or 
other sanction that (1) 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. 
See 12 U.S.C. 2461 note. All three requirements must be met for a 
fine to be defined as a CMP.
    \3\ Pub. L. 104-134 (April 26, 1996) (to be codified at 28 
U.S.C. 2461 note).
    \4\ Some of OTS's CMPs are in a commonly administered statute, 
12 U.S.C. 1818. Each agency that administers this statute is making 
the identical adjustments.
    \5\ We note here that while the CMP statutes of other agencies 
frequently provide for a minimum and maximum penalty amount, all of 
OTS's CMP statutes provide only for a daily maximum amount and do 
not contain daily minimum amounts. Today's rule therefore refers 
only to maximum CMPs.
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    The statute provides that the inflation adjustment shall be 
determined by increasing the maximum CMP for each CMP by a cost-of-
living adjustment. The term ``cost-of-living'' adjustment is defined as 
the percentage for each CMP by which the Consumer Price Index (CPI) for 
the month of June of the calendar year preceding the adjustment exceeds 
the CPI for the month of June of the calendar year in which the amount 
of such CMP was last set or adjusted pursuant to law. Any increase 
calculated under the statute must be rounded according to rounding 
rules set forth in the statute. Agencies do not have discretion in 
choosing whether to adjust a maximum CMP, by how much to adjust a 
maximum CMP, or the methods used to determine the adjustment.
    To help explain the six-step statutorily-mandated inflation 
adjustment calculation, we will use the following example. Pursuant to 
12 U.S.C. 1818(i), OTS may impose a daily maximum third-tier CMP not to 
exceed $1,000,000 for violations of certain banking laws. The first 
step in the calculation requires finding the Consumer Price Index for 
the All Urban Consumers (CPI-U) for two different time periods.6 
The statute requires that the CPI-U for the year preceding the year of 
adjustment be used, which here, because the adjustment will occur in 
1996, will be the CPI-U for June, 1995, which is 456.7. The CPI-U for 
June of the year the CMP was last set by law or adjusted for inflation 
also must be determined. Because section 1818(i) was adopted in August, 
1989, the CPI-U used is June, 1989, which is 371.7.
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    \6\ The Consumer Price Index described herein was obtained from 
the Bureau of Labor Statistics of the Department of Labor. There are 
several Consumer Price Indices. The statute requires the use of the 
CPI-U.
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    Second, to calculate the cost of living adjustment or inflation 
factor, we divide the CPI-U for June of the preceding year of the 
adjustment by the CPI-U for June of the year the CMP was last set by 
law or adjusted for inflation. Using our example, the CPI for June, 
1995 (456.7) divided by the CPI-U for June, 1989 (371.7) equals 1.23. 
Therefore, 1.23 is our inflation factor.
    Third, to calculate the raw inflation adjustment, we multiply the 
maximum penalty amounts set by law by the inflation factor. In our 
example, $1,000,000 multiplied by our inflation factor of 1.23 equals 
$1,230,000.
    Fourth, we have to round the raw inflation adjustment amounts 
according to the rounding rules set forth in the FCMPIAA. Since we 
round the increased amount, we calculate the increased amount by 
subtracting the original maximum penalty amounts from the raw maximum 
inflation adjustments. The increased amount for the maximum penalty in 
our example is $1,230,000 minus $1,000,000, which equals $230,000. 
According to the rounding rules, if the penalty is greater

[[Page 56119]]

than $200,000, then we round the increase to the nearest multiple of 
$25,000. Therefore, the maximum penalty increase for our example, after 
application of the rounding rules, is $225,000.
    Fifth, we find the inflation adjustment maximum penalty after 
rounding by adding the rounded increase to the original maximum penalty 
amount set by law to calculate the maximum inflation adjusted penalty 
amounts. In our example, $1,000,000 plus $225,000 yields a maximum 
inflation adjusted penalty amount of $1,225,000.
    Finally, the statute provides that the inflation adjustment of the 
maximum penalty amount cannot exceed 10% of the original maximum 
penalty amount. Ten percent of the original maximum penalty amount of 
$1,000,000 in our example equals $100,000. Because the increase in the 
maximum penalty amount cannot exceed 10% of the original maximum 
penalty amount, the adjusted maximum penalty amount in our example is 
$1,100,000. This is the amount set forth in the regulation.
    The six-step calculation just described has been applied to all of 
OTS's CMP statutes, and the maximum penalty amount for each statute is 
set out in the regulation.

Need for an Immediately Effective Final Rule

    Section 553 of the Administrative Procedure Act 7 requires 
separate findings for good cause, first, that notice and comment are 
impracticable, unnecessary, or contrary to the public interest when an 
agency determines to issue a rule without prior notice and comment and 
second, when it determines to make a rule effective without a 30-day 
delay. Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 8 requires that a regulation that imposes 
new requirements take effect on the first day of the quarter following 
publication of the final rule. That section provides, however, that an 
agency may determine that the rule should take effect earlier upon a 
finding of good cause.
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    \7\ 5 U.S.C. 553.
    \8\ 12 U.S.C. 4802.
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    Under the statute, agencies must make the required CMP inflation 
adjustments (1) according to the very specific formula set forth in the 
statute and (2) by October 23, 1996. Agencies have no discretion either 
as the inflation adjustment amount or the timing of the adjustment. Due 
to this lack of agency discretion, the OTS believes that notice and 
comment are unnecessary. For these same reasons, the OTS believes that 
there is good cause to make this rule effective immediately upon 
publication.

Executive Order 12866

    The Director of the OTS has determined that this final rule does 
not constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866.

Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (Unfunded Mandates Act), requires that an agency prepare a 
budgetary impact statement before promulgating a rule that includes a 
federal mandate that may result in expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. If a budgetary impact statement is 
required, section 205 of the Unfunded Mandates Act also requires an 
agency to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule. OTS has determined that the 
rule will not result in expenditures by state, local, or tribal 
governments or by the private sector of $100 million or more. 
Accordingly, this rulemaking is not subject to section 202 of the 
Unfunded Mandates Act.

List of Subjects in 12 CFR Part 510

    Administrative practice and procedure, Penalties.

    Accordingly, OTS amends title 12, chapter V, part 510 of the Code 
of Regulations as set forth below.

PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS

    The authority citation for part 510 is revised to read as follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464; Pub. L. 101-410, 104 
Stat. 890; Pub. L. 104-134, 110 Stat. 1321-358.

    2. Section 510.6 is added to read as follows:


Sec. 510.6  Civil money penalty inflation adjustment.

    Pursuant to the Federal Civil Monetary Penalties Inflation 
Adjustment Act of 1990 (28 U.S.C. 2461 note), as amended by the Debt 
Collection Improvement Act of 1996 (Pub. L. 104-134, 110 Stat. 1321-
358), OTS is required to make inflationary adjustments for civil 
monetary penalties in statutes that it administers. The following chart 
displays those adjustments, as calculated pursuant to the statute:

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                                                           New maximum  
      U.S. Code citation            CMP description          amount     
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12 U.S.C. 1464(v)(4)..........  Reports of Condition--            $2,000
                                 1st Tier.                              
12 U.S.C. 1464(v)(5)..........  Reports of Condition--            22,000
                                 2nd Tier.                              
12 U.S.C. 1464(v)(6)..........  Reports of Condition--         1,100,000
                                 3rd Tier.                              
12 U.S.C. 1467(d).............  Refusal to Cooperate               5,500
                                 in Exam.                               
12 U.S.C. 1467a(i)(3).........  Holding Company Act                5,500
                                 Violation.                             
12 U.S.C. 1467a(r)(1).........  Late/Inaccurate                    2,000
                                 Reports--1st Tier.                     
12 U.S.C. 1467a(r)(2).........  Late/Inaccurate                   22,000
                                 Reports--2nd Tier.                     
12 U.S.C. 1467a(r)(3).........  Late/Inaccurate                1,100,000
                                 Reports--3rd Tier.                     
12 U.S.C. 1817(j)(16)(A)......  Change in Control--1st             5,500
                                 Tier.                                  
12 U.S.C. 1817(j)(16)(B)......  Change in Control--2nd            27,500
                                 Tier.                                  
12 U.S.C. 1817(j)(16)(C)......  Change in Control--3rd         1,100,000
                                 Tier.                                  
12 U.S.C. 1818(i)(2)(A).......  Violation of Law or                5,500
                                 Unsafe or Unsound                      
                                 Practice--1st Tier.                    
12 U.S.C. 1818(i)(2)(B).......  Violation of Law or               27,500
                                 Unsafe or or Unsound                   
                                 Practice--2nd Tier.                    
12 U.S.C. 1818(i)(2)(C).......  Violation of Law or            1,100,000
                                 Unsafe or Unsound                      
                                 Practice--3rd Tier.                    
12 U.S.C. 3349(b).............  Appraisals Violation--             5,500
                                 1st Tier.                              
12 U.S.C. 3349(b).............  Appraisals Violation--            27,500
                                 2nd Tier.                              
12 U.S.C. 3349(b).............  Appraisals Violation--         1,100,000
                                 3rd Tier.                              
42 U.S.C. 4012a(f)............  Flood Insurance.......       350/105,000
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[[Page 56120]]

    Dated: October 22, 1996.

    By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-27927 Filed 10-30-96; 8:45 am]
BILLING CODE 6720-01-P