[Federal Register Volume 61, Number 216 (Wednesday, November 6, 1996)]
[Rules and Regulations]
[Pages 57290-57291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28189]



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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

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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]
BILLING CODE 7535-01-P