[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Rules and Regulations]
[Pages 68152-68154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33945]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1780

RIN 2550-AA06


Civil Money Penalties

AGENCY: Office of Federal Housing Enterprise Oversight, HUD.

ACTION: Final rule.

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SUMMARY: OFHEO is issuing this final rule to adjust each civil money 
penalty within its jurisdiction to account for inflation. This action 
is necessary to implement the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended by the Debt Collection Improvement 
Act of 1996.

DATES: This final rule is effective December 31, 1997.

FOR FURTHER INFORMATION CONTACT: Danielle Arigoni, Research Assistant, 
Office of Policy Analysis, or Marvin L. Shaw, Senior Counsel, Office of 
General Counsel, 1700 G Street, NW, 4th Floor, Washington, DC 20552, 
telephone (202) 414-3800 (not a toll-free number). The telephone number 
for the Telecommunications Device for the Deaf is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Federal Housing Enterprise Oversight (OFHEO) was 
established by Title XIII of the Housing and Community Development Act 
of 1992, Pub. L. 102-550, known as the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (1992 Act). OFHEO is an 
independent office within the U.S. Department of Housing and Urban 
Development (HUD) with responsibility for ensuring that the Federal 
National Mortgage Association (Fannie Mae) and the Federal Home Loan 
Mortgage Corporation (Freddie Mac) (collectively, the Enterprises) are 
adequately capitalized and operating in a safe and sound manner. The 
1992 Act authorizes OFHEO's Director (Director) to impose a civil money 
penalty for violations by an Enterprise or its executive officers or 
directors of any statute or regulation under OFHEO's jurisdiction.\1\
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    \1\ See 1992 Act, section 1376 (12 U.S.C. 4636).
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    Fannie Mae and Freddie Mac are Government-sponsored enterprises 
that provide liquidity to and stability in the secondary market for 
residential

[[Page 68153]]

mortgages.\2\ The Enterprises also increase the availability of 
mortgage credit benefiting low- and moderate-income families and areas 
that are underserved by lending institutions. The Enterprises engage in 
two principal businesses: investing in residential mortgages and 
guaranteeing residential mortgage securities.
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    \2\ See 1992 Act, secitons 1331-38 (12 U.S.C. 4561-67, 4562 
note).
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II. Debt Collection Improvement Act of 1996

    In order to preserve the remedial impact of civil money penalties 
and foster compliance with the law, the Federal Civil Penalties 
Inflation Adjustment Act of 1990,\3\ as amended by the Debt Collection 
Improvement Act of 1996 \4\ (the Debt Collection Improvement Act), 
requires Federal agencies to make an initial inflationary adjustment 
for all applicable civil money penalties and to make further 
adjustments of these penalty amounts at least once every 4 years. The 
Debt Collection Improvement Act further stipulates that any resulting 
increases in a civil money penalty due to the calculated inflation 
adjustments (i) should apply only to violations that occur after 
October 23, 1996--the Act's effective date--and (ii) should not exceed 
10 percent of the penalty indicated.
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    \3\ Pub. L. 101-410, 28 U.S.C. 2461 note.
    \4\ Pub. L. 104-134, seciton 31001(s), 110 Stat. 1321-358 
(codified as amended at 28 U.S.C. 2461 note).
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    Under the Debt Collection Improvement Act, the inflation adjustment 
for each applicable civil money penalty is determined by increasing the 
maximum civil money penalty amount per violation by the cost-of-living 
adjustment. The ``cost-of-living'' adjustment is defined by the statute 
as the amount 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 year in which the amount of such civil penalty 
was last set or adjusted pursuant to law, divided by the earlier CPI 
value. Any calculated increase under this adjustment is subject to a 
specific rounding formula \5\ set forth in the Debt Collection 
Improvement Act.
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    \5\ The statute's rounding rules require that an increase be 
rounded to the nearest multiple as follows: $10 in the case of 
penalties less than or equal to $100; $100 in the case of penalties 
greater than $100 but less than or equal to $1,000; $1,000 in the 
case of penalties greater than $1,000 but less than or equal to 
$10,000; $5,000 in the case of penalties greater than $10,000 but 
less than or equal to $100,000; $10,000 in the case of penalties 
greater than $100,000 but less than or equal to $200,000; and 
$25,000 in the case of penalties greater than $200,000.
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III. OFHEO'S Civil Money Penalties Affected by the Inflation 
Adjustment

    The following example illustrates how the methodology outlined in 
the Debt Collection Improvement Act applies to civil money penalties 
assessed by OFHEO. Under section 1376 of the 1992 Act, OFHEO may impose 
a daily penalty not to exceed $1,000,000 on either Enterprise or any 
executive officer or director of an Enterprise for certain violations. 
The first step in determining the inflation adjustment is to calculate 
and apply the percentage by which the CPI for all Urban Consumers (CPI-
U) has changed over the period beginning in the year in which the 
existing civil money penalty amounts were last statutorily defined 
(section 1376 was adopted in 1992, and no adjustments have been made 
since) and ending in the calendar year preceding the adjustment. Given 
that the current year is 1997, the end of the period is the preceding 
year, 1996. The corresponding CPI-U values for the months of June in 
1992 and 1996 are 419.9 and 469.5, respectively. Dividing the 
difference between the two values by the base year (1992) value yields 
a percentage increase of 11.8, which is multiplied by the existing 
civil money penalty amount of $1,000,000 to yield an increase of 
$118,000.
    The second step is to apply the rounding rules in the Debt 
Collection Improvement Act which state that, where the increase is 
greater than $100,000 but less than or equal to $200,000, the increase 
shall be rounded to the nearest multiple of $10,000. As a result, the 
increase is rounded up to $120,000. When added to the original civil 
money penalty, the adjustment yields a new maximum civil money penalty 
of $1,120,000.
    Finally, the Debt Collection Improvement Act provides that any 
adjustment for inflation of a civil money penalty shall not exceed 10 
percent of the existing amount. In this case, the maximum penalty 
amount is $100,000. As such, the final increase is adjusted to meet the 
10 percent increase limit, since the $120,000 increase resulting from 
the calculations exceeds the amount allowed by the Debt Collection 
Improvement Act. A final civil money penalty amount is reached by 
adding the equivalent of 10 percent of the statutorily defined penalty 
($100,000) to the existing civil money penalty amount ($1,000,000), 
yielding a figure of $1,100,000. This is the figure which is associated 
with the violations previously penalized by a maximum $1,000,000 fine. 
This adjustment process has been applied to all of OFHEO's statutory 
civil money penalty limits to determine the maximum amounts as listed 
in the 1992 Act.
    Based on these considerations, OFHEO has decided to amend chapter 
XVII of Title 12 of the Code of Federal Regulations by adding subpart 
E, titled ``Civil Money Penalties,'' to Part 1780 to reflect the 
inflation adjustments mandated by the Debt Collection Improvement Act.

IV. Effective Date

    OFHEO finds good cause to make this rule effective upon publication 
of this document in the Federal Register under the Administrative 
Procedure Act (APA). 5 U.S.C. 553(d). This final rule does not impose 
any additional responsibilities on any entity. Instead, it simply 
adjusts the civil penalties as directed by the Debt Collection 
Improvement Act.
    OFHEO also finds for good cause that notice and an opportunity to 
comment on this document are unnecessary under the APA. 5 U.S.C. 553. 
This rulemaking conforms with and is consistent with the statutory 
authority set forth in the Debt Collection Improvement Act, with no 
issues of policy discretion. Consequently, because the opportunity for 
notice and comment is unnecessary, OFHEO is issuing these requirements 
as a final rule.

V. Regulatory Impact Statements

Executive Order 12612, Federalism

    Executive Order 12612 requires that Executive departments and 
agencies identify regulatory actions that have significant federalism 
implications. A regulation has federalism implications if it has 
substantial direct effects on the States, on the relationship or 
distribution of power between the Federal Government and the States, or 
on the distribution of power and responsibilities among various levels 
of government. OFHEO has determined that this regulation has no 
federalism implications that warrant the preparation of a Federalism 
Assessment in accordance with Executive Order 12612.

Executive Order 12866, Regulatory Planning and Review

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

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Executive Order 12988, Civil Justice Reform

    Executive Order 12988 sets forth guidelines to promote the just and 
efficient resolution of civil claims and to reduce the risk of 
litigation to the Federal Government.
    The regulation meets the applicable standards of sections 3(a) and 
3(b) of Executive Order 12988.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995, 44 U.S.C. chapter 35, requires 
that regulations involving the collection of information receive 
clearance from OMB. The regulation contains no such collection of 
information requiring OMB approval under the Paperwork Reduction Act. 
Consequently, no information has been submitted to OMB for review under 
the Paperwork Reduction Act.

Regulatory Flexibility Act

    The Regulatory Flexibility Act applies only to rules for which an 
agency publishes a general notice of proposed rulemaking pursuant to 5 
U.S.C. 553(b) (see 5 U.S.C. 601(2)). Because this action is limited to 
the adoption of statutory language, without interpretation, notice and 
comment on this final rule is unnecessary pursuant to 5 U.S.C. 
553(b)(B). Therefore, the Regulatory Flexibility Act does not apply to 
this final rule.

Unfunded Mandates Act of 1995

    OFHEO has determined that this final rule will not result in 
expenditures by State, local, and tribal governments, or by the private 
sector of $100 million or more in any one year. Accordingly, this 
rulemaking is not subject to the Unfunded Mandates Act of 1995.

List of Subjects in 12 CFR Part 1780

    Administrative practice and procedure, Penalties.

    Accordingly, for the reasons set forth in the preamble, OFHEO 
amends chapter XVII of Title 12 of the Code of Federal Regulations by 
adding Part 1780 to read as follows:

PART 1780--UNIFORM RULES OF PRACTICE AND PROCEDURE

Subpart A--[Reserved]

Subpart B--[Reserved]

Subpart C--[Reserved]

Subpart D--[Reserved]

Subpart E--Civil Money Penalty Inflation Adjustments

Sec.
1780.70  Inflation adjustments.
1780.71  Applicability.

    Authority: 12 U.S.C. 4513, 4636; 28 U.S.C. 2461 note.

Subpart A--[Reserved]

Subpart B--[Reserved]

Subpart C--[Reserved]

Subpart D--[Reserved]

Subpart E--Civil Money Penalty Inflation Adjustments


Sec. 1780.70  Inflation adjustments.

    The maximum amount of each civil money penalty within OFHEO's 
jurisdiction is adjusted in accordance with the Debt Collection 
Improvement Act of 1996 (28 U.S.C. 2461 note) as follows:

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                                                                                     Previous      New adjusted 
              U.S. Code citation                           Description                maximum         maximum   
                                                                                      penalty         penalty   
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12 U.S.C. 4636(b)(1)..........................  First Tier......................          $5,000          $5,500
12 U.S.C. 4636(b)(2)..........................  Second Tier (Executive Officer            10,000          11,000
                                                 or Director.                                                   
12 U.S.C. 4636(b)(2)..........................  Second Tier (Enterprise)........          25,000          27,500
12 U.S.C. 4636(b)(3)..........................  Third Tier (Executive Officer or         100,000         110,000
                                                 Director).                                                     
12 U.S.C. 4636(b)(3)..........................  Third Tier (Enterprise).........       1,000,000       1,100,000
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Sec. 1780.71  Applicability.

    The inflation adjustments in Sec. 1780.70 apply to civil money 
penalties assessed in accordance with the provisions of 12 U.S.C. 4636 
for violations occurring after October 23, 1996.

    Dated: December 22, 1997.
Mark A. Kinsey,
Acting Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 97-33945 Filed 12-30-97; 8:45 am]
BILLING CODE 4220-01-P