[Federal Register Volume 65, Number 185 (Friday, September 22, 2000)]
[Rules and Regulations]
[Pages 57277-57280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24431]
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Rules and Regulations
Federal Register
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This section of the FEDERAL REGISTER contains regulatory documents
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Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 /
Rules and Regulations
[[Page 57277]]
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 Penalties 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 was required, by October 23, 1996,
and at least once every four years thereafter, to adjust its CMPs for
inflation. In 1996, the National Credit Union Administration (NCUA)
issued a final rule to implement the required adjustments to certain
CMPs authorized by the Federal Credit Union Act. Since that time, NCUA
has discovered several more CMPs that should also be adjusted for
inflation. In order to comply with Congress' mandate to adjust CMPs for
inflation at least every four years, NCUA is issuing this final rule to
implement the required adjustments to those CMPs.
EFFECTIVE DATE: October 23, 2000.
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:
Background:
The Debt Collection Improvement Act of 1996 \1\ (DCIA) amended the
Federal Civil Penalties Inflation Adjustment Act of 1990 \2\ (FCPIA
Act) to require every Federal agency to enact regulations that adjust
each civil monetary penalty (CMP) \3\ provided by law under its
jurisdiction by the rate of inflation pursuant to the inflation
adjustment formula in section 5(b) of the FCPIA Act. Each Federal
agency was required to issue these implementing regulations by October
23, 1996, and at least once every 4 years thereafter. Section 6 of the
amended FCPIA Act specifies that inflation-adjusted CMPs will only
apply to violations that occur after the effective date of the
adjustment. The inflation adjustment is based on the percentage
increase in the Consumer Price Index (CPI).\4\ Specifically, section
5(b) of the FCPIA Act defines ``the term `cost-of-living adjustment'
[to] mean the percentage (if any) for each civil monetary penalty by
which--(1) the Consumer Price Index for the month of June of the
calendar year preceding the adjustment, exceeds (2) the Consumer Price
Index for the month of June of the calendar year in which the amount of
such civil monetary penalty was last set or adjusted pursuant to law.''
Furthermore, each CMP that has been adjusted for inflation must be
rounded to a number prescribed by section 5(a) of the FCPIA Act.\5\
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\1\ Pub. L. 104-134, Sec. 31001(s), 110 Stat. 1321-373, (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), also
codified at 28 U.S.C. 2461 note.
\3\ Section 3(2) of the amended FCPIA 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.
\4\ The CPI is published by the Department of Labor, Bureau of
Statistics, and is available at its website: www.bls.gov/top20.html.
\5\ NCUA recognizes that the rounding provision of the FCPIA Act
is capable of differing interpretations. As an example, the
provision states, in part, that an increase ``shall be rounded to
the nearest * * * multiple of $1,000 in the case of penalties
greater than $1,000 but less than or equal to $10,000.'' Section
5(a)(3), FCPIA Act. NCUA understands that some agencies have chosen
to determine which rounding rule to follow based upon the amount of
the increase, rather than the amount of the penalty. In other words,
the forgoing rounding provision would only be applied if the amount
of the adjustment was more than $1,000 but less than $10,000. NCUA
has chosen to follow the language in the statute and therefore has
adopted an interpretation that selects the appropriate rounding rule
based upon the amount of the penalty.
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CMPs Previously Adjusted
Calculation of the Adjustment
With respect to the CMPs authorized by 12 U.S.C. 1786(k)(2), the
last adjustment for inflation occurred in 1996. Therefore, the current
adjustment will be the percentage by which the CPI for the month of
June 1999 exceeds the CPI for the month of June 1996. According to the
Bureau of Labor Statistics, the CPI for the month of June 1999 was
166.2 and the CPI for the month of June 1996 was 156.7. When 166.2 is
divided by 156.7, the result is 1.06. Thus, the CMPs authorized by 12
U.S.C. 1786(k)(2) should be multiplied by a factor of 1.06 to arrive at
the new adjusted amounts (before required rounding).
Section 206(k)(2) of the Federal Credit Union Act, 12 U.S.C.
1786(k)(2), authorizes NCUA to impose three levels or tiers of CMPs
upon insured credit unions or institution-affiliated parties.
First Tier CMPs
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 provides that first tier
CMPs shall not be more than $5,000 for each day the violation
continues. After the required adjustment for inflation in 1996, the
maximum penalty was increased to $5,500 for each day.\6\ Multiplying
the current penalty of $5,500 by the factor of 1.06 results in $5,830,
an increase of $330. When that number is rounded as required by the
FCPIA Act,\7\ the inflation-adjusted maximum for a first tier CMP
remains $5,500.
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\6\ The FCPIA Act limited the first adjustment of a CMP to a
maximum of 10%.
\7\ ``Any increase determined under this subsection shall be
rounded to the nearest-- * * * (3) multiple of $1,000 in the case of
penalties greater than $1,000 but less than or equal to $10,000.''
Section 5(a), FCPIA Act. Therefore, $330 is rounded to the nearest
multiple of $1,000 or to $0.
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[[Page 57278]]
Second Tier CMPs
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 statute provides a maximum second
tier CMP of $25,000 for each day the violation, practice or breach
continues. After the required 1996 adjustment for inflation, the
maximum penalty was increased to $27,500 per day. Multiplying the
current penalty of $27,500 by the factor of 1.06 results in $29,150, an
increase of $1,650. When that number is rounded as required by the
FCPIA Act,\8\ the inflation-adjusted maximum for a second tier CMP
remains $27,500.
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\8\ ``Any increase determined under this subsection shall be
rounded to the nearest-- * * * (4) multiple of $5,000 in the case of
penalties greater than $10,000 but less than or equal to $100,000.''
Section 5(a), FCPIA Act. Therefore, $1,650 is rounded to the nearest
multiple of $5,000 or to $0.
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Third Tier CMPs
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, under the statute 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 statute provides a
current daily maximum CMP of the lesser of $1,000,000 or 1 percent of
the total assets of the credit union. In 1996, the maximum CMP for a
person other than an insured credit union was increased for inflation
to $1,100,000 per day. At the same time, the maximum CMP for an insured
credit union was increased to the lesser of $1,100,000 or 1 percent of
the total assets of the credit union. Multiplying the current penalty
of $1,100,000 by the factor of 1.06 results in $1,166,000, an increase
of $66,000. When that number is rounded as required by the FCPIA
Act,\9\ the new inflation-adjusted third tier CMP becomes $1,175,000.
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\9\ ``Any increase determined under this subsection shall be
rounded to the nearest-- * * * (6) multiple of $25,000 in the case
of penalties greater than $200,000.'' Section 5(a), FCPIA Act.
Therefore, $66,000 is rounded to the nearest multiple of $25,000 or
to $75,000.
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CMPs Not Previously Adjusted For Inflation
NCUA has determined that several additional provisions authorize
penalties that meet the definition of CMPs. These provisions were not
previously adjusted for inflation in 1996.
12 U.S.C. 1782(a)(3)
NCUA is authorized to require credit unions to provide reports of
condition. The failure to submit a required report or the submission of
a false or misleading report subjects a credit union to three levels of
CMPs, depending upon the reasons for noncompliance. For an inadvertent
failure to submit a report or the inadvertent submission of a false or
misleading report, the credit union is subject to a penalty of not more
than $2,000 for each day the failure continues or such false or
misleading information is not corrected. For a non-inadvertent failure
to submit a report or for the non-inadvertent submission of a false or
misleading report, the credit union is subject to a penalty of not more
than $20,000 for each day the failure continues or such false or
misleading information is not corrected. Lastly, for a failure to
submit a report or the submission of a false or misleading report done
knowingly or with reckless disregard, the credit union is subject to a
penalty of not more than $1,000,000 or 1 percent of the total assets of
the credit union, whichever is less, for each day the failure continues
or such false or misleading information is not corrected.
Calculation of the Adjustment
The CMPs authorized by 12 U.S.C. 1782(a)(3) were created by
Congress in 1989. Therefore, the current adjustment will be the
percentage by which the CPI for the month of June 1999 exceeds the CPI
for the month of June 1989. According to the Bureau of Labor
Statistics, the CPI for the month of June 1999 was 166.2 and the CPI
for the month of June 1989 was 124.1. When 166.2 is divided by 124.1,
the result is 1.34. Thus, the CMPs authorized by 12 U.S.C. 1782(a)(3)
should be multiplied by a factor of 1.34 to arrive at the new adjusted
amounts (before required rounding). However, another provision of the
FCPIA Act limits the first adjustment of a CMP to an amount not to
exceed 10 percent of the original penalty.\10\ The amount of increase
to these CMPs in the final regulation would have been more if this
limit did not exist.
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\10\ ``The first adjustment of a civil monetary penalty made
pursuant to [the FCPIA Act] may not exceed 10 percent of such
penalty.'' Section 6, FCPIA Act (originally designated as Section
7).
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The maximum CMP authorized by 12 U.S.C. 1782(a)(3) for an
inadvertent failure to submit a report or the inadvertent submission of
a false or misleading report is currently $2,000 for each day the
failure continues or such false or misleading information is not
corrected. After the required adjustment for inflation, the maximum
penalty is increased by 10%, or $200, to $2,200 per day.
The maximum CMP authorized by 12 U.S.C. 1782(a)(3) for a non-
inadvertent failure to submit a report or the non-inadvertent
submission of a false or misleading report is currently $20,000 for
each day the failure continues or such false or misleading information
is not corrected. After the required adjustment for inflation, the
maximum penalty is increased by 10%, or $2,000, to $22,000 per day.
The maximum CMP authorized by 12 U.S.C. 1782(a)(3) for a failure to
submit a report or the submission of a false or misleading report done
knowingly or with reckless disregard is currently $1,000,000 or 1
percent of the total assets of the credit union, whichever is less, for
each day the failure continues or such false or misleading information
is not corrected. After the required adjustment for inflation, the
maximum penalty is increased by 10%, or $100,000, to $1,100,000 or 1
percent of the total assets of the credit union, whichever is less, per
day.
12 U.S.C. 1782(d)(2)
In a provision similar to the authority discussed above, NCUA is
authorized to require each credit union to provide periodic certified
statements of the amount of insured shares in the credit union, as well
as to pay required deposits into the National Credit Union Share
Insurance Fund (NCUSIF). The failure to submit a required certified
statement or the submission of a false or misleading statement subjects
a credit union to three tiers of CMPs, depending upon the reasons for
noncompliance.
Calculation of the Adjustment
The CMPs authorized by 12 U.S.C. 1782(d)(2) were created by
Congress in 1991. Therefore, the current adjustment will be the
percentage by which the CPI for the month of June 1999 exceeds the CPI
for the month of June 1991. According to the Bureau of Labor
[[Page 57279]]
Statistics, the CPI for the month of June 1999 was 166.2 and the CPI
for the month of June 1991 was 136. When 166.2 is divided by 136, the
result is 1.22. Thus, the CMPs authorized by 12 U.S.C. 1782(d)(2)
should be multiplied by a factor of 1.22 to arrive at the new adjusted
amounts (before required rounding). However, as noted previously,
another provision of the FCPIA Act limits the first adjustment of a CMP
to an amount not to exceed 10 percent of the original penalty. The
amount of increase to these CMPs in the final regulation would have
been more if this limit did not exist.
First Tier CMPs
The maximum CMP authorized by 12 U.S.C. 1782(d)(2)(A) for an
inadvertent failure to timely submit a certified statement or an
inadvertent submission of a false or misleading certified statement, is
currently $2,000 for each day the failure continues or such false or
misleading information is not corrected. After the required adjustment
for inflation, the maximum penalty is increased by 10%, or $200, to
$2,200 per day.
Second Tier CMPs
The maximum CMP authorized by 12 U.S.C. 1782(d)(2)(B) for a non-
inadvertent failure to timely submit a certified statement, or a non-
inadvertent submission of a false or misleading certified statement, or
the failure or refusal to pay any required deposit or premium for
insurance is currently $20,000 for each day the failure continues, such
false or misleading information is not corrected, or the deposit or
premium is not paid. After the required adjustment for inflation, the
maximum penalty is increased by 10%, or $2,000, to $22,000 per day.
Third Tier CMPs
The maximum CMP authorized by 12 U.S.C. 1782(d)(2)(C) for a failure
to submit a report or the submission of a false or misleading report
done knowingly or with reckless disregard is currently $1,000,000 or 1
percent of the total assets of the credit union, whichever is less, for
each day the failure continues or such false or misleading information
is not corrected. After the required adjustment for inflation, the
maximum penalty is increased by 10%, or $100,000, to $1,100,000 or 1
percent of the total assets of the credit union, whichever is less, per
day.
12 U.S.C. 1785(e)(3)
Pursuant to 12 U.S.C. 1785(e)(1), NCUA is authorized to promulgate
regulations to provide minimum standards with which each insured credit
union must comply with respect to security devices and procedures to
discourage robberies, burglaries and larcenies and to assist in the
identification and apprehension of persons who commit such acts. A
credit union that violates such a regulation is subject to a CMP of up
to $100 for each day the violation continues. 12 U.S.C. 1785(e)(3).
Calculation of the Adjustment
The CMP authorized by 12 U.S.C. 1785(e)(3), originally passed by
Congress in 1970, was not adjusted for inflation in 1996. Therefore,
the current adjustment will be the percentage by which the CPI for the
month of June 1999 exceeds the CPI for the month of June 1970.
According to the Bureau of Labor Statistics, the CPI for the month of
June 1999 was 166.2 and the CPI for the month of June 1970 was 38.8.
When 166.2 is divided by 38.8, the result is 4.28. Thus, the CMP
authorized by 12 U.S.C. 1785(e)(3) should be multiplied by a factor of
4.28 to arrive at the new adjusted amounts (before required rounding).
However, as discussed previously, the FCPIA Act limits the first
adjustment of a CMP to an amount not to exceed 10 percent of the
original penalty. The amount of increase to this CMP in the final
regulation would have been more if this limit did not exist.
The maximum CMP authorized by 12 U.S.C. 1785(e)(3) for non-
compliance with NCUA security regulations is currently $100 for each
day the violation continues. After the required adjustment for
inflation, the maximum penalty is increased by 10%, or $10, to $110 per
day.
42 U.S.C. 4012a(f)
Pursuant to 42 U.S.C. 4012a(f), NCUA is authorized to impose CMPs
against a credit union that is found to have a pattern or practice of
committing certain specified actions in violation of the National Flood
Insurance Program. A credit union that engages in such violations is
subject to a CMP of up to $350 for each violation. The total amount of
penalties assessed against any credit union during any calendar year
may not exceed $100,000. 42 U.S.C. 4012a(f)(5).
Calculation of the Adjustment
The CMP authorized by 42 U.S.C. 4012a(f), originally passed by
Congress in 1994, was not adjusted for inflation in 1996. Therefore,
the current adjustment will be the percentage by which the CPI for the
month of June 1999 exceeds the CPI for the month of June 1994.
According to the Bureau of Labor Statistics, the CPI for the month of
June 1999 was 166.2 and the CPI for the month of June 1994 was 148.0.
When 166.2 is divided by 148.0, the result is 1.12. Thus, the CMP
authorized by 42 U.S.C. 4012a(f) should be multiplied by a factor of
1.12 to arrive at the new adjusted amounts (before required rounding).
However, as discussed previously, the FCPIA Act limits the first
adjustment of a CMP to an amount not to exceed 10 percent of the
original penalty. The amount of increase to this CMP in the final
regulation would have been more if this limit did not exist.
The maximum CMP authorized by 42 U.S.C. 4012a(f) for certain
violations of the National Flood Insurance Program is currently $350
for each violation, up to a maximum of $100,000 per calendar year.
After the required adjustment for inflation, the maximum penalty is
increased by 10%, or $35, to $385 per violation. The annual maximum
penalty is also increased by 10%, or $10,000, to $110,000 per calendar
year.
The NCUA Board now adopts this final rule to adjust the forgoing
CMPs for the rate of inflation, as required by the FCPIA Act. The FCPIA
Act provides federal agencies with no discretion in the adjustment of
CMPs for inflation, and it also requires such adjustments for inflation
to occur at least every four years. Further, the regulation is
ministerial and technical and, for these reasons, the NCUA Board 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).
Regulatory Procedures
Regulatory Flexibility Act
The NCUA Board certifies that the proposed regulation will not have
a significant economic impact on a substantial number of small credit
unions. Small credit unions are defined by NCUA, pursuant to its
authority to define ``small organizations,'' as those credit unions
with assets of $1 million or less. 5 U.S.C. 601(4), (6); NCUA IRPS 81-
4, 46 FR 29248 (1981); NCUA IRPS 87-2, 12 CFR 791.8(a). Accordingly, a
regulatory flexibility analysis is not required.
Paperwork Reduction Act
No collections of information pursuant to the Paperwork Reduction
Act (44 U.S.C. 3501 et seq.) are contained in the rule. Consequently,
no information has been submitted to the
[[Page 57280]]
Office of Management and Budget for review.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their regulatory actions on state and local
interests. In adherence to fundamental federalism principles, NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the Executive Order. This final rule will
apply to all federally-insured credit unions, but it will not have
substantial direct effects 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. NCUA has
determined the final rule does not constitute a policy that has
federalism implications for purposes of the Executive Order.
Assessment of Federal Regulations and Policies on Families
NCUA has determined that this rule will not affect family well-
being within the meaning of section 654 of the Treasury and General
Government Appropriations Act, 1999, Pub. L. No. 105-277, 112 Stat.
2681 (1998).
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. No. 104-21) provides generally for congressional review of
agency rules. A reporting requirement is triggered in instances where
NCUA issues a final rule as defined by Section 551 of the
Administrative Procedures Act. 5 U.S.C. 551. The Office of Management
and Budget has reviewed this rule and has determined that for purposes
of the Small Business Regulatory Enforcement Fairness Act of 1996 it is
not a major rule.
List of Subjects in 12 CFR Part 747
Credit unions, Civil monetary penalties.
By the National Credit Union Administration Board on September
6, 2000.
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, 1782, 1784, 1785, 1786, 1787; 42
U.S.C. 4012a; Pub. L. 101-410; Pub.L. 104-134.
2. Part 747, Subpart K is revised 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.
(a) NCUA is required by the Federal Civil Penalties Inflation
Adjustment Act of 1990 (Public Law 101-410, 104 Stat. 890, as amended
(28 U.S.C. 2461 note)) to adjust the maximum amount of each civil money
penalty within its jurisdiction by the rate of inflation. The following
chart displays those adjustments, as calculated pursuant to the
statute:
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U.S. Code citation CMP description New maximum amount
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(1) 12 U.S.C. 1782(a)(3).... Inadvertent failure $2,200
to submit a report
or the inadvertent
submission of a
false or misleading
report.
(2) 12 U.S.C. 1782(a)(3).... Non-inadvertent $22,000
failure to submit a
report or the non-
inadvertent
submission of a
false or misleading
report.
(3) 12 U.S.C. 1782(a)(3).... Failure to submit a $1,100,000 or 1
report or the percent of the
submission of a total assets of the
false or misleading credit union,
report done whichever is less
knowingly or with
reckless disregard.
(4) 12 U.S.C. 1782(d)(2)(A). First tier.......... $2,200
(5) 12 U.S.C. 1782(d)(2)(B). Second tier......... $22,000
(6) 12 U.S.C. 1782(d)(2)(C). Third tier.......... $1,100,000 or 1
percent of the
total assets of the
credit union,
whichever is less
(7) 12 U.S.C. 1785(e)(3).... Non-compliance with $110
NCUA security
regulations.
(8) 12 U.S.C. 1786(k)(2)(A). First tier.......... $5,500
(9) 12 U.S.C. 1786(k)(2)(B). Second tier......... $27,500
(10) 12 U.S.C. 1786(k)(2)(C) Third tier.......... For a person other
than an insured
credit union:
$1,175,000;
For an insured
credit union:
$1,175,000 or 1
percent of the
total assets of the
credit union,
whichever is less
(11) 42 U.S.C. 4012a(f)..... Per violation....... $385
Per calendar year... $110,000
------------------------------------------------------------------------
(b) The adjustments displayed in paragraph (a) of this section
apply to acts occurring beginning on October 23, 2000.
[FR Doc. 00-24431 Filed 9-21-00; 8:45 am]
BILLING CODE 7535-01-P