[Federal Register Volume 69, Number 213 (Thursday, November 4, 2004)]
[Rules and Regulations]
[Pages 64249-64251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24674]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Part 509

[No. 2004-51]
RIN 1550-AB95


Rules of Practice and Procedure in Adjudicatory Proceedings; 
Civil Money Penalty Inflation Adjustment

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Federal Civil Penalties Inflation Adjustment Act of 1990 
requires all federal agencies with statutory authority to impose civil 
money penalties (CMPs) to evaluate and adjust those CMPs every four 
years. The Office of Thrift Supervision (OTS) last adjusted its CMP 
statutes in 2000. Consequently, OTS is issuing this final rule to 
implement the required adjustments to OTS's CMP statutes.

DATES: Effective November 4, 2004.

FOR FURTHER INFORMATION CONTACT: Timothy P. Leary, Counsel (Banking & 
Finance), (202) 906-7170, Regulations and Legislation Division, Office 
of the Chief Counsel, Office of Thrift Supervision, 1700 G Street, NW., 
Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

    The Federal Civil Penalties Inflation Adjustment Act of 1990\1\ 
(FCPIAA) requires each agency to make inflationary adjustments to the 
CMPs in statutes that it administers.\2\ Under the

[[Page 64250]]

FCPIAA, agencies must make those adjustments at least once every four 
years. OTS last adjusted its CMPs in 2000.\3\ OTS's civil money penalty 
adjustment regulation is 12 CFR 509.103. An increased CMP applies only 
to violations that occur after the increase takes effect.
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    \1\ 28 U.S.C. 2461 note.
    \2\ Some of OTS's CMPs are in a commonly administered statute, 
12 U.S.C. 1818. Each agency that administers this statute is making 
identical adjustments.
    \3\ 12 CFR 509.103; 65 FR 61260 (Oct. 17, 2000).
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    While the CMP statutes of many agencies provide for minimum and 
maximum penalty amounts, all of OTS's CMP statutes provide only for a 
daily maximum amount per violation. Today's rule therefore refers only 
to maximum CMPs. Today's increases in maximum CMPs may not necessarily 
affect the amount of any CMP that OTS may seek for a particular 
violation. OTS calculates each CMP on a case-by-case basis based upon a 
variety of factors (including the gravity of the violation, whether the 
violation was willful or recurring, and any harm to the depository 
institution). As a result, the maximums merely serve as caps.
    Under the statute, the agency determines the inflation adjustment 
by increasing the maximum CMP by a ``cost-of-living'' adjustment. The 
``cost-of-living'' adjustment is the percentage 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 the CMP was last set or adjusted. Under 
Section 3 of the statute, the CPI is the Consumer Price Index for all 
urban consumers (CPI-U) published by the Department of Labor.
    The statute contains specific rules for rounding any increase.\4\ 
Agencies do not have discretion in choosing whether to adjust a maximum 
CMP, how much to adjust a maximum CMP, or the methods used to determine 
the adjustment.
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    \4\ The rounding rules require that an increase be rounded to 
the nearest multiple of: $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. See 28 U.S.C. 2461 note, sec. 5.
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II. Summary of Calculation

    To explain the inflation adjustment calculation, we will use the 
following example. Under 12 U.S.C. 1818(i), as adjusted in 2000 under 
12 CFR 509.103, OTS may impose a daily maximum third-tier CMP not to 
exceed $1,175,000 for violations of certain banking laws.
    First, we determine the appropriate CPI-Us. The statute requires 
OTS to use the CPI-U for June of the calendar year preceding the year 
of adjustment. Here, because we are adjusting CMPs in 2004, we use the 
CPI-U for June 2003, which was 183.7. We must also determine the CPI-U 
for June of the year the CMP was last set by law or adjusted for 
inflation. Because OTS last adjusted the CMPs under 12 U.S.C. 1818 in 
2000, we use the CPI-U for June 2000, which was 172.4.
    Second, we calculate the cost of living adjustment or inflation 
factor. To do this, we divide the CPI-U for June 2003 (183.7) by the 
CPI-U for June 2000 (172.4). Our result is 1.065 (i.e., a 6.6% 
increase).
    Third, we calculate the raw inflation adjustment. To do this, we 
multiply the maximum penalty amounts by the inflation factor. In our 
example, $1,175,000 multiplied by the inflation factor of 1.065 equals 
$1,251,375.
    Fourth, we round the raw inflation amounts according to the 
rounding rules in sec. 5(a) of the FCPIAA. Since we round only the 
increased amount, we calculate the increased amount by subtracting the 
current maximum penalty amounts from the raw maximum inflation 
adjustments. Accordingly, the increased amount for the maximum penalty 
in our example is $76,375 (i.e., $1,251,375 less $1,175,000). Under the 
rounding rules, if the penalty is greater than $200,000, we round the 
increase to the nearest multiple of $25,000. Therefore, the maximum 
penalty increase for our example is $75,000.
    Fifth, we add the rounded increase to the maximum penalty amount 
last set or adjusted. In our example, $1,175,000 plus $75,000 yields a 
maximum inflation adjusted penalty amount of $1,250,000. \5\
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    \5\ Nine CMPs are subject to a slightly different treatment 
because the statutorily mandated computation and the rounding rules 
did not result in any adjustment in 2000. Eight of those penalties 
were last adjusted in 1996. For those eight penalties (12 U.S.C. 
1464(v)(5), 12 U.S.C. 1467(d), 12 U.S.C. 1467a(r)(2), 12 U.S.C. 
1817(j)(16)(A) and (B), 12 U.S.C. 1818(i)(2)(A) and (B), and 12 
U.S.C. 3349(b) (first and second tier)), we compared the CPI-U for 
June 1996 (156.7) to the CPI-U for June 2003 (183.7), resulting in 
an inflation increase of 17.2%.
    Moreover, because of application of the rounding rules, the $350 
per violation penalty for failure to require flood insurance or 
notify the borrower of lack of coverage found in 42 U.S.C. 4012a(f) 
has never been adjusted for inflation. For that penalty, we compared 
the CPI-U for June of the year of enactment, 1994 (see Riegle 
Community Development and Regulatory Improvement Act of 1994, Pub. 
L. 103-325, Title V, section 525, 108 Stat. 2260) (148.0) with the 
CPI-U for June 2003 (183.7). This resulted in an inflation increase 
of 24.1%. Because this is the first time these CMPs have been 
adjusted pursuant to the statute, the adjustment cannot exceed 10%. 
The adjustment to the per violation penalty in 42 U.S.C. 4012a(f) 
therefore is capped at $35; the resulting penalty is $385.
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III. Need for an Immediately Effective Final Rule

    To issue a final rule without public notice and comment, an agency 
must find good cause that notice and comment are impracticable, 
unnecessary, or contrary to the public interest.\6\ Similarly, to issue 
a rule that is immediately effective, the agency must find good cause 
for dispensing with the 30-day delay required by the Administrative 
Procedure Act.\7\ Moreover, sec. 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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    \6\ 5 U.S.C. 553(b).
    \7\ Id.
    \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 in the statute; 
and (2) within four years of the last inflation adjustment, or by 
October 31, 2004. Agencies have no discretion as to the amount or 
timing of the adjustment. The regulation is ministerial, technical, and 
noncontroversial. OTS is unable to vary the amounts of the adjustments 
to reflect any views or suggestions provided by commenters. 
Accordingly, OTS believes that notice and comment are unnecessary. For 
these same reasons, OTS believes that there is good cause to make this 
rule effective immediately upon publication.

IV. Regulatory Flexibility Act

    An initial regulatory flexibility analysis under the Regulatory 
Flexibility Act (RFA) is required only when an agency must publish a 
general notice of proposed rulemaking.\9\ As already noted, OTS has 
determined that publication of a notice of proposed rulemaking is not 
necessary for this final rule. Accordingly, the RFA does not require an 
initial regulatory flexibility analysis. Nevertheless, OTS has 
considered the likely impact of the rule on small entities and believes 
that the rule will not have a significant impact on a substantial 
number of small entities.
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    \9\ 5 U.S.C. 603.
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V. Executive Order 12866

    OTS has determined that this final rule does not constitute a 
``significant

[[Page 64251]]

regulatory action'' for purposes of Executive Order 12866.

VI. Unfunded Mandates Act of 1995

    OTS had determined that the final 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 sec. 202 of the Unfunded Mandates Act.

List of Subjects in 12 CFR Part 509

    Administrative practice and procedure, Penalties.


0
Accordingly, for the reasons outlined in the preamble, OTS amends part 
509 of chapter V, title 12, Code of Federal Regulations, as set forth 
below.

PART 509--RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY 
PROCEEDINGS

0
1. The authority citation for part 509 continues to read as follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 
1468, 1817(j), 1818, 3349, 4717; 15 U.S.C. 78(l), 78o-5, 78u-2; 28 
U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a.

0
2. Revise Sec.  509.103(c) to read as follows:


Sec.  509.103  Civil money penalties.

* * * * *
    (c) Inflation adjustment. Under the Federal Civil Penalties 
Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), OTS must adjust 
for inflation the civil monetary penalties in statutes that it 
administers. The following chart displays the adjusted civil money 
penalties. The amounts in this chart apply to violations that occur 
after November 4, 2004:

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                  U.S. code citation                            CMP description                                 New maximum amount
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12 U.S.C. 1464(v)(4).................................  Reports of Condition--1st Tier...  $2,200.
12 U.S.C. 1464(v)(5).................................  Reports of Condition--2nd Tier...  $27,500.
12 U.S.C. 1464(v)(6).................................  Reports of Condition--3rd Tier...  $1,250,000.
12 U.S.C. 1467(d)....................................  Refusal to Cooperate in Exam.....  $6,500.
12 U.S.C. 1467a(i)(2)................................  Holding Company Act Violation....  $27,500.
12 U.S.C. 1467a(i)(3)................................  Holding Company Act Violation....  $27,500.
12 U.S.C. 1467a(r)(1)................................  Late/Inaccurate Reports--1st Tier  $2,200.
12 U.S.C. 1467a(r)(2)................................  Late/Inaccurate Reports--2nd Tier  $27,500.
12 U.S.C. 1467a(r)(3)................................  Late/Inaccurate Reports--3rd Tier  $1,250,000.
12 U.S.C. 1817(j)(16)(A).............................  Change in Control--1st Tier......  $6,500.
12 U.S.C. 1817(j)(16)(B).............................  Change in Control--2nd Tier......  $32,500.
12 U.S.C. 1817(j)(16)(C).............................  Change in Control--3rd Tier......  $1,250,000.
12 U.S.C. 1818(i)(2)(A)..............................  Violation of Law or Unsafe or      $6,500.
                                                        Unsound Practice--1st Tier.
12 U.S.C. 1818(i)(2)(B)..............................  Violation of Law or Unsafe or      $32,500.
                                                        Unsound Practice--2nd Tier.
12 U.S.C. 1818(i)(2)(C)..............................  Violation of Law or Unsafe or      $1,250,000.
                                                        Unsound Practice--3rd Tier.
12 U.S.C. 1884.......................................  Violation of Security Rules......  $110.
12 U.S.C. 3349(b)....................................  Appraisals Violation--1st Tier...  $6,500.
12 U.S.C. 3349(b)....................................  Appraisals Violation--2nd Tier...  $32,500.
12 U.S.C. 3349(b)....................................  Appraisals Violation--3rd Tier...  $1,250,000.
42 U.S.C. 4012a(f)...................................  Flood Insurance..................  $385 (per 4012a(f) violation).
                                                                                          $125,000 (per calendar year).
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    Dated: October 29, 2004.

    By the Office of Thrift Supervision.
James E. Gilleran,
Director.
[FR Doc. 04-24674 Filed 11-3-04; 8:45 am]
BILLING CODE 6720-01-P