[Federal Register Volume 70, Number 49 (Tuesday, March 15, 2005)]
[Rules and Regulations]
[Pages 12583-12585]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5001]


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FARM CREDIT ADMINISTRATION

12 CFR Part 622

RIN 3052-AC28


Rules of Practice and Procedure; Adjusting Civil Money Penalties 
for Inflation

AGENCY: Farm Credit Administration.

ACTION: Final rule.

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SUMMARY: This regulation implements cost-of-living adjustments to civil 
money penalties (CMPs) that the Farm Credit Administration (FCA) may 
impose under the Farm Credit Act of 1971, as amended (Farm Credit Act), 
and under the National Flood Insurance Reform Act of 1994 (Reform Act). 
The Federal Civil Penalties Inflation Adjustment Act of 1990, as 
amended by the Debt Collection Improvement Act of 1996, requires all 
Federal agencies with the authority to impose CMPs to evaluate those 
CMPs periodically to ensure that they continue to maintain their 
deterrent value.

EFFECTIVE DATE: The regulation will become effective on March 16, 2005.

FOR FURTHER INFORMATION CONTACT:

Mark L. Johansen, Senior Policy Analyst, Office of Policy and 
Analysis, Farm Credit Administration, McLean, VA 22102-5090, (703) 
883-4498, TTY (703) 883-4434; or
Wendy R. Laguarda, Senior Counsel, or Rebecca S. Orlich, Senior 
Attorney, Office of General Counsel, Farm Credit Administration, 
McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-4020.


SUPPLEMENTARY INFORMATION:

I. Background

A. Federal Civil Penalties Inflation Adjustment Act of 1990, as Amended

    The Federal Civil Penalties Inflation Adjustment Act of 1990 (FCPIA 
Act),\1\ as amended by the Debt Collection Improvement Act of 1996 
(DCIA),\2\ requires every Federal agency with authority to issue CMPs 
\3\ to enact regulations that adjust its CMPs pursuant to the inflation 
adjustment formula in section 5(b) of the FCPIA Act. Each Federal 
agency was required to issue these regulations by October 23, 1996, and 
adjust when necessary at least once every 4 years thereafter. Section 6 
of the amended FCPIA Act specifies that inflation-adjusted CMPs will 
apply only 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'' as 
``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, the increase for each CMP that is adjusted for inflation 
must be rounded using a method prescribed by section 5(a) of the FCPIA 
Act. We made our last adjustments to CMPs issued under the Farm Credit 
Act in October 1996.\5\
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    \1\ Pub. L. 101-410, 104 Stat. 890 (October 5, 1990), codified 
at 28 U.S.C. 2461 note.
    \2\ Pub. L. 104-134, title III, section 31001(s), 110 Stat. 
1321-373 (April 26, 1996), 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 Web site: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.
    \5\ We made CMP adjustments in 2000 and rescinded them in 2002 
pursuant to instructions from the General Accounting Office (now the 
Government Accountability Office). See 65 FR 46087 (July 27, 2000) 
and 67 FR 68931 (Nov. 14, 2002).
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B. CMPs Issued Under the Farm Credit Act

    The adjustment requirement affects two provisions of section 
5.32(a) of the Farm Credit Act, which authorizes the FCA to impose CMPs 
on Farm Credit System (FCS or System) institutions and their related 
parties. Section 5.32(a) provides that any FCS institution or any 
officer, director, employee, agent, or other person participating in 
the conduct of the affairs of an FCS institution who violates the terms 
of a final order issued under section 5.25 or 5.26 of the Farm Credit 
Act must pay up to $1,000 per day for each day during which such 
violation continues. Orders issued under section 5.25 or 5.26 of the 
Farm Credit Act include temporary and permanent cease-and-desist 
orders. In addition, section 5.32(h) provides for the FCA to treat a 
directive issued under sections 4.3(b)(2), 4.3A(e), or 4.14A(i) of the 
Farm Credit Act as a final order issued under section 5.25 for purposes 
of assessing a CMP. Section 5.32(a) also states that ``[a]ny such 
institution or person who violates any provision of the [Farm Credit] 
Act or any regulation issued under this Act shall forfeit and pay a 
civil penalty of not more that $500 per day for each day during which 
such violation continues.'' The maximum

[[Page 12584]]

amounts of these CMPs last increased in 1996, and the increases are set 
forth in existing Sec.  622.61.
1. Mathematical Calculation
    The adjustment calculation will be based on the percentage by which 
the CPI for June 2004 exceeds the CPI for June 1996. According to the 
Bureau of Labor Statistics, the CPI for June 1996 was 156.7, and the 
CPI for June 2004 was 189.7, resulting in a percentage change of 21.06 
percent.
2. Penalty Amounts Remain the Same in Sec.  622.61(a)(1)
    The maximum CMP in Sec.  622.61(a) for a violation of a final order 
issued under section 5.25 or 5.26 of the Farm Credit Act is currently 
$1,100. Multiplying $1,100 by 21.06 percent results in an increase of 
$231.65. When that number is rounded as required by the FCPIA Act,\6\ 
the inflation-adjusted maximum remains $1,100. Existing Sec.  622.61(a) 
will be revised and redesignated as Sec.  622.61(a)(1).
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    \6\ ``Any increase determined under this paragraph 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.'' 
Therefore, $231.65 is rounded to the nearest multiple of $1,000, 
which is $0.
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3. New Penalty Amounts in Sec.  622.61(a)(2)
    The maximum CMP in existing Sec.  622.61(b) for a violation of the 
Act or regulations is $550. Multiplying $550 by 21.06 percent results 
in an increase of $115.83. When that number is rounded to $100 as 
required by the FCPIA Act,\7\ the inflation-adjusted maximum increases 
to $650. Existing Sec.  622.61(b) will be revised and redesignated as 
Sec.  622.61(a)(2).
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    \7\ ``Any increase determined under this paragraph shall be 
rounded to the nearest * * * (3) multiple of $100 in the case of 
penalties greater than $100 but less than or equal to $1,000.'' 
Therefore, $115.83 is rounded to the nearest multiple of $100, or to 
$100.
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C. CMPs Issued Under the Reform Act

    The Flood Disaster Protection Act of 1973,\8\ as amended by the 
Reform Act,\9\ requires that FCA assess a CMP for a pattern or practice 
of committing certain specific actions in violation of the National 
Flood Insurance Program. Under the Reform Act, which became law in 
1994, these CMPs were not to exceed $350 for each violation, and the 
total amount of penalties assessed for certain violations of the 
program against any single regulated entity during any calendar year 
was not to exceed $100,000.\10\
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    \8\ 42 U.S.C. 4012a.
    \9\ 103 Pub. L. 325, title V, 108 Stat. 2160, 2255-87 (September 
23, 1994).
    \10\ 42 U.S.C. 4012a(f).
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1. Mathematical Calculation
    Because this is our first adjustment of the amounts for CMPs issued 
under the Reform Act since the CMPs were set in 1994, the adjustment 
calculation will be based on the percentage by which the CPI for June 
2004 exceeds the CPI for June 1994. According to the Bureau of Labor 
Statistics, the CPI for June 1994 was 148.0, and the CPI for June 2004 
was 189.7, resulting in a percentage change of 28.18. However, the 
amended FCPIA Act limits the first adjustment of a CMP to an amount not 
in excess of 10 percent of the original penalty.\11\ Therefore, any 
required adjustments are limited to 10 percent.
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    \11\ Section 6 of the FCPIA Act, as amended by the DCIA, 
provides: ``The first adjustment of a civil monetary penalty made 
pursuant to the amendment made by paragraph (1) [amending the FCPIA 
Act] may not exceed 10 percent of such penalty.''
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2. New Penalty Amounts in Sec.  622.61(b)
    Multiplying $350 by 28.18 percent yields a $98.63 increase, which 
would be rounded to a $100 increase under the usual formula. But the 
10-percent limit means that the CMP may increase by only $35. 
Therefore, the new CMP maximum for each violation will be $385. 
Similarly, the $100,000 total cap would have increased by a rounded 
$30,000 under the usual formula, but the 10-percent limit results in an 
increase of only $10,000, bringing the new cap to $110,000 in total 
penalties that may be assessed under the Reform Act against any single 
regulated entity during any calendar year.

II. Other Changes to Part 622, Subpart B

    We have revised various sections in part 622, subpart B on ``Rules 
and Procedures for Assessment and Collection of Civil Money Penalties'' 
to clarify that the current CMP procedures apply to CMPs assessed under 
the Reform Act. We have provided that FCA will forward payments for 
CMPs assessed under the Reform Act to the National Flood Mitigation 
Fund. We have also made nonsubstantive changes to conform the language 
of subpart B to plain English principles.
    In addition, we have deleted existing Sec. Sec.  622.53 and 622.54 
as unnecessary because they simply repeat provisions of section 5.32(b) 
of the Farm Credit Act. These deletions will have no substantive effect 
on FCA procedures for assessing and collecting CMPs.
    As described above, these inflation-adjusted CMPs will apply only 
to violations that occur after the effective date of this rule.

III. Notice and Comment Not Required by Administrative Procedure Act

    The FCPIA Act gives Federal agencies no discretion in the 
adjustment of CMPs for the rate of inflation. Further, these revisions 
are ministerial, technical, and noncontroversial. For these reasons, 
the FCA finds good cause to determine that public notice and an 
opportunity to comment are impracticable, unnecessary, and contrary to 
the public interest pursuant to the Administrative Procedure Act, 5 
U.S.C. 553(b)(B), and adopts this rule in final form. For all of the 
foregoing reasons, the FCA also finds good cause to determine that this 
regulation should become effective immediately, pursuant to the 
Administrative Procedure Act, 5 U.S.C. 553(d).

IV. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), the FCA hereby certifies that the final rule will 
not have a significant economic impact on a substantial number of small 
entities. Each of the banks in the System, considered together with its 
affiliated associations, has assets and annual income in excess of the 
amounts that would qualify them as small entities. Therefore, System 
institutions are not ``small entities'' as defined in the Regulatory 
Flexibility Act.

List of Subjects in 12 CFR Part 622

    Administrative practice and procedure, Crime, Investigations, 
Penalties.

0
For the reasons stated in the preamble, part 622 of chapter VI, title 
12 of the Code of Federal Regulations is amended to read as follows:

PART 622--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation for part 622 is revised to read as follows:

    Authority: Secs. 5.9, 5.10, 5.17, 5.25-5.37 of the Farm Credit 
Act (12 U.S.C. 2243, 2244, 2252, 2261-2273); 28 U.S.C. 2461 note; 
and 42 U.S.C. 4012a(f).

Subpart B--Rules and Procedures for Assessment and Collection of 
Civil Money Penalties

0
2. In Sec.  622.52, revise paragraphs (a) and (b) and add paragraph (c) 
to read as follows:


Sec.  622.52  Purpose and scope.

* * * * *

[[Page 12585]]

    (a) For violations of the terms of a final cease and desist order 
issued under section 5.25 or 5.26 of the Act;
    (b) For violations of any provision of the Act or any regulation 
issued under the Act; or
    (c) For violations of the National Flood Insurance Reform Act 
(Reform Act) as set forth in 42 U.S.C. 4012a(f) or any regulation 
issued under the Reform Act.


Sec. Sec.  622.53 and 622.54  [Removed and Reserved]

0
3. Remove and reserve Sec. Sec.  622.53 and 622.54.

0
4. Revise Sec.  622.55(a) to read as follows:


Sec.  622.55  Notice of assessment of civil money penalty.

    (a) Notice of assessment. The notice of assessment for a civil 
money penalty will state:
    (1) The legal authority for the assessment;
    (2) The amount of the civil money penalty being assessed;
    (3) The date by which the civil money penalty must be paid;
    (4) The matter of fact or law constituting the grounds for 
assessment of the civil money penalty;
    (5) The right of the institution or person being assessed to a 
formal hearing to challenge the assessment;
    (6) That failure to request a hearing constitutes a waiver of the 
opportunity for a hearing and the notice of assessment will constitute 
a final and unappealable order; and
    (7) The time limit to request such a formal hearing.
* * * * *


Sec. Sec.  622.57(a), 622.58, and 622.59(b)  [Amended]

0
5. Amend Sec. Sec.  622.57(a), 622.58, and 622.59(b) by removing the 
word ``shall'' and adding in its place, the word ``will'' each place it 
appears.

0
6. Revise Sec. Sec.  622.60 and 622.61 to read as follows:


Sec.  622.60  Payment of civil money penalty.

    (a) Payment date. Generally, the date designated in the notice of 
assessment for payment of the civil money penalty will be 60 days from 
the issuance of the notice. If, however, the Board finds, in a specific 
case, that the purposes of the relevant statutes would be better served 
if the 60-day period were changed, the Board may shorten or lengthen 
the period or make the civil money penalty payable immediately upon 
receipt of the notice of assessment. If a timely request for a formal 
hearing to challenge an assessment of a civil money penalty is filed, 
payment of the penalty will not be required unless and until the Board 
issues a final order of assessment following the hearing. If an 
assessment order is issued, it will specify the date by which the civil 
money penalty is to be paid or collected.
    (b) Method of payment. Checks in payment of civil money penalties 
must be made payable to the ``Farm Credit Administration.'' Upon 
collection, the FCA will forward payment for penalties described in 
Sec.  622.52(a) and (b) to the United States Department of Treasury. 
The FCA will forward payment for penalties described in Sec.  622.52(c) 
to the National Flood Mitigation Fund as required by 42 U.S.C. 
4012a(f)(8).


Sec.  622.61  Adjustment of civil money penalties by the rate of 
inflation under the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended.

    (a) The maximum amount of each civil money penalty within FCA's 
jurisdiction is adjusted in accordance with the Federal Civil Penalties 
Inflation Adjustment Act of 1990, as amended (28 U.S.C. 2461 note), as 
follows:
    (1) Amount of civil money penalty imposed under section 5.32 of the 
Act for violation of a final order issued under section 5.25 or 5.26 of 
the Act: The maximum daily amount is $1,100.
    (2) Amount of civil money penalty for violation of the Act or 
regulations: The maximum daily amount is $550 for each violation that 
occurs before March 16, 2005, and $650 for each violation that occurs 
on or after such date.
    (b) The maximum civil money penalty amount assessed under 42 U.S.C. 
4012a(f) is $350 for each violation that occurs before March 16, 2005, 
with total penalties under such statute not to exceed $100,000 for any 
single institution during any calendar year. For violations that occur 
on or after March 16, 2005, the maximum civil money penalty is $385 for 
each violation, with total penalties under such statute not to exceed 
$110,000 for any single institution during any calendar year.

    Dated: March 9, 2005.
Jeanette C. Brinkley,
Secretary, Farm Credit Administration Board.
[FR Doc. 05-5001 Filed 3-14-05; 8:45 am]
BILLING CODE 6705-01-P