[Federal Register Volume 71, Number 217 (Thursday, November 9, 2006)]
[Rules and Regulations]
[Pages 65711-65713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-18804]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 308

RIN 3064-AD06


Penalty for Failure To Timely Pay Assessments

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') is 
adopting its final rule amending its regulations concerning penalties 
for failure to timely pay assessments. The final rule adopts changes 
made by the Federal Deposit Insurance Reform Act of 2005 (``Reform 
Act''), which amended provisions of the Federal Deposit Insurance Act 
(``FDI Act''). The statute generally provides that an insured 
depository institution which fails or refuses to pay any assessment 
shall be subject to a penalty of not more than 1 percent of the 
assessment due for each day the violation continues. The statute 
includes an exception if the failure to pay results from a dispute with 
the FDIC over the amount of the assessment and the institution deposits 
satisfactory security with the FDIC. The statute includes a provision 
covering assessment amounts of less than $10,000, which authorizes 
penalties up to $100 per day. Finally, the statute accords the FDIC 
discretion to

[[Page 65712]]

compromise, modify or remit any penalty imposed on a finding that good 
cause prevented timely payment. The final rule amends the FDIC's former 
rule concerning late assessment penalties, in conformity with these 
provisions of the Reform Act.

DATES: This final rule will become effective on January 1, 2007.

FOR FURTHER INFORMATION CONTACT: Donna M. Saulnier, Senior Assessment 
Policy Specialist, DOF, (703) 562-6167; or William V. Farrell, Manager, 
Assessments Section, DOF, (703) 562-6168; or Christopher Bellotto, 
Counsel, Legal Division, (202) 898-3801; or Stephen T. Weisweaver, 
Attorney, Legal Division, (202) 898-6976.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 2104 (c) of the Reform Act amends section 18(h) of the FDI 
Act, 12 U.S.C. 1828(h) (2000).\1\ As described in its proposal, 71 FR 
40938 (July 19, 2006), the FDIC added the present rule concerning late 
assessment penalties when it amended 12 CFR 308.132 pursuant to the 
Debt Collection Improvement Act of 1996 (``DCIA'').\2\ See 61 FR 57987 
(Nov. 12, 1996).\3\ Accordingly, the FDIC increased the late assessment 
penalty amount from a maximum of $100, as originally established in 
section 18(h) of the FDI Act, to a maximum of $110 for each day the 
violation continues. Id.\4\ This final rule amends the FDIC's late 
assessment penalty rule, 12 CFR 308.132(c)(3)(v), to reflect the 
changes made by section 2104(c) of the Reform Act. Section 2104(c) of 
the Reform Act changes the late assessment penalty from not more than 
$100 per day to not more than 1 percent of any assessment owed, per day 
that the violation continues, if the amount owed is $10,000 or more at 
the time the institution fails or refuses to pay the assessment. If the 
institution owes less than $10,000 at the time the institution fails or 
refuses to pay the assessment, then the amendment authorizes penalties 
up to $100 for each day that the violation continues. The Reform Act 
also provides for an exception if the failure to pay results from a 
dispute with the FDIC over the amount of the assessment and the 
institution deposits satisfactory security with the FDIC.
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    \1\ See Federal Deposit Insurance Reform Act of 2005, section 
2104(c), Public Law 109-171, 120 Stat. 9, 13.
    \2\ Public Law 104-134, 110 Stat. 1321-358, 373, amending 
section 4 of the Federal Civil Penalties Inflation Adjustment Act of 
1990 (``Inflation Adjustment Act''), 28 U.S.C. 2461 (2000).
    \3\ The DCIA required the head of each Federal Agency to enact 
rules adjusting each Civil Money Penalty (``CMP''), under the 
agency's jurisdiction, by a rate of inflation prescribed in the 
DCIA.
    \4\ Section 2104(c) of the Reform Act effectively returns the 
late assessment penalty on assessments of less than $10,000 to the 
original amount of up to $100. The Inflation Adjustment Act, supra 
note 2, may require a readjustment of this amount in 2008.
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II. Comments Received

    On July 19, 2006, the FDIC published in the Federal Register a 
notice of proposed rulemaking and request for comment, which reflected 
the proposed amendments to the late assessment penalties rule, 12 CFR 
308.132(c)(3)(v). See 71 FR 40938. The FDIC received one substantive 
comment, which was from a trade association. It acknowledged the former 
late assessment penalty provisions were outdated and supported the 
FDIC's proposal. Therefore, the FDIC is adopting the proposed 
amendments to 12 CFR 308.132(c)(3)(v) with no changes in its final 
rule.
    The trade association specifically supported the statutory 
provision that allows the FDIC to compromise, modify, or remit any 
penalty upon a determination that good cause prevented the timely 
payment of an assessment. It noted that natural disasters, such as 
Hurricane Katrina that struck the Gulf Coast in August of 2005, can 
affect numerous institutions' ability to pay assessments in a timely 
manner. The FDIC recognizes that situations may arise where a 
depository institution's failure to pay may be due to matters outside 
the control of the institution therefore establishing good cause for a 
failure to pay in a timely manner. After according an affected 
institution an opportunity to request a good cause determination, and 
when applicable because the FDIC and the institution are unable to 
resolve the matter, the FDIC will impose the penalty in the same manner 
as civil money penalties issued pursuant to section 8(i) of the FDI 
Act, 12 U.S.C. 1818(i) (2000).

III. Description of the Final Rule

    Section 132(c)(3)(v) of part 308 is being amended by conforming it 
to the changes made by section 2104(c) of the Reform Act. The late 
assessment penalty is changed from a maximum of $110 per day (as 
previously adjusted under the Inflation Adjustment Act, supra note 2) 
to not more than 1 percent of the assessment owed, if the institution 
owes an assessment of $10,000 or more at the time the institution 
refuses or fails to pay any assessment.\5\ Additionally, if the amount 
the institution fails or refuses to pay is less than $10,000, the rule 
authorizes penalties of up to $100 for each day that the violation 
continues. Finally, section 132(c)(3)(v) incorporates the statutory 
exception when the failure to pay results from a dispute with the FDIC 
over the amount of the assessment and the institution deposits 
satisfactory security with the FDIC. Section 132(c)(3)(v) also 
recognizes the FDIC's discretion to compromise, modify, or remit any 
penalty that the FDIC may assess upon a finding that good cause 
prevented the timely payment of an assessment.
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    \5\ The FDIC can also initiate a termination of insurance 
proceeding, pursuant to section 8(a) of the FDI ACT, 12 U.S.C. 
1818(a) (2000), when an institution withholds portions of its 
insurance assessments. Doolin Security Savings Bank v. FDIC, 53 F.3d 
1395, 1408 (4th Cir. 1995).
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IV. Regulatory Analysis and Procedure

A. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The proposed rule requested comments on how the rule 
might be changed to reflect the requirements of GLBA. No GLBA comments 
were received.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires that each Federal 
agency either certify that a proposed rule would not, if adopted in 
final form, have a significant economic impact on a substantial number 
of small entities or prepare an initial regulatory flexibility analysis 
of the proposal and publish the analysis for comment. See 5 U.S.C. 603, 
604, 605 (2000). The proposed rule stated that the late assessment 
penalty rule adopts statutory language enacted by Congress in the 
Reform Act. Therefore the rule would not create any additional economic 
impact because the only economic impact would result from the language 
of the statute. No comments were received concerning the proposal's RFA 
certification.
    Additional factual bases exist for certifying that this final rule 
will not have a significant economic impact on a substantial number of 
small depository institutions, which are defined as having $165 million 
or less in assets. This final rule will not have an economic impact on 
a substantial number of small depository institutions because the 
assessments for a number of these institutions will remain below the 
$10,000 threshold limiting penalties to not more than $100 per day. 
Thus, the statutory changes adopted by this rule

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will not change the penalty amount that can be imposed on these 
institutions. In cases where a small depository institution's 
assessment exceeds $10,000, the economic impact of this final rule is 
limited to 1% of the assessment amount for each day of delinquency. For 
example, a bank with $165 million in assets subject to a 5 basis point 
assessment would incur a daily penalty of less than $200 for every day 
that its quarterly assessment payment was late. Additionally, over the 
last two years, less than 1% of the approximately 5,521 small 
depository institutions invoiced for deposit insurance premiums and 
FICO assessments each year failed to timely pay their assessment. 
Therefore, this final rule will not have a significant economic impact 
on a substantial number of small depository institutions.

C. 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.

D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Rules and Policies on Families

    The FDIC has determined that the final rule does not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

E. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the final 
rule is not a ``major rule'' within the meaning of the relevant 
sections of the Small Business Regulatory Enforcement and Fairness Act 
of 1996 (SBREFA) (5 U.S.C. 801 et seq.). As required by SBREFA, the 
FDIC will file the appropriate reports with Congress and the General 
Accounting Office so that the final rule may be reviewed.

List of Subjects in 12 CFR Part 308

    Administrative practice and procedure, Bank deposit insurance, 
Banks, banking, Claims, Crime, Equal access to justice, Fraud, 
Investigations, Lawyers, Penalties.


0
For the reasons set forth in the preamble, the FDIC hereby amends 
subpart H of 12 CFR 308 as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

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

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4), 
1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 
4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 
78u-2, 78u-3 and 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31 
U.S.C. 330, 5321; 42 U.S.C. 4012a; Sec. 3100(s), Pub. L. 104-134, 
110 Stat. 1321-358.


0
2. Revise paragraph (c)(3)(v) of section 308.132 as follows:


Sec.  308.132  Assessment of penalties.

* * * * *
    (c) * * *
    (3) * * *
    (v) Civil money penalties assessed pursuant to section 18(h) of the 
FDI Act for failure to timely pay assessment.
    (A) In General.--Subject to paragraph (c)(3)(v)(C) of this section, 
any insured depository institution which fails or refuses to pay any 
assessment shall be subject to a penalty in an amount of not more than 
1 percent of the amount of the assessment due for each day that such 
violation continues.
    (B) Exception In Case Of Dispute.--Paragraph (A) of this section 
shall not apply if--
    (1) The failure to pay an assessment is due to a dispute between 
the insured depository institution and the Corporation over the amount 
of such assessment; and
    (2) The insured depository institution deposits security 
satisfactory to the Corporation for payment upon final determination of 
the issue.
    (C) Special Rule For Small Assessment Amounts.--If the amount of 
the assessment which an insured depository institution fails or refuses 
to pay is less than $10,000 at the time of such failure or refusal, the 
amount of any penalty to which such institution is subject under 
paragraph (A) of this section shall not exceed $100 for each day that 
such violation continues.
    (D) Authority To Modify Or Remit Penalty.--The Corporation, in the 
sole discretion of the Corporation, may compromise, modify or remit any 
penalty which the Corporation may assess or has already assessed under 
paragraph (c)(3)(v)(A) of this section upon a finding that good cause 
prevented the timely payment of an assessment.
* * * * *

    Dated at Washington, DC, this 2nd day of November 2006.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E6-18804 Filed 11-8-06; 8:45 am]
BILLING CODE 6714-01-P