[Federal Register Volume 72, Number 163 (Thursday, August 23, 2007)]
[Rules and Regulations]
[Pages 48221-48225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-16711]



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  Federal Register / Vol. 72, No. 163 / Thursday, August 23, 2007 / 
Rules and Regulations  

[[Page 48221]]



DEPARTMENT OF THE TREASURY

5 CFR Part 3101

RINs 1550-AC03, 3209-AA15


Supplemental Standards of Ethical Conduct for Employees of the 
Department of the Treasury

AGENCY: Department of the Treasury.

ACTION: Final rule.

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SUMMARY: The Department of the Treasury (Department), with the 
concurrence of the Office of Government Ethics (OGE), is amending the 
Supplemental Standards of Ethical Conduct for Employees of the 
Department of the Treasury (Treasury Supplemental Ethics Regulations). 
The final rule revises the circumstances under which covered Office of 
Thrift Supervision (OTS) employees may obtain credit cards and loans 
secured by a principal residence from OTS-regulated savings 
associations or their subsidiaries. This amendment also modifies rules 
on disqualifications.

DATES: Effective Date: August 23, 2007.

FOR FURTHER INFORMATION CONTACT: Ira S. Kaye, Senior Ethics Counsel, 
Office of the Assistant General Counsel (General Law and Ethics), 
Department of the Treasury, Room 2023, Washington, DC 20220, (202) 622-
1963, or Elizabeth Moore, Ethics Counsel, OTS Litigation Division, 1700 
G Street, NW., Washington, DC 20552, (202) 906-7039.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office of Government Ethics (OGE) has issued rules setting out 
the Standards of Ethical Conduct for Employees of the Executive Branch 
at 5 CFR part 2635 (Standards). The Treasury Supplemental Ethics 
Regulations at 5 CFR part 3101 supplement these Standards, and were 
issued to minimize potential conflicts of interest by Department of 
Treasury employees. The Treasury Supplemental Ethics Regulations set 
out additional rules for Office of Thrift Supervision (OTS) employees 
at 5 CFR 3101.109. These rules were designed to prevent employees of 
OTS from taking actions that violate (or appear to violate) conflict of 
interest laws or certain criminal statutes, or that create (or may 
create) an appearance of a loss of impartiality.
    The Treasury Supplemental Ethics Regulations generally prohibit 
covered OTS employees from seeking or obtaining loans or other 
extensions of credit from any OTS-regulated savings association or from 
an officer, director, employee or subsidiary of such a savings 
association. 5 CFR 3101.109(c)(1).\1\ This prohibition extends to the 
spouses and minor children of covered OTS employees, unless the loan or 
extension of credit meets specified standards.\2\
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    \1\ Covered OTS employees include OTS examiners, employees in 
positions at OTS grade 17 and above, and other designated OTS 
employees. 5 CFR 3101.109(a).
    \2\ A spouse or a minor child may obtain a loan or extension of 
credit if: (1) The loan is supported only by the income or 
independent means of the spouse or child; (2) the loan is obtained 
on terms and conditions no more favorable than those offered to the 
general public; and (3) the covered OTS employee does not 
participate in the negotiation of the loan, or serve as co-maker, 
endorser, or guarantor. 5 CFR 3101.109(c)(2). This final rule makes 
a clarifying change to the second of these conditions to conform it 
to the statutory conditions in 18 U.S.C. 212(c)(4)(A) and (B), as 
amended.
---------------------------------------------------------------------------

    The current Treasury Supplemental Ethics Regulations prescribe an 
exception to this general prohibition for credit card accounts. Except 
for examiners, a covered OTS employee (or a spouse or minor child of a 
covered OTS employee), may obtain and hold a credit card from an OTS-
regulated savings association (or its subsidiary) if the credit card is 
issued on terms and conditions no more favorable than those offered to 
the general public. 5 CFR 3101.109(c)(3)(i) (2006). An examiner (or a 
spouse or minor child of an examiner) may obtain and hold a credit card 
from an OTS-regulated savings association (or its subsidiary) only if: 
(1) The savings association is not headquartered in the examiner's 
region; (2) the examiner is not assigned to examine the savings 
association; (3) the terms and conditions are no more favorable than 
those offered to the general public; and (4) the examiner submits a 
written disqualification from examining that savings association. 5 CFR 
3101.109(c)(3)(ii) (2006).
    The more rigorous credit card rule for examiners was designed to 
prevent violations of 18 U.S.C. 213, a criminal statute, which 
prohibits an examiner from accepting a loan or gratuity from a 
financial institution that he or she examines. Until December 2003, 18 
U.S.C. 213 (2000) provided:

    Whoever, being an examiner or assistant examiner of * * * 
financial institutions the deposits of which are insured by the 
Federal Deposit Insurance Corporation * * * accepts a loan or 
gratuity from any bank, branch, agency, corporation, association or 
organization examined by him or from any person connected 
[t]herewith, shall be fined under this title or imprisoned not more 
than one year, or both; and may be fined a further sum equal to the 
money so loaned or gratuity given, and shall be disqualified from 
holding office as such examiner.

A related criminal statute, 18 U.S.C. 212, prohibits officers, 
directors, or employees of financial institutions from making or 
granting such loans or gratuities.

    On December 19, 2003, the President signed the Preserving 
Independence of Financial Institution Examinations Act of 2003, Public 
Law 108-198, which amended 18 U.S.C. 212 and 213. The new law preserves 
the general prohibition against an examiner accepting a loan or 
gratuity from a financial institution under examination, but creates 
two exceptions to the criminal bar. Under the new law, it is no longer 
a crime for an examiner to hold an open-end consumer credit card 
account or obtain a loan secured by residential real property that is 
used as the principal residence of the examiner if:

    (A) The applicant satisfies any financial requirements for the 
credit card account or residential real property loan that are 
generally applicable to all applicants for the same type of credit 
card account or residential real property loan;
    (B) the terms and conditions applicable with respect to such 
account or residential real property loan, and any credit extended 
to the examiner under such account or residential real property 
loan, are no more favorable generally to the examiner than the terms 
and conditions that are generally applicable to credit card accounts 
or residential real property loans offered by the same financial 
institution to other borrowers [or] cardholders in comparable 
circumstances

[[Page 48222]]

under open end consumer credit plans or for residential real 
property loans; and
    (C) with respect to residential real property loans, the loan is 
with respect to the primary residence of the applicant.\3\
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    \3\ 18 U.S.C. 212(c)(4), as amended.

Other types of loans, such as overdraft protection not secured by a 
principal residence, vacation home loans, car loans, and personal loans 
still are subject to the prohibitions in 18 U.S.C. 212 and 213. It 
remains a crime for an examiner to examine an institution that has 
extended those types of credit to him or her.
    The Department has reexamined the restrictions on credit cards and 
loans on principal residences for covered OTS employees, and their 
spouses and minor children, in light of these recent statutory changes 
and is making several revisions to the Treasury Supplemental Ethics 
Regulation pursuant to its rulemaking authority under 18 U.S.C. 212(b) 
and 5 CFR Part 2635. In making these revisions, the Department has 
consulted with the other financial institution regulatory agencies. To 
the extent that the revised provisions apply to covered OTS employees, 
their spouses and minor children, the Department has determined, with 
OGE concurrence, that the regulations are needed so that a reasonable 
person would not question the impartiality and objectivity with which 
agency programs are administered. See 5 CFR 2635.403(a). Further, with 
respect to the revised restrictions and prohibitions on the holding of 
financial interests (indebtedness, that is certain loans and extensions 
of credit) by covered OTS employees' spouses and minor children, the 
Department has determined that there is a direct and appropriate nexus 
between such restrictions and prohibitions as applied to the spouses 
and minor children, and the efficiency of covered employees' service.

II. Rule Changes

A. Credit Card Loans

    The Department has reviewed the extent to which credit cards 
present conflicts of interest for OTS examiners and has concluded that, 
in most instances, neither obtaining nor holding a credit card creates 
a conflict of interest or presents the likelihood of a loss of 
impartiality by an OTS examiner. Individuals usually do not negotiate 
the terms and conditions of a credit card account. Rather, relevant 
terms and conditions, including credit limits, fees, and rates, are 
generally set according to various income and creditworthiness 
standards.
    Moreover, the present regulatory restriction may have a detrimental 
impact on OTS's ability to supervise certain operations. OTS supervises 
a small number of thrifts with large credit card portfolios. Due to the 
scope of these institutions' credit card operations, OTS has 
experienced some difficulty in fielding and maintaining appropriate 
examination teams for the institutions. Accordingly, the Department 
believes that the examiner restriction should be revised to ensure that 
OTS Regional and Washington offices have more flexibility to assign 
projects to examiners.\4\
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    \4\ On December 23, 2003, upon the enactment of the revised 
statute, the OTS Director granted a blanket waiver of the credit 
card regulation pursuant to 5 CFR 3101.109(g). Specifically, the OTS 
Director waived 5 CFR 3101.109(c) to permit examiners, their 
spouses, and minor children to obtain credit cards subject to the 
statutory conditions. On March 31, 2006, the Director granted a 
blanket waiver to permit all covered employees, their spouses and 
minor children, to obtain loans from OTS-regulated thrifts if the 
loan is secured by the borrower's principal residence and meets 
certain other conditions. Covered employees are required to report 
any such loans and credit cards on their annual OTS supplemental 
financial disclosure reports and to attest that the card or loan was 
obtained and is being held on non-preferential terms.
---------------------------------------------------------------------------

    The Department is amending the Treasury Supplemental Ethics 
Regulations to permit examiners (and their spouses and minor children) 
to obtain credit cards from OTS-regulated savings associations (or 
their subsidiaries) on the same basis as other covered OTS employees. 
Under the final rule, any covered OTS employee (or spouse or minor 
child of a covered OTS employee) may obtain and hold a credit card 
account established under an open-end consumer credit plan and issued 
by an OTS-regulated savings association (or its subsidiary) subject to 
certain conditions. These conditions were designed to reflect the new 
statutory exemption at 18 U.S.C. 212.
    Specifically, the final rule states at new amended paragraph 
(c)(3)(i) of Sec.  3101.109 that covered OTS employees, their spouses, 
and minor children may obtain and hold a credit card established under 
an open-end consumer credit plan and issued by an OTS-regulated savings 
association or its subsidiary if: (1) The cardholder satisfies all 
financial requirements for the credit card account that are generally 
applicable to all applicants for the same type of credit card account; 
and (2) the terms and conditions applicable with respect to the account 
and any credit extended to the cardholder under the account are no more 
favorable generally to that cardholder than the terms and conditions 
that are generally applicable to credit card accounts offered by the 
same savings association (or the same subsidiary) to other cardholders 
in comparable circumstances under open-end consumer credit plans. These 
requirements are modeled on the conditions in 18 U.S.C. 212, as 
amended, and are substantially identical to the condition applicable to 
credit card accounts permitted under the current rules, which provides 
that credit cards must be ``issued and held on terms and conditions no 
more favorable than those offered [to] the general public.'' See 5 CFR 
3101.109(c)(3)(i) and (c)(3)(ii)(C) (2006).
    Under the current Treasury Supplemental Ethics Regulations, an 
examiner must disqualify himself from examining a savings association 
if the examiner (or the spouse or minor child of an examiner) has 
obtained a credit card from that savings association or its subsidiary. 
5 CFR 3101.109(c)(3)(ii)(D) (2006). Today's final rule no longer 
requires such a disqualification every time the OTS examiner, spouse, 
or minor child obtains a credit card loan from a particular thrift or 
its subsidiary.\5\ Instead, the final rule in new amended paragraph 
(c)(3)(i)(C) requires a covered OTS employee to submit a written 
disqualification if the employee (or his or her spouse or minor child) 
as cardholder becomes involved in an ``adversarial dispute'' with the 
issuer of the credit card account. For the purposes of this rule, a 
cardholder is involved in an adversarial dispute if he or she is 
delinquent in payments on the credit card account; the issuer and the 
cardholder are negotiating to restructure the credit card debt; the 
issuer garnishes the cardholder's wages; the cardholder disputes the 
terms and conditions of the account; or the cardholder becomes involved 
in any disagreement with the issuer that casts doubt on the employee's 
ability to remain impartial with respect to the savings association or 
its subsidiaries. Preliminary inquiries regarding the accuracy of 
billing information or billed items are not, but may become, an 
adversarial dispute.
---------------------------------------------------------------------------

    \5\ OTS will, however, continue to require covered OTS employees 
to disclose their credit cards on their annual OTS supplemental 
financial disclosure reports, and to attest that their credit cards 
meet the requirements of this rule.
---------------------------------------------------------------------------

    Under amended paragraph (c)(3)(i)(C) of the final rule, a written 
disqualification must state that the covered OTS employee will not 
participate in any examination, the review of any application, or any 
other supervisory or regulatory matter directly affecting the savings 
association or its subsidiaries. This disqualification will

[[Page 48223]]

not, however, prevent a covered OTS employee from participating in 
formulating OTS policy or writing guidance, policy statements or 
regulations generally applicable to savings associations or their 
subsidiaries.\6\
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    \6\ The disqualification requirement may be waived on a case-by-
case basis under the circumstances described at 5 CFR 3101.109(g).
---------------------------------------------------------------------------

    Currently, the rules disqualify an examiner only with respect to 
activities that affect the savings association or the savings 
association's subsidiaries. 5 CFR 3101.109(c)(3)(ii) (2006). The 
disqualification does not extend to the savings association's holding 
company or to the holding company's other subsidiaries. The final rule 
takes this same approach. OTS may, of course, require a covered OTS 
employee to submit a disqualification that also covers the holding 
company and its other subsidiaries. On a case-by-case basis, OTS may 
require a disqualification if the relevant facts and circumstances 
surrounding the examiner's participation in an examination, the review 
of an application, or any other supervisory or regulatory matter 
directly affecting the holding company and its other subsidiaries would 
cause a reasonable person to question the examiner's impartiality. See 
5 CFR 2635.502.

B. Loans Secured by Principal Residence

    The Department has also reviewed whether it should retain 
restrictions on loans secured by a principal residence. Typically, home 
loans, unlike credit card loans, are the subject of negotiation between 
borrowers and lenders. While such negotiations increase the opportunity 
for a real or perceived conflict of interest, the Department believes 
that such conflicts may be minimized by the imposition of appropriate 
conditions. The Department does not believe that this rule change will 
unduly interfere with OTS's ability to distribute work assignments 
among employees, since each covered OTS employee is unlikely to have 
more than one or two loans secured by a principal residence.
    Accordingly, the Department has revised the rule in new amended 
paragraph (c)(3)(ii) of Sec.  3101.109 to permit a covered OTS employee 
(or a spouse or minor child of a covered OTS employee) to obtain and 
hold loans from a savings association or subsidiary of a savings 
association, subject to several conditions. First, pursuant to new 
amended paragraph (c)(3)(ii)(A), the loan must be secured primarily by 
residential real property that is the borrower's principal residence. 
This final rule applies to any loan secured primarily by a principal 
residence including a new mortgage loan, a refinanced loan, and a home 
equity line of credit. The rule, however, applies only to loans secured 
primarily by the borrower's principal residence. It does not apply to 
loans secured by vacation homes, investment properties, or other 
dwellings. The rule permits the borrower to retain a loan that was 
permissible when it was made, even though the residential real property 
has ceased to be the borrower's principal residence. However, any 
subsequent renewal or renegotiation of the original terms of such a 
loan must meet the requirements of the prohibited borrowings rule.
    Second, pursuant to amended paragraph (c)(3)(ii)(B), the borrower 
may not apply for the loan while the covered OTS employee participates, 
or is scheduled to participate, in any examination, the review of any 
application, or any other supervisory or regulatory matter directly 
affecting the savings association or its subsidiaries. OTS believes 
that a reasonable person might question the employee's impartiality in 
such an instance.
    Third, the final rule incorporates conditions designed to ensure 
compliance with 18 U.S.C. 212, as amended. Specifically, the rule 
provides at amended paragraph (c)(3)(ii)(C) that a borrower must 
satisfy all financial requirements for the loan that are generally 
applicable to all applicants for the same type of residential real 
property loan. Also, under amended paragraph (c)(3)(ii)(D), the terms 
and conditions applicable with respect to the loan and any credit 
extended to the borrower under the loan may be no more favorable 
generally to the borrower than the terms and conditions that are 
generally applicable to residential real property loans offered by the 
same savings association (or same subsidiary) to other borrowers in 
comparable circumstances for residential real property loans.
    To permit OTS to monitor loans under the principal residence 
exception, the final rule requires covered employees to provide certain 
information to OTS. Specifically, pursuant to amended paragraph 
(c)(3)(ii)(E), a covered OTS employee must inform his or her OTS 
supervisor and the OTS ethics officer before the borrower applies for a 
residential real property loan under the principal residence exemption. 
Immediately after the borrower enters into the loan agreement, amended 
paragraph (c)(3)(ii)(F) provides that the covered employee must also: 
Notify his or her supervisor and the OTS ethics officer of the 
agreement; certify that the loan meets the requirements for the 
principal residence exception; and submit a written disqualification 
stating that he or she will not participate in any examination, the 
review of any application, or any other supervisory or regulatory 
matter directly affecting the savings association or its 
subsidiaries.\7\ Like the credit card disqualification, this 
disqualification will not prevent the covered OTS employee from 
participating in formulating OTS policy or writing guidance, policy 
statements or regulations generally applicable to savings associations; 
does not generally extend to the savings association's holding company 
(or other holding company affiliates); and may be waived on a case-by-
case basis under 5 CFR 3101.109(g).
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    \7\ Covered OTS employees will also be required to disclose 
these loans on their annual OTS supplemental financial disclosure 
reports.
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C. Pre-Existing and Transferred Loans

    The current rules at 5 CFR 3101.109(c)(4) (2006) permit a covered 
OTS employee (or spouse or minor child of a covered OTS employee) to 
retain a loan on its original terms if (1) the loan was incurred before 
April 30, 1991 or before employment with the OTS, whichever date is 
later; or (2) the loan was acquired by sale or transfer to an OTS-
regulated savings association or by conversion or merger of the lender 
into an OTS-regulated savings association. A renewal or renegotiation 
of such a pre-existing or transferred loan, however, must comply with 
loan restrictions in 5 CFR 3101.109(c)(1) and (c)(2) (2006) of the 
current Treasury Supplemental Ethics Regulations, prior to this final 
rule amendment.
    The final rule makes a few changes to this provision. First, credit 
card accounts will not be eligible for the pre-existing or transferred 
loan exception in amended Sec.  3101.109(c)(4). OTS expects all credit 
card accounts, including pre-existing credit card accounts, to satisfy 
the ``arms-length terms'' and other requirements described in the other 
exceptions under the final rule. The final rule also requires a covered 
OTS employee to provide the OTS ethics officer with a timely 
notification when the employee (or his or her spouse or minor child) 
holds a pre-existing or transferred loan under this section, and to 
submit a written disqualification stating that the employee will not 
participate in any examination, the review of any application, or any 
other

[[Page 48224]]

supervisory or regulatory matter directly affecting that savings 
association or its subsidiaries.

D. Loans from Holding Companies

    Additionally, OTS has decided to prohibit an OTS examiner from 
examining a savings and loan holding company (or its subsidiaries), if 
the holding company (or its subsidiary) owns or holds the examiner's 
loan. This rule is not based on the criminal provisions at 18 U.S.C. 
212 and 213, since these entities usually are not financial 
institutions. Rather, OTS believes that such arrangements would raise a 
question about an examiner's impartiality in the mind of a reasonable 
person with knowledge of the relevant facts and circumstances. See 5 
CFR 2635.502.
    Specifically, the final rule states at new paragraph (c)(5) of 
Sec.  3101.109 that an OTS examiner must submit a written 
disqualification to OTS if the examiner (or his or her spouse or minor 
child) obtains or holds a loan from a savings and loan holding company 
or its subsidiary (other than a subsidiary that is an OTS-regulated 
savings association or its subsidiary). The written disqualification 
must state that the examiner will not participate in any examination, 
the review of any application, or any other supervisory or regulatory 
matter directly affecting that lender.
    However, the last sentence of new paragraph (c)(5) states that an 
examiner is not required to submit a disqualification for any loan that 
would have been permitted and would not have required a 
disqualification under the rules if a savings association had made the 
loan. For example, an OTS examiner would not be required to submit a 
disqualification for a credit card loan from a holding company if the 
examiner satisfies all financial requirements for the credit card 
account that are generally applicable to all applicants for the same 
kind of account, and the terms and conditions applicable to the account 
are no more favorable generally to the cardholder than the terms and 
conditions that are generally applicable to credit card accounts 
offered by the holding company. Of course, the examiner would be 
required to submit a written disqualification to OTS if he or she 
became involved in an adversarial dispute with the holding company that 
issued the credit card account.

E. Clarifications

    In addition to the changes discussed above, the Department has made 
technical changes to the prohibition on borrowing by a spouse or minor 
child to conform the provisions addressing permissible terms and 
conditions to the related standard contained in the statute at 18 
U.S.C. 212(c)(4)(A) and (B), as amended, and to use plain language in 
the final rule consistent with 12 U.S.C. 4809.

III. Regulatory Findings

A. Administrative Procedure Act

    Pursuant to 5 U.S.C. 553(a)(2), notice of proposed rulemaking, 
opportunity for public comment, and a 30-day delayed effective date are 
not applicable to this final rule amendment.

B. Regulatory Flexibility Act Analysis

    Because no notice of proposed rulemaking is required, the 
provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do 
not apply.

C. Executive Order 12866

    The Department has determined that this final rule does not 
constitute a ``significant regulatory action'' for the purposes of 
Executive Order 12866.

List of Subjects in 5 CFR Part 3101

    Conflict of interests, Ethics, Extensions of credit, Government 
employees, OTS employees.

0
For the reasons set forth in the preamble, the Department, with the 
concurrence of OGE, amends 5 CFR part 3101 as follows:

PART 3101--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES 
OF THE DEPARTMENT OF THE TREASURY

0
1. The authority citation for part 3101 continues to read as follows:

    Authority: 5 U.S.C. 301, 7301, 7353; 5 U.S.C. App. (Ethics in 
Government Act of 1978); 18 U.S.C. 212, 213; 26 U.S.C. 7214(b); E.O. 
12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by E.O. 
12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5 CFR 2635.105, 
2635.203(a), 2635.403(a), 2635.803, 2635.807(a)(2)(ii).


0
2. In Sec.  3101.109, revise paragraphs (c)(2), (c)(3), and (c)(4) and 
add a new paragraph (c)(5) to read as follows:


Sec.  3101.109  Additional rules for Office of Thrift Supervision 
employees.

* * * * *
    (c) * * *
    (2) Prohibition on borrowing by a spouse or minor child. The 
prohibition in paragraph (c)(1) of this section applies to the spouse 
and minor child of a covered OTS employee, except that a spouse or 
minor child may obtain and hold a loan or extension of credit from an 
OTS-regulated savings association (or its subsidiary) if:
    (i) The loan or extension of credit is supported only by the income 
or independent means of the spouse or minor child;
    (ii) The spouse or minor child satisfies all financial requirements 
for the loan or extension of credit that are generally applicable to 
all applicants for the same type of loan or extension of credit;
    (iii) The terms and conditions applicable with respect to the loan 
or extension of credit and any credit extended to the borrower under 
the loan or extension of credit are no more favorable generally to the 
borrower than the terms and conditions that are generally applicable to 
loans or extensions of credit offered by the same savings association 
(or same subsidiary) to other borrowers in comparable circumstances for 
the same type of loan or extension of credit; and
    (iv) The covered OTS employee does not participate in the 
negotiation for the loan or serve as a co-maker, endorser, or guarantor 
of the loan or extension of credit.
    (3) Exceptions--(i) Credit cards. A covered OTS employee (or a 
spouse or minor child of a covered OTS employee) may obtain and hold a 
credit card account established under an open-end consumer credit plan 
and issued by an OTS-regulated savings association (or its subsidiary), 
subject to the following conditions:
    (A) The cardholder must satisfy all financial requirements for the 
credit card account that are generally applicable to all applicants for 
the same type of credit card account;
    (B) The terms and conditions applicable with respect to the account 
and any credit extended to the cardholder under the account are no more 
favorable generally to that cardholder than the terms and conditions 
that are generally applicable to credit card accounts offered by the 
same savings association (or the same subsidiary) to other cardholders 
in comparable circumstances under open-end consumer credit plans; and
    (C) The covered OTS employee must submit a written disqualification 
to OTS if the cardholder becomes involved in an adversarial dispute 
with the issuer of the credit card account. The written 
disqualification must state that the covered OTS employee will not 
participate in any examination, the review of any application, or any 
other supervisory or regulatory matter directly affecting the savings 
association or its subsidiaries. For the purposes of this paragraph 
(c)(3)(i), a cardholder is involved in an adversarial dispute if he or 
she is delinquent in payments on the

[[Page 48225]]

credit card account; the issuer and the cardholder are negotiating to 
restructure the credit card debt; the issuer garnishes the cardholder's 
wages; the cardholder disputes the terms and conditions of the account; 
or the cardholder becomes involved in any disagreement with the issuer 
that may cast doubt on the covered OTS employee's ability to remain 
impartial with respect to the savings association or its subsidiaries. 
Preliminary inquiries to the issuer regarding the accuracy of billing 
information or billed items are not, but may become, an adversarial 
dispute.
    (ii) Loans secured primarily by principal residence. A covered OTS 
employee (or a spouse or minor child of a covered OTS employee) may 
obtain and hold a residential real property loan from an OTS-regulated 
savings association (or its subsidiary) subject to the following 
conditions:
    (A) The loan must be secured primarily by residential real property 
that is the borrower's principal residence. The borrower may retain the 
loan if the residential real property ceases to be that borrower's 
principal residence. However, any subsequent renewal or renegotiation 
of the original terms of such a loan must meet the requirements of this 
paragraph (c)(3)(ii);
    (B) The borrower may not apply for the loan while the covered OTS 
employee participates, or is scheduled to participate, in any 
examination, the review of any application, or any other supervisory or 
regulatory matter directly affecting the savings association or its 
subsidiaries;
    (C) The borrower must satisfy all financial requirements for the 
loan that are generally applicable to all applicants for the same type 
of residential real property loan;
    (D) The terms and conditions applicable with respect to the loan 
and any credit extended to the borrower under the loan are no more 
favorable generally to that borrower than the terms and conditions that 
are generally applicable to residential real property loans offered by 
the same savings association (or same subsidiary) to other borrowers in 
comparable circumstances for residential real property loans;
    (E) The covered OTS employee must inform his or her OTS supervisor 
and the OTS ethics officer before the borrower applies for a 
residential real property loan under this paragraph (c)(3)(ii); and
    (F) Immediately after the borrower enters into the loan agreement, 
the covered OTS employee must:
    (1) Notify his or her supervisor and the OTS ethics officer of the 
loan agreement;
    (2) Certify that the loan meets the requirements of this paragraph 
(c)(3)(ii); and
    (3) Submit a written disqualification stating that the covered OTS 
employee will not participate in any examination, the review of any 
application, or any other supervisory or regulatory matter directly 
affecting the savings association or its subsidiaries.
    (4) Pre-existing loans. (i) Other than a credit card account, which 
must comply with paragraph (c)(3)(i) of this section, a covered OTS 
employee (or spouse or minor child of a covered OTS employee) may 
retain a loan from an OTS-regulated savings association (or its 
subsidiary) on its original terms if:
    (A) The loan was incurred before April 30, 1991 or the date that 
the individual became a covered OTS employee, whichever date is later; 
or
    (B) The savings association (or its subsidiary) acquired the loan 
in a purchase or other transfer, or acquired the loan in a conversion 
or merger of the lender.
    (ii) A covered OTS employee must notify the OTS ethics officer, in 
a timely manner, of any loan that meets the requirements of paragraph 
(c)(4)(i) of this section, and must submit a written disqualification 
stating that the covered OTS employee will not participate in any 
examination, the review of any application, or any other supervisory or 
regulatory matter directly affecting the savings association or its 
subsidiaries.
    (iii) If a covered OTS employee (or his or her spouse or minor 
child) renews or renegotiates the original terms of a pre-existing loan 
described in this paragraph (c)(4), the renewed or renegotiated loan 
will become subject to paragraphs (c)(1) through (c)(3) of this 
section.
    (5) Loans from holding companies. An OTS examiner must submit to 
OTS a written disqualification if the OTS examiner (or a spouse or 
minor child of an OTS examiner) obtains or holds a loan from a savings 
and loan holding company or its subsidiary (other than a subsidiary 
that is an OTS-regulated savings association or its subsidiary, loans 
from which are covered by paragraph (c)(3) of this section). The 
written disqualification must state that the examiner will not 
participate in any examination, the review of any application, or any 
other supervisory or regulatory matter directly affecting that lender. 
A disqualification is not required for a loan that would have been 
permitted and would not have required a disqualification under this 
paragraph (c), if a savings association (or its subsidiary) had made 
the loan.
* * * * *

    Dated: July 9, 2007.
Robert F. Hoyt,
General Counsel, Department of the Treasury.
    Approved: August 14, 2007.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. E7-16711 Filed 8-22-07; 8:45 am]
BILLING CODE 6720-01-P