[Federal Register Volume 73, Number 208 (Monday, October 27, 2008)]
[Rules and Regulations]
[Pages 63625-63627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25453]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

[Docket ID: OTS-2008-0013]

12 CFR Part 509

RIN 1550-AC27


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 Monetary Penalty 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. OTS last adjusted its CMP statutes in 2004. Consequently, 
OTS is issuing this final rule to implement the required adjustments to 
OTS's CMP statutes.

DATES: Effective Date: October 27, 2008.

FOR FURTHER INFORMATION CONTACT: Marvin L. Shaw, Senior Attorney, (202) 
906-6639, 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 Monetary Penalties Inflation Adjustment Act of 
1990 \1\ (FCMPIAA) requires each agency to make inflationary 
adjustments to the CMPs in statutes that it administers.\2\ Under the 
FCMPIAA, agencies must make those adjustments at least once every four 
years. OTS last adjusted its CMPs in 2004.\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 that statute is making 
identical adjustments.
    \3\ 12 CFR 509.103; 69 FR 64249 (November 4, 2004).
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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. 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 a cap.
    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. OTS must 
use the CPI for All Urban Consumers (CPI-U) published by the Department 
of Labor.\4\
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    \4 \ http://data.bls.gov/cgi-bin/surveymost.
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    The statute contains specific rules for rounding any increase.\5\ 
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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    \5\ 28 U.S.C. 2461 note specifies that ``Any increase determined 
under this subsection shall be rounded to the nearest--``(1) 
multiple of $10 in the case of penalties less than or equal to $100; 
``(2) multiple of $100 in the case of penalties greater than $100 
but less than or equal to $1,000; ``(3) multiple of $1,000 in the 
case of penalties greater than $1,000 but less than or equal to 
$10,000; ``(4) multiple of $5,000 in the case of penalties greater 
than $10,000 but less than or equal to $100,000; ``(5) multiple of 
$10,000 in the case of penalties greater than $100,000 but less than 
or equal to $200,000; and ``(6) multiple of $25,000 in the case of 
penalties greater than $200,000.''
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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 under 12 CFR 
509.103, OTS may impose a daily maximum third-tier CMP not to exceed 
$1,250,000 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 2008, we use the 
CPI-U for June 2007, which was 208.4. 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 
2004, we use the CPI-U for June 2004, which was 189.7.
    Second, we calculate the cost of living adjustment or inflation 
factor. To do this, we divide the CPI-U for June 2007 (208.4) by the 
CPI-U for June 2004 (189.7). Our result is 1.098 (i.e., a 9.8 percent 
increase).\6\
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    \6\ A few CMPs were not adjusted for inflation in 2004. In such 
cases, the inflation factor is calculated from the time that CMP was 
last adjusted. For a CMP that was last adjusted in 2000, the 
inflation factor would be 20.9 percent. For a CMP that was last 
adjusted in 1996, the inflation factor would be 33 percent.
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    Third, we calculate the raw inflation adjustment. To do this, we 
multiply the maximum penalty amounts by the inflation factor. In our 
example, $1,250,000 multiplied by the inflation factor of 1.098 equals 
$1,372,500.
    Fourth, we round the raw inflation amounts according to the 
rounding rules in section 5(a) of the FCMPIAA. Since we round only the 
increased amount, we calculate the increased amount by the subtracting 
the current maximum penalty amounts from the raw maximum inflation 
adjustments. Accordingly, the increased amount for the maximum penalty 
in our example is $122,500 (i.e., $1,372,500 less $1,250,000). 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 $125,000.
    Fifth, we add the rounded increase to the maximum penalty amount 
last set or adjusted. In our example, $1,250,000 plus $125,000 yields a 
maximum inflation adjusted penalty amount of $1,375,000.\7\
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    \7\ Three CMPs are treated slightly differently because the 
statutorily mandated computation and the rounding rules did not 
result in any adjustment in 2004. Two of those penalties--12 U.S.C. 
1464(v)(4) and 12 U.S.C. 1467a(r)(1)--were last adjusted in 2000. 
For those two penalties, we compared the CPI-U for June 2000 (172.4) 
to the CPI-U for June 2007 (208.4), resulting in an inflation 
increase of 20.9%. The third penalty--12 U.S.C. 1984--was last 
adjusted in 1996. Accordingly, we compared the CPI-U for June 1996 
(156.7) to the CPI-U for June 2007 (208.4), resulting in an 
inflation increase of 33%.
    In addition, a new CMP related to post-employment restrictions 
for senior examiners in the amount of $275,000 has been added to the 
list of penalties (12 U.S.C. 1820(k)(6)(A)(ii)).

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[[Page 63626]]

III. Need for and 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.\8\ 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.\9\ Moreover, section 302 of the Riegle Community 
Development and Regulatory Improvement Act of 1994 \10\ 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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    \8\ 5 U.S.C. 553(b).
    \9\ Id.
    \10\ 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, 2008. 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.\11\ 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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    \11\ 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 regulatory action'' for purposes of Executive Order 
12866.

VI. Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4 (UMRA) requires that an agency prepare a budgetary impact 
statement before promulgating a rule that includes a Federal mandate 
that may result in the expenditure by state, local, and tribal 
governments, in the aggregate, or by the private sector of $100 million 
or more (adjusted annually for inflation) in any one year. If a 
budgetary impact statement is required, section 205 of the UMRA also 
requires an agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. The OTS has 
determined that the rule will not result in expenditures by state, 
local, and tribal governments, or by the private sector, of $133 
million or more. Accordingly, OTS has not prepared a budgetary impact 
statement or specifically addressed the regulatory alternatives 
considered

List of Subjects in 12 CFR Part 509

    Administrative practice and procedure, Penalties.

0
Accordingly, OTS amends 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. Section 509.103(c) is revised to read as follows:


Sec.  509.103  Civil money penalties.

* * * * *
    (c) Inflation adjustment. Under the Federal Civil Monetary 
Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), OTS 
must adjust for inflation the civil money 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 October 27, 2008:

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                                                           New maximum
      U.S. Code citation            CMP description          amount
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12 U.S.C. 1464(v)(4)..........  Reports of Condition--            $2,200
                                 1st Tier.
12 U.S.C. 1464(v)(5)..........  Reports of Condition--            32,500
                                 2nd Tier.
12 U.S.C. 1464(v)(6)..........  Reports of Condition--         1,375,000
                                 3rd Tier.
12 U.S.C. 1467(d).............  Refusal to Cooperate               7,500
                                 in Exam.
12 U.S.C. 1467a(i)(2).........  Holding Company Act               32,500
                                 Violation.
12 U.S.C. 1467a(i)(3).........  Holding Company Act               32,500
                                 Violation.
12 U.S.C. 1467a(r)(1).........  Late/Inaccurate                    2,200
                                 Reports--1st Tier.
12 U.S.C. 1467a(r)(2).........  Late/Inaccurate                   32,500
                                 Reports--2nd Tier.
12 U.S.C. 1467a(r)(3).........  Late/Inaccurate                1,375,000
                                 Reports--3rd Tier.
12 U.S.C. 1817(j)(16)(A)......  Change in Control--                7,500
                                 1st Tier.
12 U.S.C. 1817(j)(16)(B)......  Change in Control--               37,500
                                 2nd Tier.
12 U.S.C. 1817(j)(16)(C)......  Change in Control--            1,375,000
                                 3rd Tier.
12 U.S.C. 1818(i)(2)(A).......  Violation of Law or                7,500
                                 Unsafe or Unsound
                                 Practice--1st Tier.
12 U.S.C. 1818(i)(2)(B).......  Violation of Law or               37,500
                                 Unsafe or Unsound
                                 Practice--2nd Tier.
12 U.S.C. 1818(i)(2)(C).......  Violation of Law or            1,375,000
                                 Unsafe or Unsound
                                 Practice--3rd Tier.
12 U.S.C. 1820(k)(6)(A)(ii)...  Violation of Post                275,000
                                 Employment
                                 Restrictions.
12 U.S.C. 1884................  Violation of Security                110
                                 Rules.
12 U.S.C. 3349(b).............  Appraisals Violation--             7,500
                                 1st Tier.

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12 U.S.C. 3349(b).............  Appraisals Violation--            37,500
                                 2nd Tier.
12 U.S.C. 3349(b).............  Appraisals Violation--         1,375,000
                                 3rd Tier.
42 U.S.C. 4012a(f)............  Flood Insurance......            \1\ 385
                                                             \2\ 135,000
------------------------------------------------------------------------
\1\ Per day.
\2\ Per year.


    Dated: October 20, 2008.

    By the Office of Thrift Supervision.
John M. Reich,
Director.
[FR Doc. E8-25453 Filed 10-24-08; 8:45 am]
BILLING CODE 6720-01-P