Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Rules and Regulations 86797 

PENALTIES APPLICABLE TO FEDERAL SAVINGS ASSOCIATIONS—Continued 

U.S. Code citation CMP description 

Maximum 

penalty 

amount 

(in dollars) 1

1st Tier ....................................................................................................................................... 4,146 

2nd Tier ...................................................................................................................................... 41,463 

3rd Tier ....................................................................................................................................... 2 2,073,133 

12 U.S.C. 1467(d) ................................................. Refusal of Affiliate to Cooperate in Examination .............................................................................. 10,366 

12 U.S.C. 1467a(r) ................................................ Late/Inaccurate Reports: 

1st Tier ....................................................................................................................................... 4,146 

2nd Tier ...................................................................................................................................... 41,463 

3rd Tier ....................................................................................................................................... 2 2,073,133 

12 U.S.C. 1817(j)(16) ............................................ Violation of Change in Bank Control Act: 

Tier 1 .......................................................................................................................................... 10,366 

Tier 2 .......................................................................................................................................... 51,827 

Tier 3 .......................................................................................................................................... 2 2,073,133 

12 U.S.C. 1818(i)(2) 3 ........................................... Violation of Law, Unsafe or Unsound Practice, or Breach of Fiduciary Duty: 

Tier 1 .......................................................................................................................................... 10,366 

Tier 2 .......................................................................................................................................... 51,827 

Tier 3 .......................................................................................................................................... 2 2,073,133 

12 U.S.C. 1820(k)(6)(A)(ii) .................................... Violation of Post-Employment Restrictions: 

Per violation ................................................................................................................................ 341,000 

12 U.S.C. 1832(c) ................................................. Violation of Withdrawals by Negotiable or Transferable Instruments for Transfers to Third Parties: 

Per violation ................................................................................................................................ 2,737 

12 U.S.C. 1884 ..................................................... Violation of the Bank Protection Act ................................................................................................. 301 

12 U.S.C. 1972(2)(F) ............................................ Violation of Provisions regarding Correspondent Accounts, Unsafe or Unsound Practices, or 

Breach of Fiduciary Duty: 

Tier 1 .......................................................................................................................................... 10,366 

Tier 2 .......................................................................................................................................... 51,827 

Tier 3 .......................................................................................................................................... 2 2,073,133 

15 U.S.C. 78u–2(b) ............................................... Violations of Various Provisions of the Securities Act, the Securities Exchange Act, the Investment Company Act, or the Investment Advisers Act: 

Tier 1 (natural person)—Per violation ........................................................................................ 9,753 

Tier 1 (other person)—Per violation ........................................................................................... 97,523 

Tier 2 (natural person)—Per violation ........................................................................................ 97,523 

Tier 2 (other person)—Per violation ........................................................................................... 487,616 

Tier 3 (natural person)—Per violation ........................................................................................ 195,047 

Tier 3 (other person)—Per violation ........................................................................................... 975,230 

15 U.S.C. 1639e(k) ............................................... Violation of Appraisal Independence Requirements: 

First violation .............................................................................................................................. 11,906 

Subsequent violations ................................................................................................................ 23,811 

42 U.S.C. 4012a(f)(5) ........................................... Flood Insurance: 

Per violation ................................................................................................................................ 2,252 

1The maximum penalty amount is per day, unless otherwise indicated. 

2The maximum penalty amount for a federal savings association is the lesser of this amount or 1 percent of total assets. 

3These amounts also apply to statutes that cross-reference 12 U.S.C. 1818, such as 12 U.S.C. 2804, 3108, 3349, 4309, and 4717 and 15 U.S.C. 1607, 1681s, 

1691c, and 1692l. 

Jonathan V. Gould, 

Senior Deputy Comptroller and Chief 

Counsel, Office of the Comptroller of the 

Currency. 

[FR Doc. 2020–28942 Filed 12–30–20; 8:45 am] 

BILLING CODE 4810–33–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 701 

RIN 3133–AF24 

Fees Paid by Federal Credit Unions 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: The NCUA Board (Board) is 

amending its regulation governing 

assessment of an annual operating fee to 

Federal credit unions (FCUs). First, for 

purposes of calculating the annual 

operating fee, the final rule amends the 

current rule to exclude from total assets 

any loan an FCU reports under the 

Small Business Administration’s 

Paycheck Protection Program (PPP) or 

similar future programs approved for 

exclusion by the NCUA Board. Second, 

the final rule deletes from the current 

regulation references to the Credit 

Union System Investment Program and 

the Credit Union Homeowners 

Affordability Relief Program, both of 

which no longer exist. Third, the final 

rule amends the period used for the 

calculation of an FCU’s total assets. 

Currently, total assets are calculated 

using the FCU’s December 31st Call 

Report of the preceding year. Under the 

final rule, total assets will be calculated 

as the average total assets reported on 

the FCU’s previous four Call Reports 

available at the time the NCUA Board 

approves the agency’s budget for the 

upcoming year, adjusted for any 

excludable programs as determined by 

the Board. Finally, the final rule makes 

some minor technical changes. 

DATES: This final rule is effective on 

February 1, 2021. 

FOR FURTHER INFORMATION CONTACT: 

James Holm, Supervisory Budget 

Analyst, Office of the Chief Financial 

Officer, at (703) 518–6570; Kevin 

Tuininga, Associate General Counsel, or 

John H. Brolin, Senior Staff Attorney, 

Office of General Counsel, at (703) 518– 

6540; or by mail at 1775 Duke Street, 

Alexandria, VA 22314. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

II. Legal Authority 

III. Summary of the Proposal and Public 

Comments 

IV. Summary of the Final Rule 

V. Regulatory Procedures 


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1 85 FR 53708 (Aug 31, 2020). 

2See, e.g., 12 U.S.C. 1783(a) (making the Share 

Insurance Fund available ‘‘for such administrative 

and other expenses incurred in carrying out the 

purpose of [Subchapter II of the FCU Act] as [the 

Board] may determine to be proper.’’). 

3 12 U.S.C. 1755(a) (‘‘In accordance with rules 

prescribed by the Board, each Federal credit union 

shall pay to the Administration an annual operating 

fee which may be composed of one or more charges 

identified as to the function or functions for which 

assessed.’’). 

4See, e.g., Request for Comment Regarding 

Revised Overhead Transfer Rate Methodology, 82 

FR 29935 (June 30, 2017). 5 12 CFR 701.6(a). 

6 12 U.S.C. 1755(a). 

7 12 U.S.C. 1755(b). 

8 Id. 

9 12 CFR 701.6. 

10 Id. 11 In November 2015, the Board delegated 

authority to the Chief Financial Officer to 

administer the Board-approved methodology and to 

set the operating fees as calculated per the approved 

methodology each annual budget cycle beginning 

with 2016. See Board Action Memorandum on 2016 

Operating Fee (Nov. 19, 2015), https://

www.ncua.gov/About/Documents/ 

Agenda%20Items/AG20151119Item6a.pdf. Since 

that time, the operating fee schedule has been 

published in the NCUA’s annual budget. See 2020– 

2021 Budget Justification (December 12, 2019), 

https://www.ncua.gov/files/agenda-items/ 

AG20191212Item1b.pdf. 

12 12 CFR 701.6(a). 

13 Id. 

14Public Law 116–136 (Mar. 27, 2020). 

I. Introduction 

At its July 2020 meeting, the Board 

issued a proposed rule 1 to amend the 

NCUA’s regulation governing 

assessment of an annual operating fee to 

Federal credit unions (FCUs), 12 CFR 

701.6. For purposes of calculating the 

annual operating fee, the proposed 

amendments would have: (1) Excluded 

from total assets any loan an FCU 

reports under the Small Business 

Administration’s (SBA) Paycheck 

Protection Program (PPP), or similar 

future programs approved for exclusion 

by the NCUA Board; (2) deleted from 

the current regulation references to the 

Credit Union System Investment 

Program and the Credit Union 

Homeowners Affordability Relief 

Program, both of which no longer exist; 

and (3) revised the period used for the 

calculation of an FCU’s total assets. 

Currently, total assets are calculated 

using the FCU’s December 31st Call 

Report of the preceding year. Under the 

proposal, total assets would be 

calculated as the average total assets 

reported on the FCU’s previous four Call 

Reports available at the time the NCUA 

Board approves the agency’s budget for 

the upcoming year, adjusted for any 

excludable programs as determined by 

the Board. Finally, the proposal would 

have made some minor technical 

conforming changes. 

A. Background on the NCUA Annual 

Budget and Fees Paid by FCUs 

The NCUA charters, regulates, and 

insures deposits in FCUs and insures 

deposits in state-chartered credit unions 

that have their shares insured through 

the National Credit Union Share 

Insurance Fund (Share Insurance Fund). 

To cover expenses related to the 

NCUA’s tasks, the Board adopts an 

annual budget in the fall of each year. 

The Federal Credit Union Act (FCU Act) 

provides two primary sources to fund 

the budget: (1) Requisitions from the 

Share Insurance Fund; 2 and (2) 

operating fees charged against FCUs.3

The Board uses an allocation formula, 

the Overhead Transfer Rate (OTR), to 

determine the amount of the budget that 

it will requisition from the Share 

Insurance Fund.4 Remaining amounts 

needed to fund the annual budget are 

charged to FCUs in the form of 

operating fees, based on each FCU’s 

total assets.5

The FCU Act requires each FCU to, 

‘‘in accordance with rules prescribed by 

the Board [. . .] pay to the [NCUA] an 

annual operating fee which may be 

composed of one or more charges 

identified as to the function or functions 

for which assessed.’’ 6 The fee must ‘‘be 

determined according to a schedule, or 

schedules, or other method determined 

by the Board to be appropriate, which 

gives due consideration to the expenses 

of the [NCUA] in carrying out its 

responsibilities under the [FCU Act] and 

to the ability of [FCUs] to pay the fee.’’ 7

The statute requires the Board to, among 

other things, ‘‘determine the periods for 

which the fee shall be assessed and the 

date or dates for the payment of the fee 

or increments thereof.’’ 8

Section 701.6 of the NCUA’s 

regulations governs operating fee 

processes.9 The regulation establishes 

the following: (1) The basis for charging 

operating fees (i.e., total assets of the 

FCU, with certain exclusions, as of 

December 31st of the preceding year); 

(2) the notice the NCUA must provide 

to FCUs regarding the fees; (3) coverage 

provisions providing certain exceptions 

for new FCU charters, conversions, 

mergers, and liquidations; and (4) the 

assessment of administrative fees and 

interest for late payment, among other 

principles and processes.10 Certain 

aspects of and adjustments to the 

operating fee process, such as the 

multipliers used to determine fees 

applicable to designated asset tiers, are 

not included in the NCUA’s regulations. 

Instead, the Board generally adopts an 

operating fee schedule at an open 

meeting each year and publishes the 

schedule in the agency’s annual budget 

and on its website.11

Section 701.6(a) sets out the basis on 

which the NCUA assesses the operating 

fee. Paragraph (a) provides that FCUs 

must pay the NCUA an annual operating 

fee based on the credit union’s total 

assets.12 The NCUA calculates an FCU’s 

operating fee by multiplying the dollar 

amount of its total assets by a 

percentage set by the Board based on 

asset tiers after considering the expenses 

of the NCUA and the ability of FCUs to 

pay the fee. The term ‘‘total assets’’ for 

purposes of the operating fee presently 

includes all assets, with certain 

exclusions, reported on an FCU’s Call 

Report as of December 31st of the 

previous fiscal year. 

Operating fee payments are due from 

FCUs in April each year, and the NCUA 

prepares invoices using reported assets 

from the prior year’s December Call 

Report.13 In order to provide clarity to 

FCUs about their operating fee charges 

for the upcoming year, the Board 

typically approves the budget and sets 

the associated operating fee rates in 

November or December of the year 

before the operating fee is billed. 

Because the budget and operating fee 

rates are approved before December Call 

Report data is available, the Chief 

Financial Officer uses projected FCU 

asset growth to set the operating fee 

rates. Therefore, if actual total assets 

reported in December Call Reports are 

below the projected asset growth used 

for setting the operating fee rates, the 

NCUA will collect less in operating fee 

revenue than it requires to fund the 

budget. Conversely, if total assets 

reported in December Call Reports are 

greater than projected growth, the 

NCUA may collect more than is 

required. 

B. Background on the CARES Act and 

the SBA’s Paycheck Protection Program 

On March 27, 2020, President Trump 

signed the Coronavirus Aid, Relief, and 

Economic Security Act, or CARES Act, 

into law.14 The law is designed to 

provide aid to the U.S. economy in the 

midst of the COVID–19 pandemic. The 

CARES Act authorized the SBA to create 

a loan guarantee program, the PPP, to 

help certain businesses affected by the 

COVID–19 pandemic meet payroll 

needs (including employee salaries, sick 

leave, other paid leave, and health 

insurance expenses), as well as 

mortgage, rent, and utilities expenses. 

Provided credit union lenders comply 

with the applicable lender obligations 

set forth in the SBA’s interim final rule, 

the SBA will fully guarantee loans 


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15Credit unions that are currently permitted to 

make loans under the SBA’s 7(a) program are 

automatically approved to make PPP loans. 

Federally insured credit unions that are not current 

SBA 7(a) lenders can receive approval by 

submitting an application to the SBA, unless they 

are currently designated as being in troubled 

condition or are subject to a formal enforcement 

action that addresses unsafe and unsound lending 

practices. Non-depository financing providers, such 

as credit union service organizations, may qualify 

as a PPP lender subject to the requirements listed 

in the interim final rule. 

16Public Law 116–135, section 1102(a)(2). 

17 85 FR 23212 (Apr. 27, 2020). 

18The program was named as both the PPP 

Lending Facility and the PPP Liquidity Facility 

when the Board approved the interim final rule. It 

is now named the PPP Liquidity Facility in FRB 

documentation on the program. 

19 85 FR 23212. 

20 85 FR 20387 (Apr. 13, 2020). 

21See SBA Procedural Notice, Guidance on 

Whole Loan Sales of Paycheck Protection Program 

Loans (May 1, 2020), available at https://

www.sba.gov/sites/default/files/2020-05/5000- 

20024.pdf. 22 12 CFR 701.6(a). 23 12 U.S.C. 1755. 24 85 FR 23212 (Apr. 27, 2020). 25 85 FR 53854 (Aug. 31 2020). 26 12 U.S.C. 1751 et seq. 

27 12 U.S.C. 1766(a). 

28 12 U.S.C. 1755(a). 

29 12 U.S.C. 1755(b). 

30 Id. 

31 15 U.S.C. 636(a)(36). 

issued under the PPP, backed by the full 

faith and credit of the United States. 

Most federally insured credit unions 

were eligible to make PPP loans to 

members.15 Under the CARES Act, PPP 

loans must receive a zero percent risk 

weighting for purposes of the NCUA’s 

risk-based capital requirements.16

Following enactment of the CARES 

Act, the Board issued an interim final 

rule to make several amendments to the 

NCUA’s regulations relating to PPP 

loans.17 The April 27, 2020 interim final 

rule provided that if a covered PPP loan 

made by a federally insured credit 

union is pledged as collateral for a nonrecourse loan that is provided as part of 

the Board of Governors of the Federal 

Reserve System’s (FRB) PPP Liquidity 

Facility,18 the covered loan can be 

excluded from a credit union’s 

calculation of total assets for the 

purposes of calculating its net worth 

ratio.19 The exclusion of PPP loans 

pledged to the FRB’s Liquidity Facility 

was comparable to an interim final rule 

issued by the other banking agencies 

with respect to their capital 

regulations,20 which is consistent with 

the statutory requirement for the Board 

to prescribe a system of prompt 

corrective action that is, among other 

things, comparable to the section of the 

Federal Deposit Insurance Act that 

established prompt corrective action 

requirements for banks. 

That change applied to only the 

calculation of the net worth ratio and 

not to other requirements or 

calculations in the NCUA’s regulations 

that depend on a credit union’s total 

assets. At present, an FCU must report 

the value of all of its PPP loans in its 

Call Reports, whether the FCU 

originated the loans, purchased them in 

the secondary market, or has pledged 

them to the FRB Liquidity Facility.21

The value of PPP loans reported in Call 

Reports could therefore increase the 

total asset amounts the NCUA uses to 

compute the annual operating fees due. 

Without a change to the NCUA’s current 

operating fee regulation,22 an FCU’s PPP 

loans could subject the FCU to a higher 

operating fee, and this could impose a 

burden for participation in the program, 

or a disincentive to participate now that 

the program has been extended. As the 

PPP serves an important public purpose, 

the Board believes PPP loans warrant 

exclusion from total assets when 

determining operating fees to avoid 

these harms. 

Under the FCU Act, the Board 

considers, among other things, FCUs’ 

ability to pay assessments.23 The Board 

finds that an increase in an FCU’s assets 

based on PPP loans—regardless of 

whether they are pledged to the PPP 

Liquidity Facility—poses no undue risk 

to the credit union’s capital strength. 

Additionally, given the short-term and 

low-fee nature of PPP loans, FCUs that 

report increased total assets as a result 

of them are unlikely to have a 

corresponding increase in their ability 

to pay a higher assessment. 

Furthermore, excluding PPP loans from 

operating fee assessments makes the 

program more affordable to the 

participants and avoids imposing a 

burden based on participation in a 

program designed to provide an 

important public benefit. These benefits 

closely align with the mission of credit 

unions to support their member 

communities through trusted and 

affordable financial services. 

Accordingly, based on this statutory 

analysis and application, the NCUA’s 

proposal had a broader scope of 

exclusion than the Board’s April 27, 

2020, interim final rule on PPP loans.24

In a separate Federal Register 

document,25 the Board requested 

comment on the methodologies it uses 

to set the rate schedule for operating 

fees and how it determines the OTR. 

Members of the public were encouraged 

to comment about these methodologies 

by responding to that Federal Register 

notice. 

II. Legal Authority 

The Board is issuing this final rule 

pursuant to its authority under the FCU 

Act.26 The FCU Act grants the Board a 

broad mandate to issue regulations 

governing both FCUs and, more 

generally, all federally insured credit 

unions. For example, section 120 of the 

FCU Act is a general grant of regulatory 

authority and authorizes the Board to 

prescribe rules and regulations for the 

administration of the FCU Act.27

Section 105 of the FCU Act requires 

FCUs to pay an annual operating fee to 

the NCUA.28 In particular, section 

105(b) provides that the fee assessed 

under this section 105 shall be 

determined according to a schedule, or 

schedules, or other method determined 

by the Board to be appropriate, which 

gives due consideration to the expenses 

of the Administration in carrying out its 

responsibilities under this chapter and 

to the ability of Federal credit unions to 

pay the fee.29 Section 105(b) provides 

further that the Board shall, among 

other things, determine the periods for 

which the fee shall be assessed and the 

date or dates for the payment of the fee 

or increments thereof. 30

Accordingly, the FCU Act provides 

the Board with broad discretion to 

decide how the amount of the operating 

fee is determined. 

III. Summary of the Proposed Rule and 

Public Comments 

At its July 30, 2020 meeting, the 

NCUA Board (Board) proposed 

amending the agency’s regulation 

governing assessment of an annual 

operating fee to Federal credit unions 

(FCUs). The proposal provided for a 60- 

day comment period, which ended on 

October 30, 2020. The NCUA received 

nine comment letters in response to the 

proposed rule. In general, all of the 

letters received from commenters—two 

from credit union trade associations and 

seven from state credit union leagues— 

expressed broad support for the 

proposal. A few of the commenters, 

however, did raise issues for the 

NCUA’s consideration, which are 

discussed in more detail below. 

The proposed rule would have 

amended § 701.6(a) by excluding PPP 

loans from FCUs’ total assets for 

purposes of calculating its operating fee. 

In particular, the proposal would have 

amended current § 701.6(a) to provide, 

among other things, that the operating 

fee shall be based on the total assets of 

each FCU, less loans made under the 

PPP.31 Under the proposed rule, 

participating FCUs would have 

continued to report their assets in the 

quarterly Call Report. For purposes of 

determining the operating fee, the 


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32 74 FR 29934 (June 24, 2009). 

NCUA would have excluded reported 

PPP loans in the calculation of total 

assets. The NCUA believed the change 

would ensure that FCUs interested in 

making PPP loans did not bear greater 

financial burdens for doing so. The 

Board proposed excluding PPP loans 

from the calculation of total assets even 

if the PPP loans were not pledged to the 

FRB PPP Liquidity Facility because PPP 

loans pose no undue risk to the FCU’s 

capital strength and, due to their unique 

structure, do not increase an FCU’s 

ability to pay a higher operating fee. 

Excluding all reported PPP loans when 

determining total assets would also 

ensure that FCUs that do not pledge 

their PPP loans to the FRB are treated 

consistently with those FCUs that do. 

Absent such consistent treatment, FCUs 

that do not pledge their PPP loans to the 

FRB’s Liquidity Facility would bear a 

larger relative cost burden of the 

operating fee compared to those FCUs 

that do pledge their PPP loans. 

Comments Received: None of the 

commenters objected to this change. All 

nine of the commenters stated that they 

supported excluding from total assets 

any loan an FCU reports under the PPP 

and agreed with the NCUA’s rationale 

supporting this change. Four of the 

commenters specifically stated further 

that they supported excluding PPP loans 

from the calculation of total assets even 

if the PPP loans are not pledged to the 

Federal Reserve Board’s (FRB) PPP 

Liquidity Facility. 

Proposing to exclude PPP loans from 

the calculation of total assets was 

similar to the amendment the Board 

made to the calculation of total assets in 

a 2009 final rule to encourage FCU 

participation in the Credit Union 

System Investment Program (CU SIP) or 

the Credit Union Homeowners 

Affordability Relief Program (CU 

HARP).32 Investments in those programs 

were excluded from the computation of 

total assets because the instruments 

were guaranteed by the Share Insurance 

Fund, posed no credit risk to the 

participating credit unions, and the 

exclusion was intended to encourage a 

greater participation rate in programs 

with a clear public benefit. The CU SIP 

ended in 2010. Similarly, CU HARP 

investments were issued by the U.S. 

Central Federal Credit Union and all of 

those investments matured prior to that 

credit union’s liquidation in 2012. 

Because these programs no longer exist 

and have no remaining investments, the 

Board proposed to amend current 

§ 701.6(a) to delete references to them. 

Comments Received: None of the 

commenters objected to this change. 

Two commenters expressly stated that 

they supported deleting references to 

the programs and agreed with the 

NCUA’s rationale supporting this 

change. 

Given the potential for additional 

programs similar to the PPP to arise in 

the near future or as a result of future 

economic crises, the Board proposed 

adding regulatory language that would 

allow for the exclusion of assets in the 

future under similar programs without 

requiring a reference to the specific 

program in the regulation. Under the 

proposed new language, the Board 

anticipated making exclusions of similar 

future programs by issuing an order, 

which could be published in a letter to 

FCUs or a similar notice. 

Comments Received: None of 

commenters objected to the language, 

and eight of the commenters stated that 

they supported including the general 

language allowing the exclusion of such 

programs to be approved by the Board. 

One of the commenters, however, 

suggested that the NCUA also include 

provisions to exclude assets related to 

programs that provide relief during 

nationwide and regional crises; for 

example, disaster declarations and 

associated SBA disaster lending 

authorized as a result of hurricanes or 

other national disasters. 

NCUA Response: In response to the 

comment suggesting the NCUA also 

exclude assets related to programs that 

provide relief during nationwide and 

regional crises, the agency has decided 

not to make that change in the final rule. 

Such a change is beyond the scope of 

the proposal. The NCUA, however, does 

plan to evaluate the feasibility and 

impact of such exclusions in its next 

cyclical review of the operating fee rule. 

In particular, the NCUA plans to 

evaluate whether SBA disaster lending 

presents the same general low level of 

risk to credit unions’ balance sheets, 

and whether excluding SBA disaster 

lending from total assets would have a 

material impact on the regional 

distribution of operating fees. 

In addition, the Board proposed 

amending current § 701.6(a) to use the 

average of FCUs’ four most-recently 

reported quarterly assets to calculate 

operating fees and to make conforming 

amendments to the regulatory text to 

ensure this same approach was applied 

to merged and recently converted FCUs. 

The Board proposed to use an average 

of total assets because it believed that 

doing so would reduce the effect of 

seasonal fluctuation in the total assets of 

FCUs, and would provide more 

certainty to FCUs about their operating 

fee charges for the forthcoming year. 

The change to a four-quarter average of 

reported assets would also reduce the 

risk that the Board would collect less in 

operating fee revenue than it requires if 

actual assets reported in FCUs’ 

December Call Reports were below the 

asset growth assumption used to set the 

operating fee rates in the budget. 

In particular, the proposed rule would 

have amended current § 701.6(a) to 

provide, among other things, that the 

operating fee shall be based on the 

average of total assets of each FCU based 

on data reported in the preceding four 

Call Reports (as reported on NCUA 

Form 5300 for natural person FCUs and 

Form 5310 for corporate FCUs), or as 

otherwise determined pursuant to 

paragraph (b) of § 701.6. When 

determining the operating fee rate and 

the invoice amounts due under the 

proposal, the NCUA Board would have 

used the average of FCUs’ four mostrecent Call Reports available at the time 

the Board approved the budget for the 

forthcoming year. 

The Board anticipated that the 

proposed change would have no impact 

on current billing practices for newly 

chartered FCUs because such credit 

unions do not receive an operating fee 

invoice until the second year after they 

are chartered. The Board proposed 

continuing its current practice of 

treating merged FCUs and conversions 

of non-FCUs into FCUs as a single entity 

for purposes of calculating the average 

total assets that are the basis for 

determining the amount of operating 

fees due. For purposes of calculating the 

average total assets of an FCU that 

converts from or merges with a federally 

insured, state-chartered credit union 

(FISCU), the Board proposed computing 

comparable quarterly total assets using 

the Call Report data in the agency’s 

possession. For conversions to an FCU 

charter from entities not insured by the 

NCUA, the Board proposed to average 

assets based only on Call Reports filed 

by the time the Board finalized its 

budget because the NCUA cannot 

validate the accuracy or consistency of 

other data sources that may be similar 

to NCUA Call Reports. 

Under the proposed rule, in 

circumstances in which a conversion to 

an FCU charter from an entity not 

insured by the NCUA occurs in the 

fourth quarter of the year before the 

operating fee is due, no Call Report data 

would have been available at the time 

the Board finalized its budget, and the 

converted entity would therefore pay no 

operating fee in the year following 

conversion. While this approach would 

have produced a different result based 

only on insured status prior to 

conversion for entities that are 

otherwise of the same FCU status after 


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33While the proposed regulatory language 

introducing § 701.6(b)(2)(i)(B) could be read to 

require an entity not insured by the NCUA that 

converts to a FCU charter in the fourth quarter to 

pay a fee in the year following conversion, the lack 

of available Call Report data prior to the date the 

Board adopts the budget would preclude a fee in 

that scenario. 

the conversion, the Board believed its 

lack of access to verified Call Report 

data for non-NCUA insured entities 

supported the distinction. In addition, 

the Board expected such circumstances 

to be rare occurrences, with relatively 

small impacts, as the maximum amount 

of forgone revenue is one quarter of 

reported assets for which a converted 

entity could be exempt from paying an 

operating fee. 

While this discrepancy could be 

avoided if the Board continued its 

current practice of estimating December 

Call Report data as the sole point of 

reference for determining total assets for 

the operating fee, the Board believed the 

four-quarter average was more equitable 

on the whole because it could account 

for seasonal share account fluctuations 

that some FCUs experience based on the 

characteristics and transaction patterns 

engaged in by their fields of 

membership. As discussed above, the 

proposed four-quarter average approach 

also would have eliminated the risk that 

the Board could over- or under-collect 

operating fees based on differences 

between its estimation of and actual 

December Call Report data.33

With respect to mergers in which an 

entity not insured by the NCUA merges 

into a continuing FCU, the same issue 

existed under the proposed rule with 

regard to the Board’s access to data 

comparable to the Call Report for 

periods prior to the merger date. Here 

again, the proposed rule would have 

combined assets looking back four 

quarters for mergers involving two FCUs 

or where a FISCU merges into a 

continuing FCU. On the other hand, for 

mergers into FCUs of entities that are 

not insured by the NCUA, the proposed 

rule would not have required the 

combination of assets prior to the 

merger date, because the NCUA does 

not collect asset data for entities it does 

not insure. Instead, the continuing FCU 

would have paid a fee based only on 

assets reported on its own Call Reports 

filed prior to the effective date of the 

merger. Depending on the specific 

timing of when the merger occurred, 

this could have resulted in multiple 

quarters where the assets acquired from 

the non-NCUA insured entity were not 

included in the calculated average 

assets used to bill the continuing FCU. 

For the same reasons expressed above 

with respect to conversions, the Board 

believed the benefits of the four-quarter 

average outweighed the different 

treatment for mergers with FISCUs 

compared to mergers with entities not 

insured by the NCUA. 

With respect to purchase and 

assumption transactions, the regulation 

presently designates that such 

transactions will be treated as mergers 

in circumstances in which an FCU 

purchases all or essentially all of the 

assets of another credit union. Under 

the proposal, the Board retained that 

language, but requested comments on 

alternative approaches the Board may 

wish to consider. The Board 

acknowledged that, in some 

circumstances, determining whether a 

purchase and assumption included all 

or essentially all assets could be a 

difficult determination. 

Comments Received: All nine 

commenters stated that they supported 

these change and generally agreed with 

the NCUA’s rationale supporting this 

change. While all of the commenters 

supported this change, four of the 

commenters did ask that the NCUA also 

regularly review this change and its 

impact to ensure it does not cause any 

unintended consequences. 

Although beyond the scope of this 

proposal, one commenter did suggested 

that the NCUA further amend § 701.6 to 

treat mergers into and conversions with 

federally insured, state-chartered credit 

unions (FISCUs) differently. The 

commenter stated that, while the 

current rule bars the payment of a fee 

refund when a conversion to or merger 

into a FISCU occurs, the NCUA should 

reconsider this issue since the resulting 

credit union’s NCUSIF deposit will 

reflect the merger, unlike a combination 

with an entity that is not NCUSIFinsured, and the resulting entity is not 

an FCU. The commenter suggested that 

the NCUA provide pro rata fee refunds 

if an FCU converts to or merges into a 

FISCU. 

NCUA Response: In response to the 

comment suggesting that the NCUA 

regularly review these changes and their 

impact, the NCUA reviews all of its 

existing regulations every three years. 

The NCUA’s Office of General Counsel 

maintains a rolling review schedule that 

identifies one-third of the NCUA’s 

existing regulations for review each year 

and provides notice to the public of 

those regulations under review so the 

public may have an opportunity to 

comment. The changes made by this 

final rule will be regularly reviewed as 

part of that process and the credit union 

industry and public will be given a 

regular opportunity to raise any 

concerns they may have. 

In response to the comment 

suggesting that the NCUA issue a pro 

rata fee refund to an FCU that converts 

to or merges into a FISCU, the agency 

has made no changes in the final rule. 

Such a change would be outside the 

scope of the proposal. Moreover, the 

operating fees charged to FCUs are 

based on a detailed workload projection 

of the agency’s examination program, 

which is used to inform the agency’s 

annual budget formulation and 

calculation of operating fee collections. 

The agency generally does not have 

insight into the future merger or charter 

conversion plans of a given FCU, and 

therefore must base its workload 

estimates on the population of FCUs 

that exist in the year before the budget 

is set and the fee is calculated. If the 

NCUA were to issue pro rata refunds to 

FCUs that subsequently merge with or 

convert to a FISCU, it would face 

continuing, unfunded liabilities for staff 

salaries and associated expenses that 

could not be recouped from other 

sources since the operating fee is billed 

only once annually. Similarly, the OTR 

share of the annual operating budget is 

determined in part based on the relative 

distribution of projected workload 

between FCUs and FISCUs in the year 

before the OTR is applied to actual 

operating expenses. Although the 

NCUA’s actual workload may be 

marginally reduced if an FCU converts 

to or merges with a FISCU, such a 

change cannot be retroactively applied 

to the OTR used in a given year. 

The Board also proposed some 

technical changes to existing rule 

language. First, the proposed rule 

clarified that the NCUA would not issue 

refunds of operating fees to FCUs that 

convert to any other type of charter, not 

just a state charter. The proposed rule 

was intended to ensure the same 

treatment for a conversion to a mutual 

savings bank or any other charter type. 

The Board also proposed removing the 

language ‘‘in the year in which the 

conversion takes place’’ from the 

provision, as a refund is never provided 

to any converting FCU, regardless of 

timing. The Board proposed the same 

changes to the rule text on refunds in 

the context of mergers. 

Comments Received: The NCUA 

received no objections to this change. 

In addition, the Board proposed to 

expand the situations expressly covered 

in the regulation to include conversions 

and mergers involving entities not 

insured by the NCUA. Such transactions 

could involve privately insured, statechartered credit unions or banking 

institutions. To support this expansion, 

the proposed regulatory language 

introduced the phrase ‘‘entity not 


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86802 Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Rules and Regulations 

34 44 U.S.C. 3507(d); 5 CFR part 1320. 

35 44 U.S.C. Chap. 35. 

36 5 U.S.C. 801–804. 

37 5 U.S.C. 552. 

38 5 U.S.C. 804(2). 

insured by the NCUA.’’ In the language 

specifying that certain purchase and 

assumption transactions would be 

treated as mergers, the Board proposed 

changing the term ‘‘credit union’’ to 

‘‘depository institution’’ to clarify that a 

purchase and assumption involving a 

bank, for example, would be treated in 

the same manner. Finally, the proposed 

rule would have divided paragraph (b) 

of the regulation into additional 

subparagraphs to improve readability. 

Comments Received: The NCUA 

received no objections to this change. 

III. Summary of the Final Rule 

For the reasons discussed above, the 

Board is issuing this final rule without 

change from the proposed rule. Revised 

§ 701.6(a) provides that each calendar 

year, or as otherwise directed by the 

Board, each Federal credit union shall 

pay an operating fee to the NCUA for 

the current fiscal year (January 1 to 

December 31) in accordance with a 

schedule fixed by the Board from time 

to time. New § 701.6(a)(1) provides that 

the operating fee shall be based on the 

average of total assets of each Federal 

credit union based on data reported in 

NCUA Forms 5300 and 5310 from the 

four quarters immediately preceding the 

time the Board approves the agency’s 

budget or as otherwise determined 

pursuant to paragraph (b) of this section. 

New § 701.6(a)(2) provides that for 

purposes of calculating the operating 

fee, total assets shall not include any 

loans on the books of a natural person 

Federal credit union made under the 

Small Business Administration’s 

Paycheck Protection Program, 15 U.S.C. 

636(a)(36), or any similar program 

approved for exclusion by the Board. 

Revised § 701.6(b), Coverage, provides 

that the operating fee shall be paid by 

each Federal credit union engaged in 

operations as of January 1 of each 

calendar year in accordance with 

paragraph (a), except as otherwise 

provided by this paragraph. Section 

701.6(b)(1), New Charters, continues to 

provide that a newly chartered FCU will 

not pay an operating fee until the year 

following the first full calendar year 

after the date chartered. Revised 

§ 701.6(b)(2), Coverage, continues to 

address coverage issues, but now 

includes several new subsections. New 

§ 701.6(b)(2)(i)(A) provides that in the 

first calendar year following conversion: 

A FISCU that converts to an FCU charter 

must pay an operating fee based on the 

average assets reported in the year of 

conversion on NCUA Forms 5300 or 

5310 from the four quarters immediately 

preceding the time the Board approves 

the agency’s budget in the year of 

conversion. New § 701.6(b)(2)(i)(B) 

provides that in the first calendar year 

following conversion: An entity not 

insured by the NCUA that converts to an 

FCU charter must pay an operating fee 

based on the assets, or average thereof, 

reported on NCUA Forms 5300 or 5310 

for any one or more quarters 

immediately preceding the time the 

Board approves the agency’s budget in 

the year of conversion. New 

§ 701.6(b)(2)(ii) provides that an FCU 

converting to a different charter will not 

receive a refund of any operating fees 

paid to the NCUA. 

Revised § 701.6(b)(3), Mergers, 

continues to address merger issues, but 

now includes several new subsections. 

New § 701.6(b)(3)(i)(A) provides that in 

the first calendar year following merger: 

A continuing FCU that has merged with 

one or more federally insured credit 

unions must pay an operating fee based 

on the average combined total assets of 

the FCU and any merged federally 

insured credit unions as reported on 

NCUA Forms 5300 or 5310 in the four 

quarters immediately preceding the time 

the Board approves the agency’s budget 

in the merger year. New 

§ 701.6(b)(3)(i)(B) provides that for 

purposes of paragraph (b)(3), a purchase 

and assumption transaction in which 

the continuing FCU purchases all or 

essentially all of the assets of another 

depository institution shall be deemed a 

merger. New § 701.6(b)(3)(ii) provides 

that an FCU that merges with a Federal 

or state-chartered credit union, or an 

entity not insured by the NCUA, will 

not receive a refund of any operating fee 

paid to the NCUA. 

Finally, § 701.6(b)(4), Liquidations, 

continues to provide that an FCU placed 

in liquidation will not pay any 

operating fee after the date of 

liquidation. 

IV. Regulatory Procedures 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

generally requires that, in connection 

with a final rule, an agency prepare and 

make available for public comment an 

final regulatory flexibility analysis that 

describes the impact of a proposed rule 

on small entities. A regulatory flexibility 

analysis is not required, however, if the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities 

(defined for purposes of the RFA to 

include federally insured credit unions 

with assets less than $100 million) and 

publishes its certification and a short, 

explanatory statement in the Federal 

Register together with the rule. This 

final rule will make a technical change 

to the period for measuring total assets 

for calculating the Operating Fee. 

However, the Board does not believe the 

impact will disproportionally impact 

small credit unions such that a 

regulatory flexibility analysis is 

required. First, small credit unions are 

still required to report assets on a 

quarterly basis, and the regulation only 

increases the number of quarters the 

NCUA will consider in adjusting the 

operating fee. Nor does the exclusion of 

PPP loans from assets increase reporting 

requirements, as the NCUA already has 

the information necessary to make that 

exclusion. Finally, although exclusion 

of PPP loans will decrease fee amounts 

for some small credit unions, the Board 

does not believe the change will amount 

to a significant impact on a substantial 

number of small entities. Accordingly, 

the NCUA certifies that this final rule 

will not have a significant economic 

impact on a substantial number of small 

credit unions. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) applies to rulemakings in which 

an agency creates a new or amends 

existing information collection 

requirements.34 For the purpose of the 

PRA, an information collection 

requirement may take the form of a 

reporting, recordkeeping, or a thirdparty disclosure requirement. This final 

rule does not contain information 

collection requirements that require 

approval by OMB under the PRA.35

C. Small Business Regulatory 

Enforcement Fairness Act 

The Small Business Regulatory 

Enforcement Fairness Act of 1996 (Pub. 

L. 104–121) (SBREFA) generally 

provides for congressional review of 

agency rules.36 A reporting requirement 

is triggered in instances where the 

NCUA issues a final rule as defined by 

Section 551 of the APA.37 An agency 

rule, in addition to being subject to 

congressional oversight, may also be 

subject to a delayed effective date if the 

rule is a ‘‘major rule.’’ 38 The NCUA 

does not believe this rule is a ‘‘major 

rule’’ within the meaning of the relevant 

sections of SBREFA. As required by 

SBREFA, the NCUA will submit this 

final rule to OMB for it to determine if 

the final rule is a ‘‘major rule’’ for 

purposes of SBREFA. The NCUA also 

will file appropriate reports with 

Congress and the Government 


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Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Rules and Regulations 86803 

39Public Law 105–277, 112 Stat. 2681 (1998). 

Accountability Office so this rule may 

be reviewed. 

D. Executive Order 13132 

Executive Order 13132 encourages 

independent regulatory agencies to 

consider the impact of their actions on 

state and local interests. In adherence to 

fundamental federalism principles, the 

NCUA, an independent regulatory 

agency as defined in 44 U.S.C. 3502(5), 

voluntarily complies with the Executive 

order. This final rule will not have a 

substantial direct effect on the states, on 

the connection between the National 

Government and the states, or on the 

distribution of power and 

responsibilities among the various 

levels of government. The NCUA has 

determined that this final rule does not 

constitute a policy that has federalism 

implications for purposes of the 

Executive order. 

D. Assessment of Federal Regulations 

and Policies on Families 

The NCUA has determined that this 

final rule will not affect family wellbeing within the meaning of Section 654 

of the Treasury and General 

Government Appropriations Act, 

1999.39

List of Subjects in 12 CFR Part 701 

Credit unions, Low income, 

Nonmember deposits, Secondary 

capital, Shares. 

By the National Credit Union 

Administration Board on December 17, 2020. 

Melane Conyers-Ausbrooks, 

Secretary of the Board. 

For the reasons discussed above, the 

Board amends 12 CFR part 701 as 

follows: 

PART 701—Organization and 

Operations of Federal Credit Unions 

■ 1. The authority citation for part 701 

continues to read as follows: 

Authority: 12 U.S.C. 1752(5), 1755, 1756, 

1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 

1782, 1784, 1785, 1786, 1787, 1788, 1789. 

Section 701.6 is also authorized by 15 U.S.C. 

3717. Section 701.31 is also authorized by 15 

U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601– 

3610. Section 701.35 is also authorized by 42 

U.S.C. 4311–4312. 

■ 2. In § 701.6, revise paragraphs (a) and 

(b) to read as follows: 

§ 701.6 Fees paid by Federal credit unions. 

(a) Basis for assessment. Each 

calendar year, or as otherwise directed 

by the NCUA Board, each Federal credit 

union shall pay an operating fee to the 

NCUA for the current fiscal year 

(January 1 to December 31) in 

accordance with a schedule fixed by the 

Board from time to time. 

(1) General. The operating fee shall be 

based on the average of total assets of 

each Federal credit union based on data 

reported in NCUA Forms 5300 and 5310 

from the four quarters immediately 

preceding the time the Board approves 

the agency’s budget or as otherwise 

determined pursuant to paragraph (b) of 

this section. 

(2) Exclusions from total assets. For 

purposes of calculating the operating 

fee, total assets shall not include any 

loans on the books of a natural person 

Federal credit union made under the 

Small Business Administration’s 

Paycheck Protection Program, 15 U.S.C. 

636(a)(36), or any similar program 

approved for exclusion by the NCUA 

Board. 

(b) Coverage. The operating fee shall 

be paid by each Federal credit union 

engaged in operations as of January 1 of 

each calendar year in accordance with 

paragraph (a) of this section, except as 

otherwise provided by this paragraph 

(b). 

(1) New charters. A newly chartered 

Federal credit union will not pay an 

operating fee until the year following 

the first full calendar year after the date 

chartered. 

(2) Conversions. (i) In the first 

calendar year following conversion: 

(A) A federally insured state-chartered 

credit union that converts to a Federal 

credit union charter must pay an 

operating fee based on the average assets 

reported in the year of conversion on 

NCUA Forms 5300 or 5310 from the 

four quarters immediately preceding the 

time the Board approves the agency’s 

budget in the year of conversion. 

(B) An entity not insured by the 

NCUA that converts to a Federal credit 

union charter must pay an operating fee 

based on the assets, or average thereof, 

reported on NCUA Forms 5300 or 5310 

for any one or more quarters 

immediately preceding the time the 

Board approves the agency’s budget in 

the year of conversion. 

(ii) A Federal credit union converting 

to a different charter will not receive a 

refund of any operating fees paid to the 

NCUA. 

(3) Mergers. (i) In the first calendar 

year following merger: 

(A) A continuing Federal credit union 

that has merged with one or more 

federally insured credit unions must 

pay an operating fee based on the 

average combined total assets of the 

Federal credit union and any merged 

federally insured credit unions as 

reported on NCUA Forms 5300 or 5310 

in the four quarters immediately 

preceding the time the Board approves 

the agency’s budget in the merger year. 

(B) For purposes of this paragraph 

(b)(3), a purchase and assumption 

transaction where the continuing 

Federal credit union purchases all or 

essentially all of the assets of another 

depository institution shall be deemed a 

merger. 

(ii) A Federal credit union that merges 

with a Federal or state-chartered credit 

union, or an entity not insured by the 

NCUA, will not receive a refund of any 

operating fee paid to the NCUA. 

(4) Liquidations. A Federal credit 

union placed in liquidation will not pay 

any operating fee after the date of 

liquidation. 

* * * * * 

[FR Doc. 2020–28490 Filed 12–30–20; 8:45 am] 

BILLING CODE 7535–01–P 

LIBRARY OF CONGRESS 

Copyright Office 

37 CFR Part 210 

[Docket No. 2020–8] 

The Public Musical Works Database 

and Transparency of the Mechanical 

Licensing Collective 

AGENCY: U.S. Copyright Office, Library 

of Congress. 

ACTION: Interim rule. 

SUMMARY: The U.S. Copyright Office is 

issuing an interim rule regarding the 

Musical Works Modernization Act, title 

I of the Orrin G. Hatch-Bob Goodlatte 

Music Modernization Act. The law 

establishes a new blanket compulsory 

license that will be administered by a 

mechanical licensing collective, which 

will make available a public musical 

works database as part of its statutory 

duties. Having solicited public 

comments through previous 

notifications of inquiry and a notice of 

proposed rulemaking, the Office is 

issuing interim regulations prescribing 

categories of information to be included 

in the public musical works database, as 

well as rules related to the usability, 

interoperability, and usage restrictions 

of the database. The Office is also 

issuing interim regulations related to 

ensuring appropriate transparency of 

the mechanical licensing collective 

itself. 

DATES: Effective February 16, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Regan A. Smith, General Counsel and 

Associate Register of Copyrights, by 

email at regans@copyright.gov or Anna 

B. Chauvet, Associate General Counsel, 


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