[Federal Register Volume 65, Number 201 (Tuesday, October 17, 2000)]
[Rules and Regulations]
[Pages 61260-61262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26336]


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DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 509 and 510

[Docket No. 2000-89]
RIN 1550-AB41


Rules of Practice and Procedure for 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 1996. Consequently, 
OTS is issuing this final rule to implement the required adjustments to 
its CMP statutes. OTS is also moving its chart displaying adjusted CMPs 
to the part containing OTS's procedural rules for adjudicatory 
proceedings.

EFFECTIVE DATE: October 17, 2000.

FOR FURTHER INFORMATION CONTACT: Timothy P. Leary, Counsel (Banking & 
Finance), (202) 906-7170, 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 1996. \3\ 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 this statute is making 
identical adjustments.
    \3\ 12 CFR 510.6; 61 FR 56118 (October 31, 1996).
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    While the CMP statutes of many agencies provide for minimum and 
maximum penalty amount, 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

[[Page 61261]]

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.
    The statute contains specific rules for rounding any increase based 
on the size of the CMP. 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.

II. Summary of Calculation

    To explain the inflation adjustment calculation for CMP amounts 
that were last adjusted in 1996, we will use the following example. 
Under 12 U.S.C. 1818(i), as adjusted under 12 CFR 510.6, OTS may impose 
a daily maximum third-tier CMP not to exceed $1,100,000 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 2000, we use the 
CPI-U for June 1999, which was 166.2. 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 
1996, we use the CPI-U for June 1996, which was 156.7.
    Second, we calculate the cost of living adjustment or inflation 
factor. To do this, we divide the CPI-U for June 1999 (166.2) by the 
CPI-U for June 1996 (156.7). Our result is 1.061 (i.e., a 6.1 percent 
increase).
    Third, we calculate the raw inflation adjustment. To do this, we 
multiply the maximum penalty amounts by the inflation factor. In our 
example, $1,100,000 multiplied by the inflation factor of 1.061 equals 
$1,167,100.
    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 $67,100 (i.e., $1,167,100 less $1,100,000). 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 $75,000.
    Fifth, we add the rounded increase to the maximum penalty amount 
last set or adjusted. In our example, $1,100,000 plus $75,000 yields a 
maximum inflation adjusted penalty amount of $1,175,000.\4\
    Today's chart also corrects minor errors in our earlier rule. The 
chart accompanying the 1996 adjustment misstated the amount of the CMP 
under 12 U.S.C. 1467a(i)(3) for violations of the Holding Company Act. 
The correct CMP in section 1467a(i)(3) is $25,000, not $5,000. The 1996 
rule should have adjusted this $25,000 amount to $27,500. That figure 
is unchanged by today's computation. We have also added new references 
to two CMPs that were inadvertently omitted from the 1996 chart. These 
include CMPs under section 1467a (i)(2) (authorizing a CMP of $25,000, 
which has been adjusted to $27,500) and 12 U.S.C. 1884 (authorizing a 
CMP of $100, which has been adjusted to $110).
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    \4\ Three CMPs are subject to a slightly different treatment 
because the statutorily mandated computation and the rounding rules 
did not result in any adjustment in 1996. This affects the $2,000 
penalties under 12 U.S.C. 1464(v)(4) and 1467a(r)(1), and the $350 
penalty under 42 U.S.C. 4012a(f). Under the statute, we must use the 
CPI-U for June of the year when the penalty was ``last set or 
adjusted.`` Because these penalties were not adjusted in 1996, we 
must use the CPI-U for year in which the CMP was last set by an 
enactment. The statute also limits the amount of the first 
adjustment to a maximum 10 percent increase
    The CMPs in sections 1464(v)(4) and 1467a(r)(1) were enacted as 
part of the Financial Institutions Reforms, Recovery, and 
Enforcement Act of 1989. Pub. L. No. 101-73, 103 Stat. 183 (August 
9, 1989). The CPI-U for June 1989 was 124.1. Dividing the CPI-U for 
June 1999 (166.2) by 124.1 yields 1.3392. This factor applied to the 
$2,000 CMP yields $2,678, an increased penalty of $678. Under the 
rounding rules, this increase must be rounded to the nearest $1,000. 
Because this is the first time we have adjusted these CMPs, however, 
our adjustment cannot exceed 10% of the original CMP. Accordingly, 
we have increased the CMPs in sections 1464(v)(4) and 1467a(r)(1) by 
10%, resulting in new CMPs of $2,200.
    The $350 penalty in 42 U.S.C. 4012a(f) was enacted in the Riegle 
Community Development and Regulatory Improvement Act of 1994. Pub. 
L. No. 103-325, 108 Stat. 2160 (September 23, 1994). The CPI-U for 
June 1994 was 148.0. Dividing the CPI-U for June 1999 (166.2) by 
148.0 yields 1.1229. This factor applied to the $350 CMP yields 
$393, an increased penalty of $43. Under the rounding rules, this 
increase must be rounded to the nearest multiple of $100. Because 
the nearest multiple of $100 is zero, there is no adjustment.
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    Finally, we have moved the CMP inflation adjustment regulation from 
12 CFR Part 510 (Miscellaneous Organizational Regulations) to 12 CFR 
Part 509 (Rules of Practice and Procedure in Adjudicatory Proceedings). 
This relocation should make the chart easier to find.\5\
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    \5\ The other federal banking agencies include their CMP 
inflation adjustment regulations in their rules of practice and 
procedure. See 12 CFR 19.240 (Office of the Comptroller of the 
Currency); 12 CFR 263.65 (Federal Reserve); 12 CFR 308.116 and 
308.132 (Federal Deposit Insurance Corporation); 12 CFR 747.1001 
(National Credit Union Administration).
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III. Need for an 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.\6\ To issue a rule 
that is immediately effective, the agency must also find good cause for 
dispensing with the 30-day delay required by the Administrative 
Procedure Act.\7\ Moreover, section 302 of the Riegle Community 
Development and Regulatory Improvement Act of 1994 \8\ states that a 
final rule imposing new requirements must take effect on the first day 
of a calendar quarter following its publication. 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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    \6\ 5 U.S.C. 553(b).
    \7\ Id.
    \8\ 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, 2000. Agencies have no discretion as to the amount or 
timing of the adjustment. The regulation is ministerial, technical, and 
noncontroversial. 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.\9\ 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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    \9\ 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.

[[Page 61262]]

VI. Unfunded Mandates Act of 1995

    OTS had determined that the final rule will not result in 
expenditures by state, local, or tribal governments or by the private 
sector of $100 million or more. Accordingly, this rulemaking is not 
subject to section 202 of the Unfunded Mandates Act.

List of Subjects

12 CFR Part 509

    Administrative practice and procedure, Penalties.

12 CFR Part 510

    Administrative practice and procedure.

    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

    1. The authority citation for part 509 is revised 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.

    2. In Sec. 509.103, add paragraph (c) 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 monetary 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 17, 2000:

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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                   $2,200
                                      Condition--1st
                                      Tier.
12 U.S.C. 1464(v)(5)...............  Reports of                   22,000
                                      Condition--2nd
                                      Tier.
12 U.S.C. 1464(v)(6)...............  Reports of                1,175,000
                                      Condition--3rd
                                      Tier.
12 U.S.C. 1467(d)..................  Refusal to                    5,500
                                      Cooperate in Exam.
12 U.S.C. 1467a(i)(2)..............  Holding Company              27,500
                                      Act Violation.
12 U.S.C. 1467a(i)(3)..............  Holding Company              27,500
                                      Act Violation.
12 U.S.C. 1467a(r)(1)..............  Late/Inaccurate               2,200
                                      Reports--1st Tier.
12 U.S.C. 1467a(r)(2)..............  Late/Inaccurate              22,000
                                      Reports--2nd Tier.
12 U.S.C. 1467a(r)(3)..............  Late/Inaccurate           1,175,000
                                      Reports--3rd Tier.
12 U.S.C. 1817(j)(16)(A)...........  Change in Control--           5,500
                                      1st Tier.
12 U.S.C. 1817(j)(16)(B)...........  Change in Control--          27,500
                                      2nd Tier.
12 U.S.C. 1817(j)(16)(C)...........  Change in Control--       1,175,000
                                      3rd Tier.
12 U.S.C. 1818(i)(2)(A)............  Violation of Law              5,500
                                      or Unsafe or
                                      Unsound Practice--
                                      1st Tier.
12 U.S.C. 1818(i)(2)(B)............  Violation of Law             27,500
                                      or Unsafe or
                                      Unsound Practice--
                                      2nd Tier.
12 U.S.C. 1818(i)(2)(C)............  Violation of Law          1,175,000
                                      or Unsafe or
                                      Unsound Practice--
                                      3rd Tier.
12 U.S.C. 1884.....................  Violation of                    110
                                      Security Rules.
12 U.S.C. 3349(b)..................  Appraisals                    5,500
                                      Violation--1st
                                      Tier.
12 U.S.C. 3349(b)..................  Appraisals                   27,500
                                      Violation--2nd
                                      Tier.
12 U.S.C. 3349(b)..................  Appraisals                1,175,000
                                      Violation--3rd
                                      Tier.
42 U.S.C. 4012a(f).................  Flood Insurance...      350/115,000
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PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS

    3. The authority citation for part 510 continues to read as 
follows:

    Authority: 12 U.S.C. 1462a, 1463, 1464; Pub. L. 101-410, 104 
Stat. 890; Pub. L. 104-134, 110 Stat. 1321-358.


Sec. 510.6  [Removed]

    4. Section 510.6 is removed.


    Dated: October 4, 2000.
    By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 00-26336 Filed 10-16-00; 8:45 am]
BILLING CODE 6720-01-P