This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

51241 

Vol. 70, No. 167 

Tuesday, August 30, 2005 

1See Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992, Pub. L. 102–550, 

Title XIII, Section 1301, Oct. 28, 1992, 106 Stat. 

3672, 3941–4012 (codified at 12 U.S.C. 4501 et 

seq.). 

2See Federal Home Loan Mortgage Corporation 

Act, 12 U.S.C. 1451 et seq.; Federal National 

Mortgage Association Charter Act, 12 U.S.C. 1716 

et seq.; Act at 12 U.S.C. 4561–67, 4562 note. 

3See Pub. L. No. 102–550, Title XIII, Section 1313 

and 1371–1379B (Subtitle C—Enforcement 

Provisions) (codified at 12 U.S.C. 4513 and 4631– 

4641, respectively). 

4See 12 CFR 1780.1 

5See 28 U.S.C. 2461 note. 

6See 62 FR 68152, December 31, 1997. 7See 66 FR 709, Jan. 4, 2001. 

8The Inflation Adjustment Act specifically 

identifies the Consumer Price Index for All Urban 

Consumers published by the United States 

Department of Labor (CPI–U). The Department of 

Labor (DOL) computes the CPI–U using two 

different base time periods, 1967 and 1982–1984. 

The Inflation Adjustment Act does not specify 

which of these base periods should be used to 

calculate the inflation adjustment. OFHEO 

calculated the initial adjustment of its CMPs using 

CPI–U data with the 1967 base period. OFHEO is 

using CPI–U data with the 1982–1984 base period 

for the adjustments adopted in this final rule, 

because such data now reflect the most current 

method of computing the CPI–U. 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Office of Federal Housing Enterprise 

Oversight 

12 CFR Part 1780 

RIN 2550–AA17 

Rules of Practice and Procedure; Civil 

Money Penalty Inflation Adjustment 

AGENCY: Office of Federal Housing 

Enterprise Oversight, HUD. 

ACTION: Final rule. 

SUMMARY: The Office of Federal Housing 

Enterprise Oversight is issuing this final 

rule amending its rules of practice and 

procedure to adjust each civil money 

penalty within its jurisdiction to 

account for inflation, pursuant to the 

Federal Civil Penalties Inflation 

Adjustment Act of 1990, as amended by 

the Debt Collection Improvement Act of 

1996. 

DATES: This rule is effective on August 

30, 2005. 

FOR FURTHER INFORMATION CONTACT: 

David W. Roderer, Deputy General 

Counsel, at (202) 414–3804; Charlotte A. 

Reid, Associate General Counsel, at 

(202) 414–3810; or Frank R. Wright, 

Senior Counsel, at (202) 414–6439 (not 

toll-free numbers); Office of Federal 

Housing Enterprise Oversight, Fourth 

Floor, 1700 G Street, NW., Washington, 

DC 20552. The telephone number for 

the Telecommunications Device for the 

Deaf is: (800) 877–8339 (TDD only). 

SUPPLEMENTARY INFORMATION

Background 

The Office of Federal Housing 

Enterprise Oversight (OFHEO), an 

independent office within the 

Department of Housing and Urban 

Development (HUD), is the exclusive 

financial safety and soundness regulator 

of the Federal National Mortgage 

Association (Fannie Mae) and the 

Federal Home Loan Mortgage 

Corporation (Freddie Mac) (collectively, 

the Enterprises) under the Federal 

Housing Enterprises Financial Safety 

and Soundness Act of 1992 (Act), as 

amended.1 The Enterprises are 

government-sponsored corporations 

chartered to provide liquidity to the 

residential mortgage market and to 

promote the availability of mortgage 

credit by investing in residential 

mortgages and guaranteeing securities 

backed by residential mortgages.2

OFHEO oversees the Enterprises to 

ensure that they remain adequately 

capitalized and operate in a safe and 

sound manner and in accordance with 

applicable laws, rules and regulations. 

To that end OFHEO is vested with broad 

supervisory discretion and specific civil 

administrative enforcement powers, 

similar to such authority granted by 

Congress to the Federal bank regulatory 

agencies.3 In particular, section 1376 of 

the Act (12 U.S.C. 4636) empowers 

OFHEO to impose civil money penalties 

under specific conditions. OFHEO’s 

Rules of Practice and Procedure (12 CFR 

part 1780) govern cease and desist 

proceedings, civil money penalty 

assessment proceedings and other 

administrative adjudications.4

The Inflation Adjustment Act 

The Federal Civil Penalties Inflation 

Adjustment Act of 1990, as amended by 

the Debt Collection Improvement Act of 

1996 (the Inflation Adjustment Act) 

requires OFHEO, as well as other 

Federal agencies with the authority to 

issue civil money penalties (CMPs), to 

publish regulations to adjust the 

maximum amount of each CMP 

authorized by law that the agency has 

jurisdiction to administer.5 The 

Inflation Adjustment Act required 

agencies to make an initial adjustment 

of their CMPs upon the statute’s 

enactment, and further requires agencies 

to make additional adjustments on an 

ongoing basis, every four years 

following the initial adjustment. The 

purpose of these periodic adjustments is 

to maintain the deterrent effect of CMPs 

and promote compliance with the law. 

Subpart E of OFHEO’s Rules of Practice 

and Procedure sets forth the Civil 

Money Penalty Inflation Adjustment 

amounts and discusses their 

applicability. See 12 CFR parts 1780.80– 

81. 

As required, OFHEO made the initial 

adjustment to the maximum civil money 

penalty amounts in 1997, and provided 

that such adjustments were applicable 

to any violation occurring after October 

23, 1996 (the effective date of the 

Inflation Adjustment Act).6 The last 

adjustment was made in 2000, effective 

January 4, 2001.7 OFHEO again is 

amending the maximum civil money 

penalty amount for each tier that 

OFHEO has authority to impose under 

12 U.S.C. 4636 in accordance with the 

Inflation Adjustment Act. 

Under the Inflation Adjustment Act, 

the inflation adjustment for each 

applicable CMP is determined by 

increasing the maximum CMP amount 

per violation by a cost-of-living 

adjustment. As is described in detail 

below, the Inflation Adjustment Act 

provides that this cost-of-living 

adjustment is to reflect the percentage 

increase in the Consumer Price Index 

since the CMPs were last adjusted or 

established, and rounded in accordance 

with rules provided in the statute.8

Description of the Rule 

This final rule adjusts the maximum 

penalty amount within each of the three 

tiers specified in 12 U.S.C. 4636 by 

amending the table contained in 12 CFR 

part 1780.80 to reflect the new adjusted 

maximum penalty amount that OFHEO 

51242 Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 

9See, e.g., 12 CFR part 1780.1(c). 

10See 66 FR 709, Jan. 4, 2001; 62 FR 68152, Dec. 

31, 1997. 

11OFHEO’s last round of adjustments in 2000 

applied an inflation factor of 3.7 percent, calculated 

by comparing June 1997 data to June 1999 data. The 

1997 data was used as the base period in 

accordance with the Inflation Adjustment Act’s 

directive to use CPI–U data from the year of the 

CMP’s previous adjustment. The resulting penalty 

was then rounded in accordance with the statutory 

rules described below. 66 FR 709, January 4, 2001. 

Although the adjustment is being made in calendar 

year 2005, the resulting CMP increases do not take 

effect until publication of the rule, and will only 

apply to conduct occurring after such data. 

12The statute’s rounding rules require that each 

increase be rounded to the nearest multiple as 

follows: $10 in the case of penalties less than or 

equal to $100; $100 in the case of penalties greater 

than $100 but less than or equal to $1,000; $1,000 

in the case of penalties greater than $1,000 but less 

than or equal to $10,000; $5,000 in the case of 

penalties greater than $10,000 but less than or equal 

to $100,000; $10,000 in the case of penalties greater 

than $100,000 but less than or equal to $200,000; 

and $25,000 in the case of penalties greater than 

$200,000. 

may impose upon an executive officer 

or director or an Enterprise within each 

tier. The increases in maximum penalty 

amounts contained in this final rule 

may not necessarily affect the amount of 

any CMP that OFHEO may seek for a 

particular violation; OFHEO would 

calculate each CMP on a case-by-case 

basis in light of a variety of factors.9

The Inflation Adjustment Act directs 

federal agencies to calculate each CMP 

adjustment as the percentage by which 

the CPI–U for June of the calendar year 

preceding the adjustment exceeds the 

CPI–U for June of the calendar year in 

which the amount of each CMP was last 

adjusted. The CMP for Third Tier 

penalties by an Enterprise was adjusted 

in 2000, and every other CMP was last 

adjusted in 1997.10 Since OFHEO is 

making this round of adjustments in 

calendar year 2005, and OFHEO made 

the last round of adjustments in 

calendar year 2000, the inflation 

adjustment amount for each CMP that 

was adjusted in 2000 was calculated by 

comparing the CPI–U for June 2000 

(172.4) with the CPI–U for June 2004 

(189.7), resulting in an inflation 

adjustment of 10.0 percent.11 For each 

CMP that was last adjusted in 1997, the 

inflation adjustment amount was 

calculated by comparing the CPI–U for 

June 1997 (160.3) with the CPI–U for 

June 2004 (189.7), resulting in an 

inflation adjustment of 18.3 percent. For 

each CMP, the product of this inflation 

adjustment and the previous maximum 

penalty amount was then rounded in 

accordance with the specific 

requirements of the Inflation 

Adjustment Act, and was then summed 

with the previous maximum penalty 

amount to determine the new adjusted 

maximum penalty amount.12 The table 

below sets out these items accordingly. 

U.S. code citation Description 

Previous 

maximum 

penalty 

amount 

Inflation 

increase 

Rounded 

inflation 

increase 

New adjusted maximum penalty amount 

12 U.S.C. 4636(b)(1) .............. First Tier ..................................................................... 5,500 1,006 .50 1,000 6,500 

12 U.S.C. 4636(b)(2) .............. Second Tier (Executive Officer or Director) ............... 11,000 2,013 0 11,000 

12 U.S.C. 4636(b)(2) .............. Second Tier (Enterprise) ............................................ 27,500 5,032 .50 5,000 32,500 

12 U.S.C. 4636(b)(3) .............. Third Tier (Executive Officer or Director) ................... 110,000 20,130 20,000 130,000 

12 U.S.C. 4636(b)(3) .............. Third Tier (Enterprise) ................................................ 1,150,000 115,000 125,000 1,275,000 

Section 1780.81 states that the 

adjustments made in § 1780.80 apply 

only to violations that occur after the 

effective date, August 30, 2005. 

Public Notice and Comment and 

Delayed Effective Date Not Required 

OFHEO finds good cause that notice 

and an opportunity to comment on this 

document are unnecessary under the 

Administrative Procedure Act, 5 U.S.C. 

551–559, as amended (APA). This 

rulemaking conforms with and is 

consistent with the statutory directive 

set forth in the Inflation Adjustment 

Act, with no issues of policy discretion, 

and public comment is impracticable 

and unnecessary. Accordingly, OFHEO 

is issuing the amendments as a final 

rule. 

In addition, OFHEO finds good cause 

to make this rule effective upon 

publication of this document in the 

Federal Register under the APA. See 5 

U.S.C. 553(d). This final rule does not 

impose any additional responsibilities 

on any entity. Instead, it simply adjusts 

the amount of each CMP tier as dictated 

by the Inflation Adjustment Act. 

Regulatory Impact 

Executive Order 12866, Regulatory 

Planning and Review 

This final rule is not classified as a 

significant rule under Executive Order 

12866 because it will not result in an 

annual effect on the economy of $100 

million or more or a major increase in 

costs or prices for consumers, 

individual industries, Federal, State, or 

local government agencies, or 

geographic regions; or have significant 

adverse effects on competition, 

employment, investment, productivity, 

innovation, or on the ability of United 

States-based Enterprises to compete 

with foreign-based enterprises in 

domestic or foreign markets. 

Accordingly, no regulatory impact 

assessment is required and this final 

rule has not been submitted to the 

Office of Management and Budget for 

review. 

Unfunded Mandates Reform Act of 1995 

This final rule does not include a 

Federal mandate that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100,000,000 or more 

(adjusted annually for inflation) in any 

one year. As a result, the final rule does 

not warrant the preparation of an 

assessment statement in accordance 

with the Unfunded Mandates Reform 

Act of 1995. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) only applies to rules 

for which an agency publishes a general 

notice of proposed rulemaking pursuant 

to 5 U.S.C. 553(b) (see 5 U.S.C. 601(2)). 

OFHEO has determined for good cause 

that the APA does not require a general 

notice of proposed rulemaking for this 

regulatory action. The Regulatory 

Flexibility Act does not apply to this 

final rule. 

Paperwork Reduction Act of 1995 

The rule contains no information 

collection requirements that require the 

approval of the Office of Management 

and Budget pursuant to the Paperwork 

Reduction Act, 44 U.S.C. 3501–3520. 

List of Subjects in 12 CFR Part 1780 

Administrative practice and 

procedure, Penalties. 

■ Accordingly, for the reasons set out in 

the preamble, the Office of Federal 

Federal Register / Vol. 70, No. 167 / Tuesday, August 30, 2005 / Rules and Regulations 51243 

Housing Enterprise Oversight hereby 

amends 12 CFR part 1780 as follows: 

PART 1780—RULES OF PRACTICE 

AND PROCEDURE 

■ 1. The authority citation for part 1780 

is revised to read as follows: 

Authority: 12 U.S.C. 4501, 4513(b), 4517, 

4521, 4631–4641. 

■ 2. Revise Subpart E of part 1780 to 

read as follows: 

Subpart E—Civil Money Penalty 

Inflation Adjustments 

§ 1780.80 Inflation adjustments. 

The maximum amount of each civil 

money penalty within OFHEO’s 

jurisdiction is adjusted in accordance 

with the Federal Civil Penalties 

Inflation Adjustment Act of 1990, as 

amended by the Debt Collection 

Improvement Act of 1996 (28 U.S.C. 

2461 note) as follows: 

U.S. code citation Description 

New adjusted 

maximum 

penalty amount 

12 U.S.C. 4636(b)(1) ................................. First Tier ................................................................................................................... 6,500 

12 U.S.C. 4636(b)(2) ................................. Second Tier (Executive Officer or Director) ............................................................ 11,000 

12 U.S.C. 4636(b)(2) ................................. Second Tier (Enterprise) ......................................................................................... 32,500 

12 U.S.C. 4636(b)(3) ................................. Third Tier (Executive Officer or Director) ................................................................ 130,000 

12 U.S.C. 4636(b)(3) ................................. Third Tier (Enterprise) ............................................................................................. 1,275,000 

§ 1780.81 Applicability. 

The inflation adjustments in § 1780.80 

apply to civil money penalties assessed 

in accordance with the provisions of 12 

U.S.C. 4636 for violations occurring 

after the effective date, August 30, 2005. 

Dated: August 25, 2005. 

Stephen A. Blumenthal, 

Acting Director, Office of Federal Housing 

Enterprise Oversight. 

[FR Doc. 05–17232 Filed 8–29–05; 8:45 am] 

BILLING CODE 4220–01–U 

SMALL BUSINESS ADMINISTRATION 

13 CFR Parts 121, 124, 125 and 126 

RIN 3245–AF31 

HUBZone, Government Contracting, 

8(a) Business Development and Small 

Business Size Standard Programs 

AGENCY: U.S. Small Business 

Administration (SBA). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: This interim rule amends 

SBA’s HUBZone, 8(a) Business 

Development, Government Contracting 

and Size Standard regulations to 

implement provisions of the Small 

Business Act including the 

Consolidated Appropriations Act, 2005, 

specifically, Subtitle E of Division K 

entitled the Small Business 

Reauthorization and Manufacturing 

Assistance Act of 2004. Consistent with 

the new statutory requirements under 

Subtitle E, this interim rule: Amends the 

definitions of the terms ‘‘business 

concern,’’ ‘‘affiliation,’’ ‘‘HUBZone 

small business concern’’ and ‘‘qualified 

HUBZone small business concern;’’

amends the HUBZone eligibility 

requirements for tribally-owned 

HUBZone concerns; extends qualified 

HUBZone areas to include military base 

closure areas for a period of five years; 

revises the definition of a ‘‘qualified 

non-metropolitan county;’’ extends the 

redesignation period for HUBZone areas 

through the release of the 2010 census 

data; and provides a five percent 

HUBZone evaluation price preference 

for agricultural commodities in 

international food aid procurements. 

Pursuant to the Administrative 

Procedure Act, SBA has determined that 

there is good cause to issue this rule as 

an interim rule with an immediate 

effective date. However, SBA 

encourages and will consider all timely 

public comments in developing the final 

rule. 

DATES: This interim rule is effective 

August 30, 2005. Comments must be 

received on or before October 31, 2005. 

ADDRESSES: You may submit comments, 

identified by RIN #3245–AF31, by any 

of the following methods: 

Internet: http://www.regulations.gov. 

Follow the instructions for submitting 

comments. E-mail: hubzone@sba.gov. 

Fax: (202) 481–5593. 

Mail or Hand Deliver: Michael 

McHale, Associate Administrator for the 

HUBZone Program, 409 Third Street, 

SW., Washington, DC, 20416. 

FOR FURTHER INFORMATION CONTACT: 

Sheryl J. Swed, Office of Government 

Contracting, at (202) 205–6413 or by 

e-mail at: sheryl.swed@sba.gov. 

SUPPLEMENTARY INFORMATION: 

A. Statutory Authority 

On December 8, 2004, the President 

signed into law the Consolidated 

Appropriations Act, 2005, Public Law 

108–447 which contained the Small 

Business Reauthorization and 

Manufacturing Assistance Act of 2004 

(the Reauthorization Act). Subtitle E of 

the Reauthorization Act amended 

certain provisions of the Small Business 

Act, 15 U.S.C. 631 et. seq., that govern 

the HUBZone program and the 

definition of small agricultural 

cooperative. 

1. Section 151 of the Reauthorization 

Act 

In particular, Section 151 of the 

Reauthorization Act relaxed the 

statutory requirement that a HUBZone 

small business concern (SBC) must be 

entirely owned by U.S. citizens. 

Congress concluded that this statutory 

mandate precluded small business 

owners from taking advantage of 

available forms of business 

organizations that limit the personal 

liability of business owners. It also 

precluded ownership by small 

agricultural cooperatives that operate in 

rural HUBZones, and thereby deprived 

those communities of the economic 

benefits of increased HUBZone 

contracting opportunities. 

As a result, Section 151 of the 

Reauthorization Act amended the 

definition of ‘‘HUBZone SBC’’ in section 

3(p)(3)(A) of the Small Business Act, 15 

U.S.C 632(p)(3)(A), to require that SBCs 

eligible for HUBZone certification be 51 

percent (instead of 100 percent) owned 

and controlled by U.S. citizens. It also 

added a new section 3(p)(3)(E) to the 

Small Business Act, 15 U.S.C 

632(p)(3)(E), to include as HUBZone 

SBCs small agricultural cooperatives or 

SBCs wholly or partially-owned by 

small agricultural cooperatives 

organized and incorporated in the 

United States. Also in connection with 

agricultural cooperatives, Section 151 

further amended Section 3(j) of the 

Small Business Act, 15 U.S.C. 632(j), to 

require that small agricultural 

cooperatives be treated as business 

concerns for purposes of the Small