65622 Federal Register / Vol. 66, No. 245 / Thursday, December 20, 2001 / Rules and Regulations

and payment records for employment

income.

Paragraph 34(b) Prohibited acts or

practices for dwelling-secured loans;

open-end credit.

1. Amount of credit extended. Where

a loan is documented as open-end credit

but the features and terms or other

circumstances demonstrate that it does

not meet the definition of open-end

credit, the loan is subject to the rules for

closed-end credit, including § 226.32 if

the rate or fee trigger is met. In applying

the triggers under § 226.32, the ‘‘amount

financed,’’ including the ‘‘principal loan

amount’’ must be determined. In making

the determination, the amount of credit

that would have been extended if the

loan had been documented as a closedend loan is a factual determination to be

made in each case. Factors to be

considered include the amount of

money the consumer originally

requested, the amount of the first

advance or the highest outstanding

balance, or the amount of the credit line.

The full amount of the credit line is

considered only to the extent that it is

reasonable to expect that the consumer

might use the full amount of credit.

* * * * *

Appendix H—Closed-End Model Forms

and Clauses

* * * * *

20. Sample H–16. This sample illustrates

the disclosures required under § 226.32(c).

The sample illustrates the amount borrowed

and the disclosures about optional insurance

that are required for mortgage refinancings

under § 226.32(c)(5). Creditors may, at their

option, include these disclosures for all loans

subject to § 226.32. The sample also includes

disclosures required under § 226.32(c)(3)

when the legal obligation includes a balloon

payment.

* * * * *

By order of the Board of Governors of the

Federal Reserve System, December 14, 2001.

Jennifer J. Johnson,

Secretary of the Board.

[FR Doc. 01–31264 Filed 12–19–01; 8:45 am]

BILLING CODE 6210–01–P

NATIONAL CREDIT UNION

ADMINISTRATION

12 CFR Parts 700, 701, 712, 715, 723,

725, and 790

Definitions; Organization and

Operation of Federal Credit Unions;

Credit Union Service Corporations;

Supervisory Committee Audits and

Verifications; Member Business

Loans; Central Liquidity Facility;

Description of NCUA

AGENCY: National Credit Union

Administration (NCUA).

ACTION: Final rule.

SUMMARY: NCUA is issuing a final rule

to amend various rules to make

technical corrections and add and revise

certain definitions. The Board is adding

a scope section and definitions of ‘‘paidin and unimpaired capital and surplus’’

and ‘‘unimpaired capital and surplus’’

to its rule containing definitions. The

Board also is removing obsolete

references from this rule and updating

the rule concerning changes in officials

of newly chartered or troubled credit

unions. The Board is correcting a

citation in the supervisory committee

rule and making clarifications to the

credit union service organization

(CUSO) rule and the member business

loan rule. In addition, the Board is

updating and clarifying the definition

for ‘‘paid-in and unimpaired capital and

surplus’’ in the Central Liquidity

Facility (CLF) rule. Finally, the Board is

changing a reference in Part 790 from

the ‘‘Office of Community Development

Credit Unions’’ to the ‘‘Office of Credit

Union Development.’’

DATES: This rule is effective January 22,

2002.

FOR FURTHER INFORMATION CONTACT:

Regina Metz, Staff Attorney, Division of

Operations, Office of General Counsel,

at the National Credit Union

Administration, 1775 Duke Street,

Alexandria, Virginia 22314–3428, or

telephone: (703) 518–6561; or Herbert S.

Yolles, Deputy Director, Office of

Examination and Insurance, at the same

address or telephone: (703) 518–6360.

SUPPLEMENTARY INFORMATION:

Background

On June 21, 2001, NCUA issued a

proposed rule on definitions and

technical corrections. 66 FR 33211, June

21, 2001. The proposed rule resulted

from NCUA’s policy of continually

reviewing its regulations to ‘‘update,

clarify and simplify existing regulations

and eliminate redundant and

unnecessary provisions.’’ Interpretive

Rulings and Policy Statement (IRPS) 87–

2, Developing and Reviewing

Government Regulations. The NCUA

Board is issuing the final rule

unchanged from the proposed rule.

The proposed rule replaced obsolete

references in two parts of NCUA’s

regulations related with new references

to prompt corrective action, section 216

of the Federal Credit Union Act. 12 CFR

700.1, 701.14. In the definitions part of

the regulations, the proposed rule added

a scope section and definitions for

‘‘paid-in and unimpaired capital and

surplus’’ and ‘‘unimpaired capital and

surplus.’’ 12 CFR part 700. The

proposed rule conformed definitions of

paid-in and unimpaired capital and

surplus in the CUSO and CLF rules to

the proposed definitions in the

definitions part. 12 CFR 712.2(d); 12

CFR 725.2(o). The proposed rule also

corrected a citation in the supervisory

committee audit rule and clarified the

member business loan rule by changing

a reference from ‘‘federally insured

credit unions’’ to ‘‘federally insured

state-chartered credit unions.’’ 12 CFR

715.2(l), 723.4. The proposed rule also

updated NCUA’s regulations by

changing a reference in Part 790 from

the ‘‘Office of Community Development

Credit Unions’’ to the office’s new

name, the ‘‘Office of Credit Union

Development.’’ The NCUA Board is

adopting all the proposed changes in the

final rule.

Summary of Comments

The NCUA Board requested comment

on all aspects of the proposed rule and

received three comment letters: One

from a national trade association, one

from a state trade association, and one

from a federal credit union (FCU). The

two trade associations supported the

proposal without qualification. The FCU

offered a substantive comment regarding

the definition of ‘‘paid-in and

unimpaired capital and surplus,’’

discussed below. NCUA received no

comment on the other provisions in the

proposed rule. This preamble does not

repeat discussions from the proposal for

those provisions and the NCUA Board

has adopted them as proposed.

‘‘Paid-in and Unimpaired Capital and

Surplus’’ and ‘‘Unimpaired Capital and

Surplus’’

To improve the clarity of NCUA’s

regulations, the Board proposed to

include definitions for ‘‘paid-in and

unimpaired capital and surplus’’ and

‘‘unimpaired capital and surplus’’ in the

general definitions part of the

regulations. The proposed rule defined

‘‘unimpaired capital and surplus’’ as

meaning the same as ‘‘paid-in and

unimpaired capital and surplus’’ and

Federal Register / Vol. 66, No. 245 / Thursday, December 20, 2001 / Rules and Regulations 65623

cross-referenced its definition. The

proposed definition for ‘‘paid-in and

unimpaired capital and surplus’’ was a

refined statement of the definitions

currently in the FCU Bylaws, but did

not change the meaning of those

definitions or the agency’s long-standing

interpretation.

The proposed definition for paid-in

and unimpaired capital and surplus was

shares plus post-closing, undivided

earnings. The preamble to the proposed

rule stated that the term ‘‘post-closing’’

was simpler terminology that a credit

union person, an examiner, and an

accounting professional would

understand to encompass the closing of

the books and posting of all relevant and

required period losses to undivided

earnings. Post-closing undivided

earnings incorporates and means the

same as the language in the Bylaw

provisions that define surplus (‘‘after all

losses have been provided for and net

earnings or net losses have been added

thereto or deducted therefrom’’) and

define unimpaired capital (‘‘less any

losses that may have been incurred for

which there is no reserve or which have

not been charged against undivided

earnings’’). The proposed definition

further clarified the meaning of paid-in

and unimpaired capital and surplus by

including the statement that: ‘‘This does

not include regular reserves or special

reserves required by law, regulation or

special agreement between the credit

union and its regulator or share

insurer.’’

Amendment to Definition of ‘‘Paid-in

and Unimpaired Capital and Surplus’’

in the CLF Rule

As stated in the proposed rule, the

CLF is a mixed-ownership government

corporation created to improve the

general financial stability of credit

unions by meeting their liquidity needs.

12 CFR 725.1. Both state-chartered and

federally-chartered credit unions may

become members. 12 CFR 725.3. The

Board proposed to revise the current

definition in the CLF rule for paid-in

and unimpaired capital and surplus.

The current CLF rule combines the

definition for paid-in and unimpaired

capital in the FCU Bylaws with the

definition of surplus in the FCU Bylaws

and is substantively identical to those

provisions. 12 CFR 725.2(o). The current

definition includes deposits because

some state-chartered credit unions are

authorized to accept deposits.

The proposed rule defined paid-in

and unimpaired capital and surplus in

the CLF rule as shares and deposits plus

post-closing, undivided earnings. The

proposed definition further stated that

the term does not include regular

reserves or special reserves required by

law, regulation or special agreement

between the credit union and its

regulator or share insurer.

Comments on the Definitions of ‘‘Paidin and Unimpaired Capital and

Surplus’’

One commenter expressed the view

that the NCUA should simplify the

general definition of ‘‘paid-in and

unimpaired capital and surplus’’ to

‘‘shares and deposits plus

unappropriated earnings,’’ in order to

include the concept of ‘‘unrealized gains

or losses on investments’’ as part of

‘‘unappropriated earnings.’’ The Board

disagrees. The Board’s view is that

‘‘unappropriated earnings’’ are

equivalent to ‘‘undivided earnings,’’ and

neither term includes unrealized gains

or losses on investments, since these

amounts are not yet earned or realized.

Thus, the final rule uses the term

‘‘undivided earnings.’’

Regarding the commenter’s suggestion

that the general definition include

deposits, for the reasons stated in the

proposed rule, only the CLF definition

of ‘‘paid-in and unimpaired capital and

surplus’’ includes deposits. The general

definition does not include them in the

final rule.

Regulatory Procedures

Regulatory Flexibility Act

The Regulatory Flexibility Act

requires NCUA to prepare an analysis to

describe any significant economic

impact a rule may have on a substantial

number of small entities (primarily

those under one million dollars in

assets). The final rule will not have a

significant economic impact on a

substantial number of small credit

unions, and therefore, a regulatory

flexibility analysis is not required.

Paperwork Reduction Act

NCUA has determined that the final

rule would not increase paperwork

requirements under the Paperwork

Reduction Act of 1995 and regulations

of the Office of Management and

Budget.

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,

NCUA, an independent regulatory

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

voluntarily complies with the executive

order. This final rule would not have

substantial direct effects on the states,

on the relationship between the national

government and the states, or on the

distribution of power and

responsibilities among the various

levels of government. NCUA has

determined that this final rule does not

constitute a policy that has federalism

implications for purposes of the

executive order.

The Treasury and General Government

Appropriations Act, 1999—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,

Pub. L. 105–277, 112 Stat. 2681 (1998).

Small Business Regulatory Enforcement

Fairness Act

The Small Business Regulatory

Enforcement Fairness Act of 1996 (Pub.

L. 104–121) provides generally for

congressional review of agency rules. A

reporting requirement is triggered in

instances where NCUA issues a final

rule as defined by Section 551 of the

Administrative Procedures Act. 5 U.S.C.

551. The Office of Management and

Budget concurred with NCUA’s opinion

that the final rule does not constitute a

major rule, for purposes of the Small

Business Regulatory Enforcement

Fairness Act of 1996.

Agency Regulatory Goal

NCUA’s goal is to promulgate clear

and understandable regulations that

impose minimal regulatory burden.

NCUA requested comments on whether

its proposed rule was understandable

and minimally intrusive, but received

no comments in response to this

request.

List of Subjects

12 CFR Part 700

Credit unions, Definitions.

12 CFR Part 701

Credit unions.

12 CFR Part 712

Credit unions, Credit union service

organizations.

12 CFR Part 715

Audits, Credit unions, Supervisory

committees.

12 CFR Part 723

Credit, Credit unions.

12 CFR Part 725

Credit unions, Liquidity.

12 CFR Part 790

Credit unions.

65624 Federal Register / Vol. 66, No. 245 / Thursday, December 20, 2001 / Rules and Regulations

By the National Credit Union

Administration Board on December 13, 2001.

Becky Baker,

Secretary of the Board.

Accordingly, the NCUA amends 12

CFR parts 700, 701, 715, 723, 725, and

790 as follows:

PART 700—DEFINITIONS

1. The authority citation for part 700

continues to read as follows:

Authority: 12 U.S.C. 1752, 1757(6), 1766.

2. Redesignate current § 700.1 as

§ 700.2 and add a new § 700.1 to read

as follows:

§ 700.1 Scope.

The definitions in § 700.2 apply to

terms used in this chapter. Many

additional definitions appear in the

parts where the terms are used.

3. In newly redesignated § 700.2:

A. Remove paragraphs (h) and (j);

B. Redesignate paragraphs (e), (f), (g),

and (i), as paragraphs (g), (h), (i), and (e)

respectively; and

C. Add new paragraphs (f) and (j), to

read as follows:

§ 700.2 Definitions.

* * * * *

(f) Paid-in and unimpaired capital

and surplus means shares plus postclosing, undivided earnings. This does

not include regular reserves or special

reserves required by law, regulation or

special agreement between the credit

union and its regulator or share insurer.

‘‘Paid-in and unimpaired capital and

surplus’’ for purposes of the Central

Liquidity Facility is defined in

§ 725.2(o) of this chapter.

* * * * *

(j) Unimpaired capital and surplus

means the same as ‘‘paid-in and

unimpaired capital and surplus,’’ as

defined in paragraph (f) of this section.

* * * * *

PART 701—ORGANIZATION AND

OPERATION OF FEDERAL CREDIT

UNIONS

4. The authority citation for part 701

continues to read as follows:

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

1757, 1759, 1761a, 1761b, 1766, 1767, 1782,

1784, 1787, and 1789. Section 701.6 is also

authorized by 31 U.S.C. 3717. Section 701.31

is also authorized by 15 U.S.C. 1601 et seq.,

42 U.S.C. 1861 and 42 U.S.C. 3601–3610.

Section 701.35 is also authorized by 42

U.S.C. 4311–4312.

5. In § 701.14, revise paragraphs

(b)(3)(ii) and (b)(4)(ii) to read as follows:

§ 701.14 Change in official or senior

executive officer in credit unions that are

newly chartered or are in troubled

condition.

* * * * *

(b) * * *

(3) * * *

(ii) Has been granted assistance as

outlined under sections 208 or 216 of

the Federal Credit Union Act.

(4) * * *

(ii) Has been granted assistance as

outlined under sections 208 or 216 of

the Federal Credit Union Act.

* * * * *

PART 712—CREDIT UNION SERVICE

ORGANIZATIONS (CUSOs)

6. The authority citation for part 712

continues to read as follows:

Authority: 12 U.S.C. 1756, 1757(5)(d) and

(7)(I), 1766, 1782, 1784, 1785, and 1786.

7. Amend § 712.2 by revising

paragraph (d) to read as follows:

§ 712.2 How much can an FCU invest in or

loan to CUSOs, and what parties may

participate?

* * * * *

(d) Measurement for calculating

regulatory limitation. For purposes of

paragraphs (a) and (b) of this section:

(1) Paid-in and unimpaired capital

and surplus means shares plus postclosing, undivided earnings (this does

not include regular reserves or special

reserves required by law, regulation or

special agreement between the credit

union and its regulator or share insurer);

and

(2) Total investments in and total

loans to CUSOs will be measured

consistent with GAAP.

* * * * *

PART 715—SUPERVISORY

COMMITTEE AUDITS AND

VERIFICATIONS

8. Revise the authority citation for

part 715 to read as follows:

Authority: 12 U.S.C. 1761(b), 1761d,

1782(a)(6).

9. Amend § 715.2(l) by revising the

first sentence to read as follows:

§ 715.2 Definitions used in this part.

* * * * *

(l) Supervisory committee refers to a

supervisory committee as defined in

Section 111(b) of the Federal Credit

Union Act, 12 U.S.C. 1761(b). * * *

* * * * *

PART 723—MEMBER BUSINESS

LOANS

10. The authority citation for part 723

continues to read as follows:

Authority: 12 U.S.C. 1756, 1757, 1757A,

1766, 1785, 1789.

11. Amend § 723.4 by revising the

second sentence to read as follows:

§ 723.4 What are the other applicable

regulations?

* * * Except as required by part 741 of

this chapter, federally insured statechartered credit unions are not required

to comply with the provisions of

§ 701.21(a) through (g) of this chapter.

PART 725—NATIONAL CREDIT UNION

ADMINISTRATION CENTRAL

LIQUIDITY FACILITY

12. The authority citation for part 725

continues to read as follows:

Authority: 12 U.S.C. 1795–1795f.

13. Amend § 725.2 by revising

paragraph (o) to read as follows:

§ 725.2 Definitions.

* * * * *

(o) Paid-in and unimpaired capital

and surplus means shares and deposits

plus post-closing, undivided earnings.

This does not include regular reserves

or special reserves required by law,

regulation or special agreement between

the credit union and its regulator or

share insurer.

* * * * *

PART 790—DESCRIPTION OF NCUA;

REQUESTS FOR AGENCY ACTION

14. The authority citation for part 790

continues to read as follows:

Authority: 12 U.S.C. 1766, 1789, 1795f.

15. Amend § 790.2(b)(13) by revising

the heading to read as follows:

§ 790.2 Central and regional office

organization.

* * * * *

(b) * * *

(13) Office of Credit Union

Development. * * *

* * * * *

[FR Doc. 01–31286 Filed 12–19–01; 8:45 am]

BILLING CODE 7535–01–U