Rules of Practice and Procedure in Adjudicatory Proceedings; Civil Money Penalty Inflation Adjustment
Federal Register: October 27, 2008 (Volume 73, Number 208)
Rules and Regulations
Page 63625-63627
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DOCID:fr27oc08-4
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
Docket ID: OTS-2008-0013
RIN 1550-AC27
Rules of Practice and Procedure in Adjudicatory Proceedings;
Civil Money Penalty Inflation Adjustment
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Final rule.
SUMMARY: The Federal Civil Monetary Penalty Inflation Adjustment Act of 1990 requires all federal agencies with statutory authority to impose civil money penalties (CMPs) to evaluate and adjust those CMPs every four years. OTS last adjusted its CMP statutes in 2004. Consequently,
OTS is issuing this final rule to implement the required adjustments to
OTS's CMP statutes.
DATES: Effective Date: October 27, 2008.
FOR FURTHER INFORMATION CONTACT: Marvin L. Shaw, Senior Attorney, (202) 906-6639, Regulations and Legislation Division, Office of the Chief
Counsel, Office of Thrift Supervision, 1700 G Street, NW., Washington,
DC 20552.
SUPPLEMENTARY INFORMATION:
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Background
The Federal Civil Monetary Penalties Inflation Adjustment Act of 1990 \1\ (FCMPIAA) requires each agency to make inflationary adjustments to the CMPs in statutes that it administers.\2\ Under the
FCMPIAA, agencies must make those adjustments at least once every four years. OTS last adjusted its CMPs in 2004.\3\ OTS's civil money penalty adjustment regulation is 12 CFR 509.103. An increased CMP applies only to violations that occur after the increase takes effect.
\1\ 28 U.S.C. 2461 note.
\2\ Some of OTS's CMPs are in a commonly administered statute, 12 U.S.C. 1818. Each agency that administers that statute is making identical adjustments.
\3\ 12 CFR 509.103; 69 FR 64249 (November 4, 2004).
While the CMP statutes of many agencies provide for minimum and maximum penalty amounts, all of OTS's CMP statutes provide only for a daily maximum amount. Today's rule therefore refers only to maximum
CMPs. Today's increases in maximum CMPs may not necessarily affect the amount of any CMP that OTS may seek for a particular violation. OTS calculates each CMP on a case-by-case basis based upon a variety of factors (including the gravity of the violation, whether the violation was willful or recurring, and any harm to the depository institution).
As a result, the maximums merely serve as a cap.
Under the statute, the agency determines the inflation adjustment by increasing the maximum CMP by a ``cost-of-living'' adjustment. The
``cost-of-living'' adjustment is the percentage by which the Consumer
Price Index (CPI) for the month of June of the calendar year preceding the adjustment exceeds the CPI for the month of June of the calendar year in which the amount of the CMP was last set or adjusted. OTS must use the CPI for All Urban Consumers (CPI-U) published by the Department of Labor.\4\
\4 \ http://data.bls.gov/cgi-bin/surveymost.
The statute contains specific rules for rounding any increase.\5\
Agencies do not have discretion in choosing whether to adjust a maximum
CMP, how much to adjust a maximum CMP or the methods used to determine the adjustment.
\5\ 28 U.S.C. 2461 note specifies that ``Any increase determined under this subsection shall be rounded to the nearest--``(1) multiple of $10 in the case of penalties less than or equal to $100;
``(2) multiple of $100 in the case of penalties greater than $100 but less than or equal to $1,000; ``(3) multiple of $1,000 in the case of penalties greater than $1,000 but less than or equal to
$10,000; ``(4) multiple of $5,000 in the case of penalties greater than $10,000 but less than or equal to $100,000; ``(5) multiple of
$10,000 in the case of penalties greater than $100,000 but less than or equal to $200,000; and ``(6) multiple of $25,000 in the case of penalties greater than $200,000.''
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Summary of Calculation
To explain the inflation adjustment calculation, we will use the following example. Under 12 U.S.C. 1818(i), as adjusted under 12 CFR 509.103, OTS may impose a daily maximum third-tier CMP not to exceed
$1,250,000 for violations of certain banking laws.
First, we determine the appropriate CPI-Us. The statute requires
OTS to use the CPI-U for June of the calendar year preceding the year of adjustment. Here, because we are adjusting CMPs in 2008, we use the
CPI-U for June 2007, which was 208.4. We must also determine the CPI-U for June of the year the CMP was last set by law or adjusted for inflation. Because OTS last adjusted the CMPs under 12 U.S.C. 1818 in 2004, we use the CPI-U for June 2004, which was 189.7.
Second, we calculate the cost of living adjustment or inflation factor. To do this, we divide the CPI-U for June 2007 (208.4) by the
CPI-U for June 2004 (189.7). Our result is 1.098 (i.e., a 9.8 percent increase).\6\
\6\ A few CMPs were not adjusted for inflation in 2004. In such cases, the inflation factor is calculated from the time that CMP was last adjusted. For a CMP that was last adjusted in 2000, the inflation factor would be 20.9 percent. For a CMP that was last adjusted in 1996, the inflation factor would be 33 percent.
Third, we calculate the raw inflation adjustment. To do this, we multiply the maximum penalty amounts by the inflation factor. In our example, $1,250,000 multiplied by the inflation factor of 1.098 equals
$1,372,500.
Fourth, we round the raw inflation amounts according to the rounding rules in section 5(a) of the FCMPIAA. Since we round only the increased amount, we calculate the increased amount by the subtracting the current maximum penalty amounts from the raw maximum inflation adjustments. Accordingly, the increased amount for the maximum penalty in our example is $122,500 (i.e., $1,372,500 less $1,250,000). Under the rounding rules, if the penalty is greater than $200,000, we round the increase to the nearest multiple of $25,000. Therefore, the maximum penalty increase for our example is $125,000.
Fifth, we add the rounded increase to the maximum penalty amount last set or adjusted. In our example, $1,250,000 plus $125,000 yields a maximum inflation adjusted penalty amount of $1,375,000.\7\
\7\ Three CMPs are treated slightly differently because the statutorily mandated computation and the rounding rules did not result in any adjustment in 2004. Two of those penalties--12 U.S.C. 1464(v)(4) and 12 U.S.C. 1467a(r)(1)--were last adjusted in 2000.
For those two penalties, we compared the CPI-U for June 2000 (172.4) to the CPI-U for June 2007 (208.4), resulting in an inflation increase of 20.9%. The third penalty--12 U.S.C. 1984--was last adjusted in 1996. Accordingly, we compared the CPI-U for June 1996
(156.7) to the CPI-U for June 2007 (208.4), resulting in an inflation increase of 33%.
In addition, a new CMP related to post-employment restrictions for senior examiners in the amount of $275,000 has been added to the list of penalties (12 U.S.C. 1820(k)(6)(A)(ii)).
Page 63626
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Need for and Immediately Effective Final Rule
To issue a final rule without public notice and comment, an agency must find good cause that notice and comment are impracticable, unnecessary, or contrary to the public interest.\8\ Similarly, to issue a rule that is immediately effective, the agency must find good cause for dispensing with the 30-day delay required by the Administrative
Procedure Act.\9\ Moreover, section 302 of the Riegle Community
Development and Regulatory Improvement Act of 1994 \10\ requires that a regulation that imposes new requirements take effect on the first day of the quarter following publication of the final rule. That section provides, however, that an agency may determine that the rule should take effect earlier upon a finding of good cause.
\8\ 5 U.S.C. 553(b).
\9\ Id.
\10\ 12 U.S.C. 4802.
Under the statute, agencies must make the required CMP inflation adjustments: (1) According to the very specific formula in the statute; and (2) within four years of the last inflation adjustment, or by
October 31, 2008. Agencies have no discretion as to the amount or timing of the adjustment. The regulation is ministerial, technical, and noncontroversial. OTS is unable to vary the amounts of the adjustments to reflect any views or suggestions provided by commenters.
Accordingly, OTS believes that notice and comment are unnecessary. For these same reasons, OTS believes that there is good cause to make this rule effective immediately upon publication.
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Regulatory Flexibility Act
An initial regulatory flexibility analysis under the Regulatory
Flexibility Act (RFA) is required only when an agency must publish a general notice of proposed rulemaking.\11\ As already noted, OTS has determined that publication of a notice of proposed rulemaking is not necessary for this final rule. Accordingly, the RFA does not require an initial regulatory flexibility analysis. Nevertheless, OTS has considered the likely impact of the rule on small entities and believes that the rule will not have a significant impact on a substantial number of small entities.
\11\ 5 U.S.C. 603.
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Executive Order 12866
OTS has determined that this final rule does not constitute a
``significant regulatory action'' for purposes of Executive Order 12866.
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Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 104-4 (UMRA) requires that an agency prepare a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more (adjusted annually for inflation) in any one year. If a budgetary impact statement is required, section 205 of the UMRA also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. The OTS has determined that the rule will not result in expenditures by state, local, and tribal governments, or by the private sector, of $133 million or more. Accordingly, OTS has not prepared a budgetary impact statement or specifically addressed the regulatory alternatives considered
List of Subjects in 12 CFR Part 509
Administrative practice and procedure, Penalties. 0
Accordingly, OTS amends chapter V, title 12, Code of Federal
Regulations as set forth below.
PART 509--RULES OF PRACTICE AND PROCEDURE IN ADJUDICATORY
PROCEEDINGS 0 1. The authority citation for part 509 continues to read as follows:
Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 1464, 1467, 1467a, 1468, 1817(j), 1818, 3349, 4717; 15 U.S.C. 78(l), 78o-5, 78u-2; 28
U.S.C. 2461 note; 31 U.S.C. 5321; 42 U.S.C. 4012a. 0 2. Section 509.103(c) is revised to read as follows:
Sec. 509.103 Civil money penalties.
* * * * *
(c) Inflation adjustment. Under the Federal Civil Monetary
Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note), OTS must adjust for inflation the civil money penalties in statutes that it administers. The following chart displays the adjusted civil money penalties. The amounts in this chart apply to violations that occur after October 27, 2008:
New maximum
U.S. Code citation
CMP description
amount
12 U.S.C. 1464(v)(4).......... Reports of Condition--
$2,200 1st Tier. 12 U.S.C. 1464(v)(5).......... Reports of Condition--
32,500 2nd Tier. 12 U.S.C. 1464(v)(6).......... Reports of Condition--
1,375,000 3rd Tier. 12 U.S.C. 1467(d)............. Refusal to Cooperate
7,500 in Exam. 12 U.S.C. 1467a(i)(2)......... Holding Company Act
32,500
Violation. 12 U.S.C. 1467a(i)(3)......... Holding Company Act
32,500
Violation. 12 U.S.C. 1467a(r)(1)......... Late/Inaccurate
2,200
Reports--1st Tier. 12 U.S.C. 1467a(r)(2)......... Late/Inaccurate
32,500
Reports--2nd Tier. 12 U.S.C. 1467a(r)(3)......... Late/Inaccurate
1,375,000
Reports--3rd Tier. 12 U.S.C. 1817(j)(16)(A)...... Change in Control--
7,500 1st Tier. 12 U.S.C. 1817(j)(16)(B)...... Change in Control--
37,500 2nd Tier. 12 U.S.C. 1817(j)(16)(C)...... Change in Control--
1,375,000 3rd Tier. 12 U.S.C. 1818(i)(2)(A)....... Violation of Law or
7,500
Unsafe or Unsound
Practice--1st Tier. 12 U.S.C. 1818(i)(2)(B)....... Violation of Law or
37,500
Unsafe or Unsound
Practice--2nd Tier. 12 U.S.C. 1818(i)(2)(C)....... Violation of Law or
1,375,000
Unsafe or Unsound
Practice--3rd Tier. 12 U.S.C. 1820(k)(6)(A)(ii)... Violation of Post
275,000
Employment
Restrictions. 12 U.S.C. 1884................ Violation of Security
110
Rules. 12 U.S.C. 3349(b)............. Appraisals Violation--
7,500 1st Tier.
Page 63627
12 U.S.C. 3349(b)............. Appraisals Violation--
37,500 2nd Tier. 12 U.S.C. 3349(b)............. Appraisals Violation--
1,375,000 3rd Tier. 42 U.S.C. 4012a(f)............ Flood Insurance......
\1\ 385
\2\ 135,000
\1\ Per day.
\2\ Per year.
Dated: October 20, 2008.
By the Office of Thrift Supervision.
John M. Reich,
Director.
FR Doc. E8-25453 Filed 10-24-08; 8:45 am
BILLING CODE 6720-01-P
