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Rule

Share Insurance Appeals; Clarification of Enforcement Authority of the NCUA Board

Action

Final Rule.

Summary

NCUA is issuing a final rule to implement amendments to the Federal Credit Union Act (FCU Act) made by the Financial Services Regulatory Relief Act of 2006 (Reg Relief Act) enacted by Congress on October 13, 2006. This final rule amends NCUA's regulations to assure they are consistent with the statutory changes made by the Reg Relief Act. The final rule adopts the amendments as stated in the interim final rule issued in November 2006. It clarifies: That an appeal from a final NCUA Board decision regarding share insurance coverage shall be to the appropriate Federal District Court; that the NCUA Board may terminate the share insurance of any insured credit union for violation of any condition imposed by the Board in connection with any action on any application, notice, or other request by the credit union or an institution-affiliated party; and that Orders of Suspension, Prohibition and Removal issued by the NCUA Board remain effective against institution-affiliated parties regardless of whether they remain institution-affiliated parties at the time the Order is considered or issued.

 

Table of Contents Back to Top

DATES: Back to Top

The interim rule is adopted as final April 9, 2007.

FOR FURTHER INFORMATION CONTACT: Back to Top

John K. Ianno, Senior Trial Attorney, Office of General Counsel, at the above address or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION: Back to Top

NCUA issued the interim rule published in the Federal Register on November 22, 2006 ( 71 FR 67439).

A. Overview of Comments Received Back to Top

NCUA received three comment letters regarding the interim final rule. Two were from national credit union trade associations and a third was from a state credit union league.

In general, each of the commenters agreed with the proposed changes. Two letters requested that NCUA provide examples or issue guidelines to explain the circumstances under which the NCUA Board might undertake formal administrative action in order to terminate the insured status of a credit union. The Board does not believe it would be helpful to try and enumerate the various situations when it might conclude that it is necessary to institute a formal administrative action against a particular credit union. Experience indicates that each case tends to be fact specific. There are many variables that influence a decision on what an appropriate course of action would be to correct a specific problem. Generally the Board will begin a formal administrative action such as termination of insurance only after it has exhausted other informal attempts to correct problems that have been identified. These less formal mechanisms include but are not limited to: (1) Action items contained in a document of resolution; (2) letters of understanding and agreement; (3) preliminary warning letters; and (4) cease and desist orders.

One commenter asked that the NCUA Board clarify the effective date of the change in venue for insurance appeals. The Board notes that when enacting the Reg Relief Act Congress did not indicate what venue would be appropriate for pending insurance appeals. Neither the text of the statute nor its legislative history clearly indicates whether petitions for review that were pending in the Courts of Appeal before the Act's passage should be reviewed in the District Courts under the new provision or remain in the Courts of Appeal under the old. Because there is no statutory provision that would allow a Court of Appeals to transfer a pending insurance appeal filed prior to the October 13, 2006 enactment of the statute, the Board believes that such cases should remain in the Court of Appeals. Venue for appeals of NCUA Board insurance determinations filed on or after that date shall be filed in the appropriate U.S. district court.

B. Insurance Appeals Back to Top

The Reg Relief Act amended section 207(d) of the FCU Act, which addresses the resolutions of disputes relating to any claim for insurance coverage.12 U.S.C. 1787(d). The final rule amends the provision in NCUA's regulations, 12 CFR 745.203(c), that sets forth the appropriate venue for seeking judicial review of a final determination by the Board relating to a claim for insurance coverage.

The current regulation provides for judicial review by the United States Court of Appeals for the District of Columbia or the court of appeals for the Federal circuit where the credit union's principal place of business is located. The final rule revises the regulation to reflect the statutory change that a final agency determination by the Board on a claim for insurance coverage is reviewable by the United States district court for the Federal judicial district where the principle place of business of the credit union is located.

C. Expansion of Enforcement Authority Back to Top

The Reg Relief Act amended three provisions of Section 206 of the FCU Act, 12 U.S.C. 1786, to broaden the NCUA Board's authority to take enforcement actions for violations of conditions imposed in any action on any application, notice, or other request by a credit union or an institution-affiliated party. Such violations can serve as a basis for cease and desist orders, removal and prohibition orders, and civil money penalties. Previously such enforcement actions could only be taken upon a violation of conditions imposed in “the granting of any application or other request by the credit union.” The amendments to Sections 747.1 and 202 of NCUA's Regulations conform the language of the regulation to that of the FCU Act as amended.

D. Clarification of Suspension, Prohibition and Removal Authority Back to Top

The Reg Relief Act amended Section 206(i)(1) of the FCU Act, 12 U.S.C. 1786(i)(1) to clarify the NCUA Board's authority to issue Orders against institution-affiliated parties regardless of whether they remain institution-affiliated parties of a credit union when the Order is considered or issued. The new statutory language makes clear that the NCUA Board has the authority to issue the Order even if the subject is no longer affiliated with the institution. The amendments to Sections 747.303 and 304 of NCUA's Regulations conform the language of the regulation to that of the FCU Act as amended.

Regulatory Procedures Back to Top

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 credit unions, defined as those under ten million dollars in assets. This rule clarifies NCUA's enforcement authority and identifies the appropriate venue for appeals of final share insurance determinations. It does not impose any additional regulatory burden. The interim final amendments 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 interim final rule would not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget. 44 U.S.C. 3501 et seq.; 5 CFR part 1320.

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. The final rule will not have substantial direct effects 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. NCUA has determined that this 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 well-being 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 (SBREFA), 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 APA. 5 U.S.C. 551. NCUA has requested a SBREFA determination from the Office of Management and Budget, which is pending. As required by SBREFA, NCUA will file the appropriate reports with Congress and the General Accounting Office so that the final rule may be reviewed.

List of Subjects Back to Top

begin regulatory text

Accordingly, NCUA adopts as final the interim rule amending 12 CFR parts 745 and 747.

end regulatory text

By the National Credit Union Administration Board on March 1, 2007.

Mary F. Rupp,

Secretary of the Board.

[FR Doc. E7-4225 Filed 3-8-07; 8:45 am]

BILLING CODE 7535-01-P

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