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Rules of Practice and Procedure in Adjudicatory Proceedings; Civil Money Penalty Inflation Adjustment

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Office of Thrift Supervision, Treasury.


Final rule.


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.


Effective Date: October 27, 2008.

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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.

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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 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.

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]

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.

II. 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]

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]

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III. 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.

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.

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.[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.

V. Executive Order 12866

OTS has determined that this final rule does not constitute a “significant regulatory action” for purposes of Executive Order 12866.

VI. 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

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List of Subjects in 12 CFR Part 509

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Accordingly, OTS amends chapter V, title 12, Code of Federal Regulations as set forth below.

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1. The authority citation for part 509 continues to read as follows:

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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.

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2. Section 509.103(c) is revised to read as follows:

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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:

U.S. Code citationCMP descriptionNew maximum amount
12 U.S.C. 1464(v)(4)Reports of Condition—1st Tier$2,200
12 U.S.C. 1464(v)(5)Reports of Condition—2nd Tier32,500
12 U.S.C. 1464(v)(6)Reports of Condition—3rd Tier1,375,000
12 U.S.C. 1467(d)Refusal to Cooperate in Exam7,500
12 U.S.C. 1467a(i)(2)Holding Company Act Violation32,500
12 U.S.C. 1467a(i)(3)Holding Company Act Violation32,500
12 U.S.C. 1467a(r)(1)Late/Inaccurate Reports—1st Tier2,200
12 U.S.C. 1467a(r)(2)Late/Inaccurate Reports—2nd Tier32,500
12 U.S.C. 1467a(r)(3)Late/Inaccurate Reports—3rd Tier1,375,000
12 U.S.C. 1817(j)(16)(A)Change in Control—1st Tier7,500
12 U.S.C. 1817(j)(16)(B)Change in Control—2nd Tier37,500
12 U.S.C. 1817(j)(16)(C)Change in Control—3rd Tier1,375,000
12 U.S.C. 1818(i)(2)(A)Violation of Law or Unsafe or Unsound Practice—1st Tier7,500
12 U.S.C. 1818(i)(2)(B)Violation of Law or Unsafe or Unsound Practice—2nd Tier37,500
12 U.S.C. 1818(i)(2)(C)Violation of Law or Unsafe or Unsound Practice—3rd Tier1,375,000
12 U.S.C. 1820(k)(6)(A)(ii)Violation of Post Employment Restrictions275,000
12 U.S.C. 1884Violation of Security Rules110
12 U.S.C. 3349(b)Appraisals Violation—1st Tier7,500
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12 U.S.C. 3349(b)Appraisals Violation—2nd Tier37,500
12 U.S.C. 3349(b)Appraisals Violation—3rd Tier1,375,000
42 U.S.C. 4012a(f)Flood Insurance1 385 2 135,000
1 Per day.
2 Per year.
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Dated: October 20, 2008.

By the Office of Thrift Supervision.

John M. Reich,


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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.

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3.  12 CFR 509.103; 69 FR 64249 (November 4, 2004).

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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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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.

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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)).

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[FR Doc. E8-25453 Filed 10-24-08; 8:45 am]