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FDIC Federal Register Citations
[Federal Register: November 9, 2006 (Volume 71, Number 217)]
[Rules and Regulations]              
[Page 65711-65713]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no06-2]                        

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 308

RIN 3064-AD06

 
Penalty for Failure To Timely Pay Assessments

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') is
adopting its final rule amending its regulations concerning penalties
for failure to timely pay assessments. The final rule adopts changes
made by the Federal Deposit Insurance Reform Act of 2005 (``Reform
Act''), which amended provisions of the Federal Deposit Insurance Act
(``FDI Act''). The statute generally provides that an insured
depository institution which fails or refuses to pay any assessment
shall be subject to a penalty of not more than 1 percent of the
assessment due for each day the violation continues. The statute
includes an exception if the failure to pay results from a dispute with
the FDIC over the amount of the assessment and the institution deposits
satisfactory security with the FDIC. The statute includes a provision
covering assessment amounts of less than $10,000, which authorizes
penalties up to $100 per day. Finally, the statute accords the FDIC
discretion to

[[Page 65712]]

compromise, modify or remit any penalty imposed on a finding that good
cause prevented timely payment. The final rule amends the FDIC's former
rule concerning late assessment penalties, in conformity with these
provisions of the Reform Act.

DATES: This final rule will become effective on January 1, 2007.

FOR FURTHER INFORMATION CONTACT: Donna M. Saulnier, Senior Assessment
Policy Specialist, DOF, (703) 562-6167; or William V. Farrell, Manager,
Assessments Section, DOF, (703) 562-6168; or Christopher Bellotto,
Counsel, Legal Division, (202) 898-3801; or Stephen T. Weisweaver,
Attorney, Legal Division, (202) 898-6976.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 2104 (c) of the Reform Act amends section 18(h) of the FDI
Act, 12 U.S.C. 1828(h) (2000).\1\ As described in its proposal, 71 FR
40938 (July 19, 2006), the FDIC added the present rule concerning late
assessment penalties when it amended 12 CFR 308.132 pursuant to the
Debt Collection Improvement Act of 1996 (``DCIA'').\2\ See 61 FR 57987
(Nov. 12, 1996).\3\ Accordingly, the FDIC increased the late assessment
penalty amount from a maximum of $100, as originally established in
section 18(h) of the FDI Act, to a maximum of $110 for each day the
violation continues. Id.\4\ This final rule amends the FDIC's late
assessment penalty rule, 12 CFR 308.132(c)(3)(v), to reflect the
changes made by section 2104(c) of the Reform Act. Section 2104(c) of
the Reform Act changes the late assessment penalty from not more than
$100 per day to not more than 1 percent of any assessment owed, per day
that the violation continues, if the amount owed is $10,000 or more at
the time the institution fails or refuses to pay the assessment. If the
institution owes less than $10,000 at the time the institution fails or
refuses to pay the assessment, then the amendment authorizes penalties
up to $100 for each day that the violation continues. The Reform Act
also provides for an exception if the failure to pay results from a
dispute with the FDIC over the amount of the assessment and the
institution deposits satisfactory security with the FDIC.
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    \1\ See Federal Deposit Insurance Reform Act of 2005, section
2104(c), Public Law 109-171, 120 Stat. 9, 13.
    \2\ Public Law 104-134, 110 Stat. 1321-358, 373, amending
section 4 of the Federal Civil Penalties Inflation Adjustment Act of
1990 (``Inflation Adjustment Act''), 28 U.S.C. 2461 (2000).
    \3\ The DCIA required the head of each Federal Agency to enact
rules adjusting each Civil Money Penalty (``CMP''), under the
agency's jurisdiction, by a rate of inflation prescribed in the
DCIA.
    \4\ Section 2104(c) of the Reform Act effectively returns the
late assessment penalty on assessments of less than $10,000 to the
original amount of up to $100. The Inflation Adjustment Act, supra
note 2, may require a readjustment of this amount in 2008.
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II. Comments Received

    On July 19, 2006, the FDIC published in the Federal Register a
notice of proposed rulemaking and request for comment, which reflected
the proposed amendments to the late assessment penalties rule, 12 CFR
308.132(c)(3)(v). See 71 FR 40938. The FDIC received one substantive
comment, which was from a trade association. It acknowledged the former
late assessment penalty provisions were outdated and supported the
FDIC's proposal. Therefore, the FDIC is adopting the proposed
amendments to 12 CFR 308.132(c)(3)(v) with no changes in its final
rule.
    The trade association specifically supported the statutory
provision that allows the FDIC to compromise, modify, or remit any
penalty upon a determination that good cause prevented the timely
payment of an assessment. It noted that natural disasters, such as
Hurricane Katrina that struck the Gulf Coast in August of 2005, can
affect numerous institutions' ability to pay assessments in a timely
manner. The FDIC recognizes that situations may arise where a
depository institution's failure to pay may be due to matters outside
the control of the institution therefore establishing good cause for a
failure to pay in a timely manner. After according an affected
institution an opportunity to request a good cause determination, and
when applicable because the FDIC and the institution are unable to
resolve the matter, the FDIC will impose the penalty in the same manner
as civil money penalties issued pursuant to section 8(i) of the FDI
Act, 12 U.S.C. 1818(i) (2000).

III. Description of the Final Rule

    Section 132(c)(3)(v) of part 308 is being amended by conforming it
to the changes made by section 2104(c) of the Reform Act. The late
assessment penalty is changed from a maximum of $110 per day (as
previously adjusted under the Inflation Adjustment Act, supra note 2)
to not more than 1 percent of the assessment owed, if the institution
owes an assessment of $10,000 or more at the time the institution
refuses or fails to pay any assessment.\5\ Additionally, if the amount
the institution fails or refuses to pay is less than $10,000, the rule
authorizes penalties of up to $100 for each day that the violation
continues. Finally, section 132(c)(3)(v) incorporates the statutory
exception when the failure to pay results from a dispute with the FDIC
over the amount of the assessment and the institution deposits
satisfactory security with the FDIC. Section 132(c)(3)(v) also
recognizes the FDIC's discretion to compromise, modify, or remit any
penalty that the FDIC may assess upon a finding that good cause
prevented the timely payment of an assessment.
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    \5\ The FDIC can also initiate a termination of insurance
proceeding, pursuant to section 8(a) of the FDI ACT, 12 U.S.C.
1818(a) (2000), when an institution withholds portions of its
insurance assessments. Doolin Security Savings Bank v. FDIC, 53 F.3d
1395, 1408 (4th Cir. 1995).
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IV. Regulatory Analysis and Procedure

A. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The proposed rule requested comments on how the rule
might be changed to reflect the requirements of GLBA. No GLBA comments
were received.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires that each Federal
agency either certify that a proposed rule would not, if adopted in
final form, have a significant economic impact on a substantial number
of small entities or prepare an initial regulatory flexibility analysis
of the proposal and publish the analysis for comment. See 5 U.S.C. 603,
604, 605 (2000). The proposed rule stated that the late assessment
penalty rule adopts statutory language enacted by Congress in the
Reform Act. Therefore the rule would not create any additional economic
impact because the only economic impact would result from the language
of the statute. No comments were received concerning the proposal's RFA
certification.
    Additional factual bases exist for certifying that this final rule
will not have a significant economic impact on a substantial number of
small depository institutions, which are defined as having $165 million
or less in assets. This final rule will not have an economic impact on
a substantial number of small depository institutions because the
assessments for a number of these institutions will remain below the
$10,000 threshold limiting penalties to not more than $100 per day.
Thus, the statutory changes adopted by this rule

[[Page 65713]]

will not change the penalty amount that can be imposed on these
institutions. In cases where a small depository institution's
assessment exceeds $10,000, the economic impact of this final rule is
limited to 1% of the assessment amount for each day of delinquency. For
example, a bank with $165 million in assets subject to a 5 basis point
assessment would incur a daily penalty of less than $200 for every day
that its quarterly assessment payment was late. Additionally, over the
last two years, less than 1% of the approximately 5,521 small
depository institutions invoiced for deposit insurance premiums and
FICO assessments each year failed to timely pay their assessment.
Therefore, this final rule will not have a significant economic impact
on a substantial number of small depository institutions.

C. Paperwork Reduction Act

    No collections of information pursuant to the Paperwork Reduction
Act (44 U.S.C. 3501 et seq.) are contained in the final rule.

D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Rules and Policies on Families

    The FDIC has determined that the final rule does not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999
(Pub. L. 105-277, 112 Stat. 2681).

E. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the final
rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement and Fairness Act
of 1996 (SBREFA) (5 U.S.C. 801 et seq.). As required by SBREFA, the
FDIC will file the appropriate reports with Congress and the General
Accounting Office so that the final rule may be reviewed.

List of Subjects in 12 CFR Part 308

    Administrative practice and procedure, Bank deposit insurance,
Banks, banking, Claims, Crime, Equal access to justice, Fraud,
Investigations, Lawyers, Penalties.


0
For the reasons set forth in the preamble, the FDIC hereby amends
subpart H of 12 CFR 308 as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation continues to read as follows:

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505,
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4),
1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909,
4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u,
78u-2, 78u-3 and 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31
U.S.C. 330, 5321; 42 U.S.C. 4012a; Sec. 3100(s), Pub. L. 104-134,
110 Stat. 1321-358.


0
2. Revise paragraph (c)(3)(v) of section 308.132 as follows:


Sec.  308.132  Assessment of penalties.

* * * * *
    (c) * * *
    (3) * * *
    (v) Civil money penalties assessed pursuant to section 18(h) of the
FDI Act for failure to timely pay assessment.
    (A) In General.--Subject to paragraph (c)(3)(v)(C) of this section,
any insured depository institution which fails or refuses to pay any
assessment shall be subject to a penalty in an amount of not more than
1 percent of the amount of the assessment due for each day that such
violation continues.
    (B) Exception In Case Of Dispute.--Paragraph (A) of this section
shall not apply if--
    (1) The failure to pay an assessment is due to a dispute between
the insured depository institution and the Corporation over the amount
of such assessment; and
    (2) The insured depository institution deposits security
satisfactory to the Corporation for payment upon final determination of
the issue.
    (C) Special Rule For Small Assessment Amounts.--If the amount of
the assessment which an insured depository institution fails or refuses
to pay is less than $10,000 at the time of such failure or refusal, the
amount of any penalty to which such institution is subject under
paragraph (A) of this section shall not exceed $100 for each day that
such violation continues.
    (D) Authority To Modify Or Remit Penalty.--The Corporation, in the
sole discretion of the Corporation, may compromise, modify or remit any
penalty which the Corporation may assess or has already assessed under
paragraph (c)(3)(v)(A) of this section upon a finding that good cause
prevented the timely payment of an assessment.
* * * * *

    Dated at Washington, DC, this 2nd day of November 2006.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E6-18804 Filed 11-8-06; 8:45 am]

BILLING CODE 6714-01-P
 




Last Updated 11/13/2006 Regs@fdic.gov