FDIC Federal Register Citations

[Federal Register: July 19, 2006 (Volume 71, Number 138)]

[Proposed Rules]

[Page 40938-40940]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr19jy06-24]

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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: Notice of proposed rulemaking and request for comment.

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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') proposes

to amend its rule concerning penalties for failure to timely pay

assessments in compliance with the Federal Deposit Insurance Reform Act

of 2005 (``Reform Act''), which amended provisions of the Federal

Deposit Insurance Act (``FDIA''). The revisions generally provide 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

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. A special statutory rule

covering assessment amounts of less than $10,000 authorizes penalties

up to $100 per day. The FDIC is accorded discretion to compromise,

modify or remit any penalty imposed on a finding that good cause

prevented timely payment. The FDIC proposes amending its rule

concerning late assessment penalties in conformity with these

provisions of the Reform Act. The proposed rule would incorporate these

statutory provisions into the FDIC's regulations in place of the

existing late assessment penalty rule at 12 CFR 308.132(c)(3)(v).

DATES: Comments must be received on or before September 18, 2006.

ADDRESSES: You may submit comments, identified by RIN number by any of

the following methods:

Agency Web site: http://www.fdic.gov/rules/laws/federal/propose.html.

Follow instructions for submitting comments on the Agency

Web site.

E-mail: Comments@FDIC.gov. Include the RIN number in the

subject line of the message.

Mail: Robert E. Feldman, Executive Secretary, Attention:

Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,

Washington, DC 20429.

Hand Delivery/Courier: Guard station at the rear of the

550 17th Street Building (located on F Street) on business days between

7 a.m. and 5 p.m.

Instructions: All submissions received must include the agency name

and RIN for this rulemaking. All comments received will be posted

without change to http://www.fdic.gov/rules/laws/federal/propose.html

including any personal information provided.

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 FDIA,

12 U.S.C. 1828(h).\1\ Section 18(h) was added to the FDIA in 1950

subjecting insured banks who fail or refuse to pay any assessment to a

penalty of not more than $100 for each day that such a violation

continued.\2\ Section 18(h) has remained virtually unchanged since its

enactment in 1950.\3\ 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'').\4\ See 61 FR 57987

(Nov. 12, 1996). 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.

Accordingly, the FDIC added a version of the paragraph presently found

at 12 CFR 308.132(c)(3) entitled ``Adjustment of civil money penalties

by the rate of inflation pursuant to section 31001(s) of the Debt

Collection Improvement Act.'' \5\ 61 FR at 57988. The FDIC also added

the present rule set forth in 12 CFR 308.132(c)(3)(v) increasing the

amount of any CMP that may be assessed pursuant to section 18(h) of the

FDIA. The rule increased that amount from the maximum of $100, as

stated in section 18(h) of the FDIA, to a maximum of $110 for each day

the violation continues. 61 FR at 57989.\6\

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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\ See An Act to Amend the Federal Deposit Insurance Act,

section 2, Public Law 797, 64 Stat. 893 (1950).

\3\ The Financial Institutions Reform, Recovery, and Enforcement

Act of 1989 (``FIRREA''), Public Law 101-187, 103 Stat. 187, amended

section 18(h) of the FDIA making the provision applicable to

``insured depository institutions'' versus ``insured banks.'' See

section 201(a), Public Law 101-187.

\4\ 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).

\5\ The original version of 12 CFR 308.132(c)(3) applied to

violations which occurred after November 12, 1996. However, the DCIA

requires an adjustment of CMP's every four years. The provision was

updated in 2000 and 2004, and the present version of 12 CFR

308.132(c)(3)(v) by its terms applies to violations that occur after

December 31, 2004. The proposed amendment to 12 CFR

308.132(c)(3)(v), however, will apply to violations that occur after

the effective date of the Reform Act to avoid retroactive

application of this change.

\6\ 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 4, may require a readjustment of this amount in 2008.

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The Reform Act contains the first major statutory changes to the

late assessment penalty provisions in the FDIA. The FDIC proposes

amending its rule concerning late assessment penalties, 12 CFR

308.132(c)(3)(v), to reflect the changes set forth in section 2104(c)

of the Reform Act.

II. Description of the Proposal

Section 2104(c) of the Reform Act amends subsection (h) of section

18 of the FDIA, 12 U.S.C. 1828(h), by changing the late assessment

penalty from not more than $100 per day to not more than 1 percent of

any assessment owed 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

[[Page 40939]]

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.

The FDIC proposes to amend its rule concerning late assessment

penalties by revising the paragraph presently found at 12 CFR

308.132(c)(3)(v) and replacing the paragraph with the language from

section 2104(c) of the Reform Act. The late assessment penalty will

change from a maximum of $110 per day 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.\7\ Additionally, if the amount the institution fails or

refuses to pay is less than $10,000, the rule will authorize penalties

up to $100 for each day that the violation continues.

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\7\ The FDIC can also initiate a termination of insurance

proceeding, pursuant to section 8(a) of the FDIA, 12 U.S.C. 1818(a),

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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Finally, the proposed rule would adopt the statutory provisions

providing 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. The proposed rule would

also adopt the statutory provisions according the FDIC 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.

III. 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. We invite your comments on how to make this proposal

easier to understand. For example:

Have we organized the material to suit your needs? If not,

how could this material be better organized?

Are the requirements in the proposed rule clearly stated?

If not, how could the rule be more clearly stated?

Does the proposed rule contain language or jargon that is

not clear? If so, which language requires clarification?

Would a different format (grouping and order of sections,

use of headings, paragraphing) make the rule easier to understand? If

so, what changes to the format would make the rule easier to

understand?

What else could we do to make the rule easier to

understand?

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. The proposed rule would amend the FDIC's rule concerning late

assessment penalties to adopt statutory language enacted by Congress in

the Reform Act. The proposed rule would not create any additional

economic impact because, if an economic impact exists, the only

economic impact results from the language of the statute. Therefore,

the proposed rule would not have a significant economic impact on a

substantial number of small entities if adopted in final form.

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 proposed rule.

D. The Treasury and General Government Appropriations Act, 1999--

Assessment of Federal Rules and Policies on Families

The FDIC has determined that the proposed rule will 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

(Public Law 105-277, 112 Stat. 2681).

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.

For the reasons set forth in the preamble, the FDIC proposes to

amend Subpart H of 12 CFR 308 as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

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.

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

FDIA 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 (c)(3)(v)(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 (c)(3)(v)(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.

* * * * *

By order of the Board of Directors.

Dated at Washington, DC, this 11th day of July, 2006.

[[Page 40940]]

Federal Deposit Insurance Corporation.

Valerie Best,

Assistant Executive Secretary.

[FR Doc. E6-11423 Filed 7-18-06; 8:45 am]

BILLING CODE 6714-01-P