Federal Deposit
Insurance Corporation

The inquiry here is whether DOF brought its action to recover Bank Y’s $246,259.20 underpayment within Section 1817(g)’s five-year limitations period. To answer this, the Committee must ascertain when DOF’s claim accrued (i.e., when did the statute of limitations begin to run) and when DOF brought its “action or proceeding” to collect the underpayment. If the two dates are more than five years apart, DOF’s collection is barred by Section 1817(g).

The Committee has previously addressed the question of accrual in assessment matters. In AAC Case No. 2002-04 (July 18, 2002), the bank alleged that its AADA had been incorrectly calculated in 1994, resulting in an assessment overpayment. To resolve the matter, the Committee identified the alleged calculation error (a growth worksheet filed in December 1994) and the semiannual assessment it first affected (the January 1995 semiannual period). The Committee ruled that the bank’s “claim accrued on January 31, 1995, when its first alleged SAIF overpayment was due.” AAC Case No. 2002-04 at 5. Although the bank alleged it had pursued its claim for a refund with the FDIC over a five-year period, the Committee found the claim was first brought in a letter to the FDIC dated October 24, 2001. Because the bank waited over six years to bring the claim, the Committee ruled the claim was untimely under Section 1817(g).

Bank Y’s calculation error occurred on the December 31, 1998 Call Report. That error first affected Bank Y’s January 1999 semiannual period, specifically, the payment made for the second half of that period. The incorrect payment was first due on March 30, 1999, the same day it was debited from Bank Y’s ACH account. Under this Committee’s precedent, the accrual date for DOF’s cause of action to recover of Bank Y’s underpaid assessment was March 30, 1999.

The Bank, however, urges a different test for establishing accrual dates in assessment matters. Citing as support the decision in Norwest Bank Minnesota National Ass’n v. FDIC, 312 F.3d 447 (D.C. Cir. 2002), the Bank asserts that accrual occurs at the time of the miscalculation or, at the latest, when the invoice based on that miscalculation is issued. In the Committee’s view, the Bank’s analysis of Norwest is incorrect.

Accrual of a cause of action under Section 1817(g) was at issue in the Norwest case. According to Norwest, the FDIC incorrectly interpreted the effective date provision of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and applied the wrong “growth rate” component to computations of the growth in Norwest’s deposit base that occurred after December 31, 1991, improperly allocating its BIF/SAIF ratio. Norwest argued that its suit for refund was timely filed under Section 1817(g), since it was filed within five years after 1995, the date Norwest first suffered financial injury arising from the divergence of BIF and SAIF assessment rates.

The court analyzed section 1817(g) and held that the five-year statute of limitations accrued when Norwest paid its disputed BIF and SAIF assessment in 1992.

Normally, the Norwest court declared, a claim accrues when the factual and legal prerequisites to filing suit are in place. In the court’s view, “In January 1992, when the alleged miscalculation of Norwest’s AADA occurred, Norwest could have requested a refund from the agency or it could have brought suit in court alleging that the miscalculation resulted in an overpayment to the SAIF.” 312 F.3d at 451 (emphasis added).

The Norwest court viewed the miscalculation and payment as having occurred at the same time or very close together (it refers to both as occurring in January 1992). Viewing the language in its entirety, the court’s meaning is inescapable: “But here nothing prevented Norwest from learning in 1992 that its AADA may have been overstated, thus resulting in an overpayment to the SAIF.” 312 F.2d at 52 n.4 (emphasis added).

The Bank’s interpretation requires a truncated reading of the court’s decision. The Committee rejects the Bank’s assertion that under Norwest suit may be maintained based on a miscalculated Call Report or invoice. It is axiomatic that incorrect payment must be made before the remedies named by the court - refund from the agency or suit for overpayment - can be sought. Under Norwest, accrual of the bank’s cause of action for refund of assessments occurred with its first alleged overpayment.

The FDIC could not have filed suit or taken any action to collect Bank Y’s underpaid assessment on January 31, 1999, when Bank Y filed its inaccurate Call Report, or on February 28, 1999, when the inaccurate invoice based on that Call Report was issued. No amount had yet been paid, nor was payment due. Accordingly, the Committee finds that the FDIC’s claim for underpayment accrued when Bank Y underpaid its assessment on March 30, 1999.

This result is consistent with the Norwest decision, this Committee’s precedent (AAC No. 2002-04), and with case law generally. See Dye v. United States, 121 F.3d 1399, 1407 (10th Cir. 1997) (taxpayer not entitled to refund until taxes overpaid); Fisher v. United States, 80 F.3d 1576, 1579 (Fed. Cir. 1996) (overpayment must appear before refund authorized).

The FDIC collected the underpaid Bank Y assessment by debiting the Bank’s ACH account on March 30, 2004. That action fell within five years from the date the action for underpayment accrued - albeit the last day of the five-year period - and was timely under Section 1817(g).

The Bank next asserts that the FDIC twice violated its regulations: first, by not invoicing the Bank 15 days prior to the March 30, 2004 payment date, as 12 C.F.R. § 327.3(c)(1) requires,⁴ and again by failing to note the underpayment adjustment along with the Bank’s current assessment on the March 15, 2004 invoice, as mandated under 12 C.F.R. § 327.3(g). At the oral presentation, the Bank stated that it did not receive the adjustment invoice prior to the March 30, 2004 debit, which appears to be the salient point behind these claimed regulatory violations.

The FDIC provided an invoice to the Bank no later than 15 days prior to the payment date, as required under section 327.3(d)(1). An invoice for the underpayment (invoice number 01739112, which reflected the January 1999 Bank Y underpayment) was printed on March 11, 2004 and mailed to the Bank on March 15, 2004 (a preliminary copy was faxed to the Bank on March 4, 2004).

In addition, section 327.3(g) does not require that the March 15, 2004 invoice (invoice number 01731714, which contained the January 2004 semiannual period assessment) reflect the prior AADA adjustment. The regulatory language on this point is permissive, not mandatory - quarterly assessment invoices provided by the Corporation may reflect prior adjustments (see 12 C.F.R. § 327.3(g)) – and affords no basis for the Bank’s argument.

Finally, the Committee notes that even where insured institutions do not receive an assessment invoice, they are not excused from payment of the related assessment. Rather, under the regulations, an institution must notify the FDIC if an assessment invoice is not received by the invoice date. The regulations further state that failure to provide prompt notice to the FDIC “shall not affect the institution’s obligation to make full and timely assessment payment.” 12 C.F.R. § 327.3(i).

Conclusion
The FDIC’s action to recover Bank Y’s underpaid assessment accrued on March 30, 1999, the date Bank Y underpaid its assessment. The FDIC collected that underpayment from the Bank - Bank Y’s successor institution - on March 30, 2004. The action to collect the underpayment - the March 30, 2004 debit - fell within the five-year statute of limitations for assessment actions set out in 12 U.S.C. § 1817(g). Collection of the underpaid assessment is not time barred. The FDIC properly invoiced the adjustment according to its regulations. Accordingly, for the reasons set forth in this decision, the Bank’s appeal is denied.