Parent Corporation filed an appeal with the Assessment Appeals
Committee (Committee) of the Federal Deposit Insurance Corporation
(FDIC) by letter dated January 3, 2005, on behalf of Bank, (the Bank).
The Bank is appealing a decision issued by the FDICs Division of Finance
(DOF) on December 2, 2004. In that decision, DOF denied the Banks request
for the refund of a $246,259.20 assessment payment the Bank claimed was
barred by the five-year statute of limitations for assessments. This appeal
involves interpreting the assessment statute of limitations, 12 U.S.C. §
1817(g), and a case applying that statute, Norwest Bank Minnesota
National Assn v. FDIC, 312 F.3d 447 (D.C. Cir. 2002).
At its meeting held on April 11, 2005, the Committee allowed the Bank,
pursuant to the Guidelines for Appeals of Deposit Insurance Assessment
Determinations1, to appear and make an oral presentation in support of its
case for an assessment refund. After carefully considering all of the
written and oral submissions and facts of this case, the Committee has
determined that the Banks appeal must be denied.
In 1998, the Banks holding company (Parent) purchased a Savings
Association Insurance Fund (SAIF) member institution (Bank X). The
deposits of the acquired SAIF-insured institution were distributed to
several of the holding companys Bank Insurance Fund (BIF) insured
subsidiary banks, including Bank Y. Acquisition of these SAIF-insured
deposits made Bank Y - and the other subsidiaries - Oakar banks, that is,
institutions required to pay assessments to both primary (BIF) and secondary
(SAIF) insurance funds. See 12 U.S.C. §
1815(d)(3). Bank Y received
approximately $2 billion of Bank Xs deposits.
Bank Ys December 31, 1998 Call Report, filed on January 31, 1999,
contained an error resulting in the underreporting of the acquired SAIF
deposits. That Call Report was the basis for the assessment Bank Y paid on
March 30, 1999. On February 28, 1999, an invoice based on the underreported
deposits was provided to Bank Y by the FDIC. The invoiced amount was debited
from Bank Ys account on March 30, 1999; as a result, Bank Y underpaid its
assessment for the January 1999 semiannual period. The Bank is Bank Ys
The FDICs Division of Finance (DOF) Assessment Management Section
conducted compliance audits on four of the holding companys subsidiaries,
including the Bank. The audits were completed in the first quarter of 2004
and revealed discrepancies in Bank Ys December 31, 1998 Call Report, as
well as the Call Reports of the other three subsidiaries.2 Call Report
amendments for all four subsidiaries were prepared by DOF.
The amendments to Bank Ys December 31, 1998 Call Report resulted in
additional assessments owed to the FDIC in the amount of $246,259.20. Bank Y
was a 1A rated institution at the time it filed its December 1998 Call
Report; the additional amount is a Financing Corporation (FICO) assessment
required by the Deposit Insurance Funds Act of 1996 (DIFA).3
The $246,259.20 assessment adjustment includes interest and appears on
invoice number 01739112, prepared and printed by the FDIC on March 11, 2004.
A separate invoice (number 01731714) was prepared March 4, 2004, reflecting
the Banks assessment for the second half (April - June) of the January 2004
On March 10, 2004, DOF conducted a conference telephone call with
officials of the holding company to discuss the additional assessments.
Holding company officials did not dispute the data revisions and the
amendments to Bank Ys December 31, 1998 Call Report or the Call Reports for
any of the other affected subsidiaries. As to the Bank Y underpayment,
however, the holding company asserted that the five-year statute of
limitations on assessment actions at 12 U.S.C. § 1817(g) had expired and,
for that reason, the FDIC could no longer recover from the Bank any monies
owed based on the amended December 31, 1998 Call Report information.
DOF took a different view of the statute of limitations and debited
$246,259.20 from the Banks ACH account on March 30, 2004 for the underpaid
By letter dated April 28, 2004, the Bank filed with DOF a request for
revision of the $246,259.20 assessment. According to the Bank, the
adjustment amount was not reflected on its March 15, 2004 invoice, in
violation of the FDICs regulations, 12 C.F.R. §
327.3(c)(1) and (g), and
was without proper authority and therefore inappropriate.
Further, the Bank contended that the five-year statute of limitations
precluded FDIC collection of the underpayment. According to the Bank, the
FDICs cause of action accrued no later that February 28, 1999, the date of
the original incorrect invoice. Collection of the underpayment on March 31,
2004 was, in the Banks view, too late. In support, the Bank cited Norwest
Bank Minnesota National Assn v. FDIC, 312 F.3d 447 (D.C. Cir. 2002).
DOF denied the Banks request by letter dated September 7, 2004.
According to DOF, the FDICs claim for recovery accrued on March 30, 1999,
when Bank Y underpaid its assessment. Rejecting the Banks view of Norwest,
DOF noted that the FDIC could not have filed suit or instituted an
administrative action for recovery of an underpayment if no underpayment had
yet occurred. DOF also found that an invoice reflecting the additional
amounts owed to the FDIC was mailed to the Bank on or before March 15, 2004,
in full compliance with 12 C.F.R. § 327.3(c)(1).
By letter dated October 5, 2004, the Bank requested further review by the
DOF Director. The Bank reasserted that the FDICs right to recover the 1999
underpayment accrued when the AADA was miscalculated, placing accrual as
early as January 31, 1999 -- when Bank Ys Call Report was filed -- but no
later than February 28, 1999, the date of the erroneous invoice.
The DOF Director upheld the prior DOF review on December 2, 2004.
On January 3, 2005, the Bank (through its holding company) appealed DOFs
decision to this Committee. Norwest, the Bank urges, holds that accrual
occurs with an AADA miscalculation. The Bank posits two accrual dates. As
the approving agency under the Bank Merger Act, the Bank asserts that the
FDIC should have uncovered the error and so accrual occurred with the
filing of the incorrect Call Report on January 31, 1999. Alternatively, the
Bank contends that accrual occurred no later than February 28, 1999, when
the FDIC invoiced the underpayment calculated from the incorrect Call
Report. By these dates, the Bank argues, the legal and factual prerequisites
to suit were in place and the miscalculation had been made.
Lastly, the Bank asserts that the FDIC violated its regulations by not
invoicing the Bank 15 days prior to the payment date, as 12 C.F.R. §
327.3(c)(1) requires, and by failing to note the underpayment adjustment
along with the Banks current assessment on the March 15, 2004 invoice, as
mandated under 12 C.F.R. § 327.3(g).
Under Section 1817(g), an action or proceeding for the recovery of any
assessment due the FDIC, or for the recovery of any excess amount paid to
the FDIC, must be brought within five years after the right accrued for
which the claim is made. The standard legal rule is that accrual occurs
when the plaintiff has a complete and present cause of action, i.e., when
suit can be filed and relief obtained. Bay Area Laundry and Dry Cleaning
Pension Trust Fund v. Ferbar Corp. of Calif., 522 U.S. 192, 201 (1997);
Reiter v. Cooper, 507 U.S. 258, 267 (1993); Rawlings v. Ray, 312 U.S. 96, 98
The inquiry here is whether DOF brought its action to recover Bank Ys
$246,259.20 underpayment within Section 1817(g)s five-year limitations
period. To answer this, the Committee must ascertain when DOFs 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, DOFs collection is barred by
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 banks 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 Ys calculation error occurred on the December 31, 1998 Call Report.
That error first affected Bank Ys 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 Ys ACH account. Under this Committees precedent, the
accrual date for DOFs cause of action to recover of Bank Ys 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 Assn 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
Committees view, the Banks 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 Norwests 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
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
Normally, the Norwest court declared, a claim accrues when the factual
and legal prerequisites to filing suit are in place. In the courts view,
In January 1992, when the alleged miscalculation of Norwests 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
courts 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 Banks interpretation requires a truncated reading of the courts
decision. The Committee rejects the Banks 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 banks 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
Ys 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 FDICs claim for
underpayment accrued when Bank Y underpaid its assessment on March 30, 1999.
This result is consistent with the Norwest decision, this Committees
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 Banks
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 Banks 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 Banks
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 institutions obligation to make full and
timely assessment payment. 12 C.F.R. § 327.3(i).
The FDICs action to recover Bank Ys underpaid assessment accrued on
March 30, 1999, the date Bank Y underpaid its assessment. The FDIC collected
that underpayment from the Bank - Bank Ys 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
Banks appeal is denied.
Pursuant to authority delegated by the FDIC Board of Directors to the
Committee, the Committees decision constitutes the FDICs final agency
action on this matter.
By direction of the Assessment Appeals Committee, dated June 16, 2005.
The Guidelines are set out at 69 Fed. Reg. 41479, 41486
(July 9, 2004), and in FDIC Financial Institution Letter (FIL)
(Oct. 13, 2004).
2 The discrepancies in question related to calculation of
the institutions adjusted attributable deposit amounts (AADA). An Oakar
bank is a member of the BIF, but a portion of its assessment base is
allocated to the SAIF, its secondary fund. The deposits attributed to the
secondary fund are based upon the institutions AADA, which is computed and
adjusted over time pursuant to the statutory formula contained in the Oakar
amendment, 12 U.S.C. §
3 DIFA provided for the payment of interest on bonds
issued by FICO, to be paid by all institutions covered by FDIC insurance.
The FICO obligation was split between BIF and SAIF deposits, but the SAIF
rate was five times the BIF rate. See 12 U.S.C. § 1441(f)(2). After December
31, 1999, the FICO rate for BIF and SAIF deposits was equalized. See Pub. L.
No. 104-208, § 2703(c), 110 Stat. 3009-485 (1996).
4 The actual cite is 12 C.F.R. §
327.3(d)(1), since the
question presented relates to a second quarterly payment, not a first