E9-656. Rules of Practice and Procedure; Adjusting Civil Money Penalties for Inflation

AGENCY:

Farm Credit Administration.

ACTION:

Final rule.

SUMMARY:

This regulation implements cost-of-living adjustments to civil money penalties (CMPs) that the Farm Credit Administration (FCA) may impose under the Farm Credit Act of 1971, as amended (Farm Credit Act), and under the National Flood Insurance Reform Act of 1994 (Reform Act). The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 (FCPIA Act), requires all Federal agencies with the authority to impose CMPs to evaluate those CMPs periodically to ensure that they continue to maintain their deterrent value.

DATES:

Effective Date: The regulation will become effective on January 16, 2009.

FOR FURTHER INFORMATION CONTACT:

Michael T. Wilson, Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, McLean, VA 22102-5090, [phone], TTY [phone],

or

Howard I. Rubin, Senior Counsel, Office of General Counsel, Farm Credit Administration, McLean, VA 22102-5090, [phone], TTY [phone].

SUPPLEMENTARY INFORMATION:

I. Objective

The objective of this regulation is to recalculate the CMP inflation adjustments consistent with the FCPIA Act.

II. Background

A. Federal Civil Penalties Inflation Adjustment Act of 1990, as Amended

The FCPIA Act requires every Federal agency with authority to issue CMPs to enact regulations that adjust its CMPs pursuant to the inflation adjustment formula in section 5(b) of the FCPIA Act.^[1] Each Federal agency was required to issue these regulations by October 23, 1996, and adjust them when necessary at least once every 4 years thereafter. Section 6 of the amended FCPIA Act specifies that inflation-adjusted CMPs will apply only to violations that occur after the effective date of the adjustment. The inflation adjustment is based on the percentage increase in the Consumer Price Index (CPI).^[2] Specifically, section 5(b) of the FCPIA Act defines the term “cost-of-living adjustment” as “the percentage (if any) for each civil monetary penalty by which (1) the Consumer Price Index for the month of June of the calendar year preceding the adjustment, exceeds (2) the Consumer Price Index for the month of June of the calendar year in which the amount of such civil monetary penalty was last set or adjusted pursuant to law.” Furthermore, the increase for each CMP that is adjusted for inflation must be rounded using a method prescribed by section 5(a) of the FCPIA Act.

B. CMPs Issued Under the Farm Credit Act

Section 5.32(a) of the Farm Credit Act provides that any FCS institution or any officer, director, employee, agent, or other person participating in the conduct of the affairs of an FCS institution who violates the terms of a final order issued under section 5.25 or 5.26 of the Farm Credit Act must pay up to $1,000 per day for each day during which such violation continues. Orders issued by FCA under section 5.25 or 5.26 of the Farm Credit Act include temporary and permanent cease-and-desist orders. In addition, section 5.32(h) provides that any directive issued under sections 4.3(b)(2), 4.3A(e), or 4.14A(i) of the Farm Credit Act “shall be treated” as a final order issued under section 5.25 for purposes of assessing a CMP. Section 5.32(a) also states that “[a]ny such institution or person who violates any provision of the [Farm Credit] Act or any regulation issued under this Act shall forfeit and pay a civil penalty of not more that $500 per day for each day during which such violation continues.”

1. Mathematical Calculation

In general, the adjustment calculation is based on the percentage by which the CPI for June 2008 exceeds the CPI for June of the calendar year the CMP was last adjusted. The CMP for violation of the terms of a final order issued under section 5.25 or 5.26 of the Farm Credit Act was last adjusted in 1996. The CMP for a violation of the Farm Credit Act, or a regulation issued under the Farm Credit Act, was last adjusted in 2005. According to the Bureau of Labor Statistics, the CPI for June 1996 and June 2005 was 156.7 and 194.5, respectively. The CPI for June 2008 was 218.815, resulting in a percentage change of 39.64 percent from June 1996 and 12.50 percent from June 2005.

2. Penalty Amount Remains the Same in § 622.61(a)(1)

The maximum CMP in § 622.61(a) for a violation of a final order issued under section 5.25 or 5.26 of the Farm Credit Act is currently $1,100.^[3]

Multiplying $1,100 by 39.64 ^[4] percent results in an increase of $436.04. When that number is rounded as required by section 5(a) of the FCPIA Act, the inflation-adjusted maximum remains $1,100.

3. New Penalty Amount in § 622.61(a)(2)

The maximum CMP in existing § 622.61(a)(2) for a violation of the Farm Credit Act or regulations issued under the Farm Credit Act is $650. When multiplying the existing CMP amount by 12.50 percent, this results in an increase of $81.25. This increase is rounded to $100 as required by section 5(a) of the FCPIA Act, and the inflation-adjusted maximum increases to $750.

C. CMPs Issued Under the Reform Act

The Flood Disaster Protection Act of 1973, as amended by the Reform Act, requires that FCA assess a CMP for a pattern or practice of committing certain specific actions in violation of the National Flood Insurance Program.^[5] Under the Reform Act, which became law in 1994, these CMPs were not to exceed $350 for each violation, and the total amount of penalties assessed for certain violations of the program against any single regulated entity during any calendar year was not to exceed $100,000.^[6]

1. Mathematical Calculation

The adjustment calculation for these CMPs is based on the percentage by which the CPI for June 2008 exceeds the CPI for June 2005, the calendar the CMPs were last adjusted. As stated above, the CPI for June 2005 was 194.5, and the CPI for June 2008 was 218.815, resulting in a percentage change of 12.50.

2. New Penalty Amounts in § 622.61(b)

Multiplying $385 by 12.50 percent yields a $48.13 increase. This amount is rounded downward to $0.00 under the FCPIA rounding formula. Accordingly, the CMP maximum for each violation will remain $385. Similarly, multiplying the $110,000 total cap by 12.50 percent yields a $13,750 increase. This increase is rounded to $10,000 under the FCPIA rounding formula, bringing the new cap to $120,000 in total penalties that may be assessed under the Reform Act against any single regulated entity during any calendar year.

III. Notice and Comment Not Required by Administrative Procedure Act

The FCPIA Act gives Federal agencies no discretion in the adjustment of CMPs for the rate of inflation. Further, these revisions are ministerial, technical, and noncontroversial. For these reasons, the FCA finds good cause to determine that public notice and an opportunity to comment are impracticable, unnecessary, and contrary to the public interest pursuant to the Administrative Procedure Act, 5 U.S.C. 553(b)(B), and adopts this rule in final form. For all of the foregoing reasons, the FCA also finds good cause to determine that this regulation should become effective immediately, pursuant to the Administrative Procedure Act, 5 U.S.C. 553(d).

IV. Regulatory Flexibility Act

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the FCA hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities. Each of the banks in the System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, System institutions are not “small entities” as defined in the Regulatory Flexibility Act.

List of Subjects 12 CFR Part 622

• Administrative practice and procedure
• Crime
• Investigations
• Penalties

For the reasons stated in the preamble, part 622 of chapter VI, title 12 of the Code of Federal Regulations is amended to read as follows:

PART 622—RULES OF PRACTICE AND PROCEDURE

1. The authority citation for part 622 continues to read as follows:

Authority: Secs. 5.9, 5.10, 5.17, 5.25-5.37 of the Farm Credit Act (12 U.S.C. 2243, 2244, 2252, 2261-2273); 28 U.S.C. 2461 note; and 42 U.S.C. 4012a(f).

Subpart B—Rules and Procedures for Assessment and Collection of Civil Money Penalties

2. Revise § 622.61 to read as follows:

§ 622.61

Adjustment of civil money penalties by the rate of inflation under the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended.

(a) The maximum amount of each civil money penalty within FCA's jurisdiction is adjusted in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended (28 U.S.C. 2461 note), as follows:

(1) Amount of civil money penalty imposed under section 5.32 of the Act for violation of a final order issued under section 5.25 or 5.26 of the Act: The maximum daily amount is $1,100.

(2) Amount of civil money penalty for violation of the Act or regulations: The maximum daily amount is $550 for each violation that occurs before March 16, 2005, $650 for each violation that occurs on or after March 16, 2005, but before January 16, 2009, and $750 for each violation that occurs on or after January 16, 2009.

(b) The maximum civil money penalty amount assessed under 42 U.S.C. 4012a(f) is $350 for each violation that occurs before March 16, 2005, with total penalties under such statute not to exceed $110,000 for any single institution during any calendar year. For violations that occur on or after March 16, 2005, but before January 16, 2009, the maximum civil money penalty is $385 for each violation, with total penalties under such statute not to exceed $110,000 for any single institution during any calendar year. For violations that occur on or after January 16, 2009, the maximum civil money penalty is $385 for each violation, with total penalties under such statute not to exceed $120,000 for any single institution during any calendar year.

Date: January 9, 2009.

Roland E. Smith,

Secretary, Farm Credit Administration Board.

Footnotes

1.  See 28 U.S.C. 2461 note. Section 3(2) of the amended FCPIA Act defines a CMP as any penalty, fine, or other sanction that: (1) Either is for a specific monetary amount as provided by Federal law or has a maximum amount provided for by Federal law; (2) is assessed or enforced by an agency pursuant to Federal law; and (3) is assessed or enforced pursuant to an administrative proceeding or a civil action in the Federal courts.

2.  The CPI is published by the Department of Labor, Bureau of Statistics, and is available at its Web site: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.

3.  See 70 FR 12583 (March 15, 2005).

4.  As a result of the mathematical calculation for the year 2005 and the required rounding application, the penalty amount remained the same and did not reset. Therefore, in accordance with the FCPIA Act, the calculation for the 2009 adjustment was determined by using the June 1996 CPI of 156.7 and the June 2008 CPI of 218.815 resulting in a percentage change of 39.64 percent.

5.  See 42 U.S.C. 4012a.

6.  42 U.S.C. 4012a(f).