E6-19703. Share Insurance Appeals; Clarification of Enforcement Authority of the NCUA Board

AGENCY:

National Credit Union Administration (NCUA).

ACTION:

Interim final rule with request for comments.

SUMMARY:

NCUA is amending its rules to implement amendments to the Federal Credit Union Act (FCU Act) made by the Financial Services Regulatory Relief Act of 2006 (Reg Relief Act). This interim final rule clarifies: that an appeal from a final NCUA Board decision regarding share insurance coverage shall be to the appropriate Federal District Court; that the NCUA Board may terminate the insured status of any insured credit union for violation of any condition imposed by the Board in connection with any action on any application, notice, or other request by the credit union or an institution-affiliated party; and that Orders of Suspension, Prohibition and Removal issued by the NCUA Board remain effective against institution-affiliated parties regardless of whether they remain institution-affiliated parties at the time the Order is considered or issued.

DATES:

This interim final rule is effective November 22, 2006. Comments must be received by NCUA on or before January 22, 2007.

ADDRESSES:

You may submit comments by any of the following methods (Please send comments by one method only):

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• NCUA Web site: http://www.ncua.gov/​RegulationsOpinionsLaws/​proposed_​regs/​proposed_​regs.html. Follow the instructions for submitting comments.
• E-mail: Address to [e-mail]. Include “[Your name] Comments on Interim Final Rule—Parts 745 and 747” in the e-mail subject line.
• Fax: [phone]. Use the subject line described above for e-mail.
• Mail: Address to Mary Rupp, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314-3428.
• Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT:

John K. Ianno, Senior Trial Attorney, Office of General Counsel, at the above address or telephone: [phone].

SUPPLEMENTARY INFORMATION:

A. Insurance Appeals

The Reg Relief Act amended section 207(d) of the FCU Act, which addresses the resolutions of disputes relating to any claim for insurance coverage. 12 U.S.C. 1787(d). This interim rule amends the provision in NCUA's regulations, 12 CFR 745.203(c), that sets forth the appropriate venue for seeking judicial review of a final determination by the Board relating to a claim for insurance coverage.

The current regulation provides for judicial review by the United States Court of Appeals for the District of Columbia or the court of appeals for the Federal circuit where the credit union's principal place of business is located. The interim rule revises the regulation to reflect the statutory change that a final agency determination by the Board on a claim for insurance coverage is reviewable by the United States district court for the Federal judicial district where the principle place of business of the credit union is located.

B. Expansion of Enforcement Authority

The Reg Relief Act amended three provisions of Section 206 of the FCU Act, 12 U.S.C. 1786, to broaden the NCUA Board's authority to take enforcement actions for violations of conditions imposed in any action on any application, notice, or other request by a credit union or an institution-affiliated party. Such violations can serve as a basis for cease and desist orders, removal and prohibition orders, and civil money penalties. Previously such enforcement actions could only be taken upon a violation of conditions imposed in “the granting of any application or other request by the credit union”. The amendments to Sections 747.1 and 202 of NCUA's Regulations conform the language of the regulation to that of the FCU Act as amended.

C. Clarification of Suspension, Prohibition and Removal Authority

The Reg Relief Act amended Section 206(i)(1) of the FCU Act, 12 U.S.C. 1786(i)(1) to clarify the NCUA Board's authority to issue Orders against institution-affiliated parties regardless of whether they remain institution-affiliated parties of a credit union when the Order is considered or issued. The new statutory language makes clear that the NCUA Board has the authority to issue the Order even if the subject is no longer affiliated with the institution. The amendments to Sections 747.303 and 304 of NCUA's Regulations conform the language of the regulation to that of the FCU Act as amended.

D. Interim Final Rule

The NCUA Board is issuing this rule as an interim final rule because there is a strong public interest in assuring that NCUA's Rules and Regulations conform to statutory authority. This rule does this by making regulatory changes consistent with the statutory amendments in the Reg Relief Act. NCUA also finds these reasons are good cause to dispense with the 30-day delayed effective date requirement under section 553(d)(3) of the Administrative Procedure Act (APA). Accordingly, the Board finds that, pursuant to 5 U.S.C. 553(b)(3), notice and public procedures are unnecessary and contrary to the public interest; and, pursuant to 5 U.S.C. 553(d)(3), the rule will be effective upon publication in the Federal Register. Although the rule is being issued as an interim final rule and is effective upon publication, the Board encourages interested parties to submit comments.

Regulatory Procedures

Regulatory Flexibility Act

The Regulatory Flexibility Act requires NCUA to prepare an analysis to describe any significant economic impact a rule may have on a substantial number of small credit unions, defined as those under ten million dollars in assets. This rule clarifies NCUA's enforcement authority and identifies the appropriate venue for appeals of final share insurance determinations. It does not impose any additional regulatory burden. The interim final amendments will not have a significant economic impact on a substantial number of small credit unions, and, therefore, a regulatory flexibility analysis is not required.

Paperwork Reduction Act

NCUA has determined that the interim final rule would not increase paperwork requirements under the Paperwork Reduction Act of 1995 and regulations of the Office of Management and Budget. 44 U.S.C. 3501 et seq.; 5 CFR part 1320.

Executive Order 13132

Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. The interim final rule will not have substantial direct effects on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this rule does not constitute a policy that has federalism implications for purposes of the executive order.

The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families

The NCUA has determined that this interim final rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998).

Small Business Regulatory Enforcement Fairness Act

The Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104-121 (SBREFA), provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the APA. 5 U.S.C. 551. NCUA has requested a SBREFA determination from the Office of Management and Budget, which is pending. As required by SBREFA, NCUA will file the appropriate reports with Congress and the General Accounting Office so that the interim rule may be reviewed.

List of Subjects

12 CFR Part 745

• Credit Unions
• Share Insurance

12 CFR Part 747

• Administrative practice and procedure
• Bank deposit insurance
• Claims
• Credit unions
• Equal access to justice
• Investigations
• Lawyers
• Penalties

By the National Credit Union Administration Board on November 16, 2006.

Mary F. Rupp,

Secretary of the Board.

Accordingly, NCUA amends 12 CFR part 745 and 747 as follows:

PART 745—SHARE INSURANCE AND APPENDIX

1. The authority citation for part 745 is revised to read as follows:

Authority: 12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782, 1787, 1789; Title V, Pub. L. 109-351;120 Stat. 1966.

§ 745.203

[Amended]

2. Section 745.203(c) is amended by removing “Court of Appeals for the District of Columbia or the court of appeals for the Federal judicial circuit,” and adding in its place “district court for the Federal judicial district.”

PART 747—ADMINISTRATIVE ACTIONS, ADJUDICATIVE HEARINGS, RULES OF PRACTICE AND PROCEDURE, AND INVESTIGATIONS

3. The authority citation for part 747 is revised to read as follows:

Authority: 12 U.S.C. 1766, 1782, 1784, 1785, 1786, 1787, 1790a, 1790d; 42 U.S.C. 4012a; Pub. L. 101-410; Pub. L. 104-134; Pub. L. 109-351; 120 Stat. 1966.

§ 747.1

[Amended]

4. Section 747.1(c)(3) is amended by removing “the grant of an application or request,” and adding in its place “any action on any application, notice, or other request by the credit union or institution-affiliated party,”.

§ 747.202

[Amended]

5. Section 747.202(c) is amended by removing “any application or request of the credit union,” and adding in its place “any action on any application, notice, or other request by the credit union or institution-affiliated party,”.

6. Section 747.303 is revised to read as follows:

§ 747.303

Notice of suspension or prohibition.

Whenever an institution-affiliated party of an insured credit union is charged in any state, Federal or territorial information or indictment or complaint with the commission of or participation in a crime involving dishonesty or breach of trust, which crime is punishable by imprisonment for a term exceeding one year under state or Federal law, the NCUA Board may, if continued service or participation by the concerned party may pose a threat to the interests of any credit union's members or may threaten to impair public confidence in any credit union, by written notice served upon such party, suspend him or her from office, or prohibit him or her from further participation in any manner in the affairs of any credit union, or both. A copy of the notice of suspension or prohibition shall also be served upon the credit union of which the subject of the order is, or most recently was, an institution-affiliated party.

7. Section 747.304 is revised to read as follows:

§ 747.304

Removal or permanent prohibition.

(a) In the event that a judgment of conviction or an agreement to enter a pretrial diversion or other similar program is entered against the institution-affiliated party, and at such time as the judgment, if any, is not subject to further appellate review, the NCUA Board may, if continued service or participation by such party may pose a threat to the interests of any credit union's members or may threaten to impair public confidence in any credit union, issue and serve upon the individual an order removing him or her from office or prohibiting him or her from further participation in any manner in the conduct of the affairs of any credit union except with the consent of the NCUA Board. A copy of such order will also be served upon the credit union of which the subject of the order is, or most recently was, an institution-affiliated party.

(b) The NCUA Board may issue such order with respect to an individual who is an institution-affiliated party at a credit union at the time of the offense without regard to whether such individual is an institution-affiliated party at any credit union at the time the order is considered or issued by the Board or whether the credit union at which the individual was an institution-affiliated party at the time of the offense remains in existence at the time the order is considered or issued by the board.

(c) A finding of not guilty or other disposition of the charge will not preclude the Board from thereafter instituting proceedings, pursuant to the provisions of section 206(g) of the Act (12 U.S.C. 1786(g)) and subpart A of this part, to remove such director, committee member, officer, or other person from office or to prohibit his or her further participation in the affairs of the credit union.