[Federal Register Volume 81, Number 100 (Tuesday, May 24, 2016)]
[Rules and Regulations]
[Pages 32633-32635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-11862]


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FARM CREDIT ADMINISTRATION

12 CFR Part 622

RIN 3052-AD16


Rules of Practice and Procedure; Adjusting Civil Money Penalties 
for Inflation

AGENCY: Farm Credit Administration.

ACTION: Final rule.

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SUMMARY: This regulation implements inflation adjustments to civil 
money penalties (CMPs) that the Farm Credit Administration (FCA) may 
impose or enforce pursuant to the Farm Credit Act of 1971, as amended 
(Farm Credit Act), and pursuant to the Flood Disaster Protection Act of 
1973, as amended by the National Flood Insurance Reform Act of 1994 
(Reform Act), and further amended by the Biggert-Waters Flood Insurance 
Reform Act of 2012 (Biggert-Waters Act). The Federal Civil Penalties 
Inflation Adjustment Act of 1990, as amended by the Debt Collection 
Improvement Act of 1996 (1996 Act) and the Federal Civil Penalties 
Inflation Adjustment Act of 2015 (2015 Act) (collectively, 1990 Act, as 
amended), requires all Federal agencies with the authority to enforce 
CMPs to evaluate those CMPs each year to ensure that they continue to 
maintain their deterrent value and promote compliance with the law.

EFFECTIVE DATE: This regulation is effective on August 1, 2016.

FOR FURTHER INFORMATION CONTACT:
Michael T. Wilson, Policy Analyst, Office of Regulatory Policy, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4124, TTY (703) 
883-4056,
Or
Autumn Agans, Attorney-Advisor, Office of General Counsel, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4082, TTY (703) 883-
4056.

SUPPLEMENTARY INFORMATION:

I. Objective

    The objective of this regulation is to adjust the maximum CMPs for 
inflation with an initial ``catch-up'' adjustment through an interim 
final rulemaking (IFR) to retain the deterrent effect of such 
penalties.

II. Background

A. Introduction

    Section 3(2) of the 1990 Act, as amended, defines a civil monetary 
penalty \1\ 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\
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    \1\ While the 1990 Act, as amended by 1996 and 2015 Acts, uses 
the term ``civil monetary penalties'' for these penalties or other 
sanctions, the Farm Credit Act and the FCA Regulations use the term 
``civil money penalties.'' Both terms have the same meaning. 
Accordingly, this rule uses the term ``civil money penalty'', and 
both terms may be used interchangeably.
    \2\ See 28 U.S.C. 2461 note.
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    The FCA imposes and enforces CMPs through the Farm Credit Act and 
the Flood Disaster Protection Act of 1973, as amended. FCA's 
regulations governing CMPs are found in 12 CFR parts 622 and 623. Part 
622 establishes rules of practice and procedure applicable to formal 
and informal hearings held before the FCA, and to formal investigations 
conducted under the Farm Credit Act. Part 623 prescribes rules with 
regard to persons who may practice before the FCA and the circumstances 
under which such persons may be suspended or debarred from practice 
before the FCA.

B. CMPs Issued Under the Farm Credit Act

    The Farm Credit Act provides that any Farm Credit System (System) 
institution or any officer, director, employee, agent, or other person 
participating in the conduct of the affairs of a System institution who 
violates the terms of a cease-and-desist order that has become final 
pursuant to section 5.25 or 5.26 of the Farm Credit Act must pay up to 
a maximum daily amount of $1,000 \3\ during which such violation 
continues. This CMP maximum was set by the Farm Credit Amendments Act 
of 1985, which amended the Farm Credit Act. Orders issued by the 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) of the 
Farm Credit Act provides that any directive issued under sections 
4.3(b)(2), 4.3A(e), or section 4.14A(i) of the Farm Credit Act ``shall 
be treated'' as a final order issued under section 5.25 of the Farm 
Credit Act for purposes of assessing a CMP.
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    \3\ The inflation-adjusted CMP in effect on November 2, 2015, 
for a violation of a final order is $1,100 per day, as set forth in 
Sec.  622.61(a)(1) of FCA regulations.
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    Section 5.32(a) of the Farm Credit Act 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 than $500 \4\ per day for each day 
during which such violation continues.'' This CMP maximum was set by 
the Agricultural Credit Act of 1987, which was enacted in 1988, and 
amends the Farm Credit Act. Current, inflation-adjusted CMP maximums 
are set forth in existing Sec.  622.61 of FCA regulations.\5\
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    \4\ The inflation-adjusted CMP in effect on November 2, 2015, 
for a violation of the Farm Credit Act or a regulation issued under 
the Farm Credit Act is $750 per day, as set forth in Sec.  
622.61(a)(2) of FCA regulations.
    \5\ Prior adjustments were made under the 1990 Act.
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    The FCA also enforces the Flood Disaster Protection Act of 1973,\6\ 
as amended by the National Flood Insurance Reform Act of 1994,\7\ which 
requires FCA to assess CMPs for a pattern or practice of committing 
certain specific actions in violation of the National Flood Insurance 
Program. The existing maximum CMP for a violation under the Flood 
Disaster Protection Act of 1973 is $2,000.\8\
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    \6\ 42 U.S.C. 4012a.
    \7\ Pub. L. 103-325, title V, 108 Stat. 2160, 2255-87 (September 
23, 1994).
    \8\ Pub. L. 112-141, 126 Stat. 405 (July 6, 2012).

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[[Page 32634]]

C. Federal Civil Penalties Inflation Adjustment Act Improvements Act of 
2015

1. In General
    The 2015 Act requires all Federal agencies with authority to issue 
CMPs to make inflation-based adjustments to all CMPs within their 
jurisdictions no later than July 1, 2016. The 2015 Act also requires 
every Federal agency to adjust the CMPs yearly, starting January 15, 
2017.
    Under Section 4(b) of the 1990 Act, as amended, for the first 
adjustment made in accordance with the 2015 Act amendments, Federal 
agencies are to make a ``catch up'' adjustment to the civil monetary 
penalties through an IFR, with the adjustment taking effect no later 
than August 1, 2016.\9\ Subsequent adjustments are to be made yearly 
thereafter, no later than January 15. Section 6 of the 1990 Act, as 
amended, states that any increase to a civil monetary penalty under 
this Act applies only to civil monetary penalties, including those 
whose associated violation predated such increase, which are assessed 
after the date the increase takes effect.
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    \9\ Pub. L. 114-74, sec. 701(b)(1).
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    Section 5(b) of the 1990 Act, as amended, defines the term ``cost-
of-living adjustment'' as the percentage (if any) for each civil 
monetary penalty by which (1) the Consumer Price Index (CPI) for the 
month of October of the calendar year preceding the adjustment, exceeds 
(2) the CPI for the month of October 1 year before the month of October 
referred to in (1) of the calendar year in which the amount of such 
civil monetary penalty was last set or adjusted pursuant to law.\10\
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    \10\ 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.
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    The ``catch-up'' adjustment under the 2015 Act amendments requires 
Federal agencies to use the cost-of-living adjustment calculated by 
determining the percentage change (if any) for each civil monetary 
penalty by which the CPI for the month of October 2015 exceeds the CPI 
for the month of October during the calendar year in which the CMP was 
created or last adjusted for any reason other than pursuant to the 1996 
Act. Several adjustments have been made since the Farm Credit Act 
established the CMP maximums. Those maximums are to be disregarded for 
purposes of the 2015 Act amendment initial ``catch-up'' adjustment 
calculation. However, agencies are limited to a 150-percent increase in 
CMPs, based upon the CMP in effect on November 2, 2015. The 150-percent 
limitation is on the amount of the increase; therefore, the adjusted 
penalty level(s) will be up to 250 percent of the level(s) in effect on 
November 2, 2015.\11\
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    \11\ OMB Circular M-16-06, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015.
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    The increase for each CMP adjusted for inflation must be rounded 
using a method prescribed by section 5(a) of the 1990 Act, as amended, 
by the 2015 Act.\12\
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    \12\ Per section 5(a)(3) of the 2015 Act, any increase 
determined under the subsection shall be rounded to the nearest $1.
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2. Other Adjustments
    If a civil monetary penalty is subject to a cost-of-living 
adjustment under the 1990 Act, as amended, but is adjusted to an amount 
greater than the amount of the adjustment required under the Act within 
the 12 months preceding a required cost-of-living adjustment, the 
agency is not required to make the cost-of-living adjustment to that 
CMP in that calendar year.\13\
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    \13\ Per section 4(d) of the 1990 Act, as amended.
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III. Catch-Up Adjustments

A. Mathematical Calculations of Catch-Up Adjustments

    The adjustment requirement affects two provisions of section 
5.32(a) of the Farm Credit Act. For the ``catch-up'' adjustments to the 
CMPs set forth by the Farm Credit Act, the calculation required by the 
2015 Act is based on the percentage by which the CPI for October 2015 
exceeds the CPIs for October 1985 and October 1988, respectively. The 
maximum CMPs for violations under section 5.32(a) were established in 
1985 and 1988. The White House Office of Management and Budget (OMB) 
set forth guidance, as required by the 2015 Act,\14\ with a grid of 
multipliers for calculating the new CMP values.\15\ The OMB multiplier 
for the 1985 CMPs is 2.18802. The OMB multiplier for the 1988 CMPs is 
1.97869.
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    \14\ 28 U.S.C. 2461 note, section 7(a).
    \15\ OMB Circular M-16-06, Implementation of the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015.
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    The adjustment also affects the CMPs set by the Flood Disaster 
Protection Act of 1973, as amended. For the ``catch-up'' adjustments to 
the CMP set forth by the Flood Disaster Protection Act of 1973, as 
amended, the calculation required by the 2015 Act is based on the 
percentage by which the CPI for October 2012 exceeds the CPI for 
October 2015. The maximum CMPs for violations were created in 2012 by 
the Biggert-Waters Act, which amended the Flood Disaster Protection Act 
of 1973. The multiplier for the 2012 CMPs is 1.02819.
    If any of the CMP increases exceed 150 percent of the maximums in 
effect as of November 2, 2015, the new maximum CMPs will reflect a 
simple 150-percent increase over the November 2, 2015, CMP 
maximums.\16\
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    \16\ The 150-percent limitation is on the amount of the 
increase; therefore, the adjusted penalty level(s) will be up to 250 
percent of the level(s) in effect on November 2, 2015. OMB Circular, 
M-16-06.
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1. New Penalty Amount in Sec.  622.61(a)(1)
    While the inflation-adjusted CMP currently in effect for violations 
of a final order occurring on or after November 2, 2015, is a maximum 
daily amount of $1,100,\17\ the 2015 Act amendments require FCA to use 
the maximum daily amount of $1,000 to compute the catch-up adjustment 
as this was the amount in effect in 1985. Multiplying the $1,000 CMP by 
the 1985 OMB multiplier, 2.18802, yields a total of $2,188.02. When 
that number is rounded as required by section 5(a) of the 1990 Act, as 
amended the inflation-adjusted maximum increases to $2,188. The CMP in 
effect on November 2, 2015 was $1,100. Increasing the 2015 CMP maximum 
of $1,100 by 150 percent yields a CMP of $2,750. Since the new CMP 
maximum calculated with the 1985 OMB multiplier is less than the 150-
percent maximum increase established by the 2015 Act amendments, the 
new CMP maximum is $2,188.
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    \17\ 12 CFR 622.61(a)(1).
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2. New Penalty Amount in Sec.  622.61(a)(2)
    While the inflation-adjusted CMP currently in effect for violations 
of the Farm Credit Act or regulations issued under the Farm Credit Act 
occurring on or after November 2, 2015, is a maximum daily amount of 
$750,\18\ the 2015 Act amendments require FCA to use the maximum daily 
amount of $500 to compute the catch-up adjustment as this was the 
amount in effect in 1988. Multiplying the $500 CMP maximum by the 1988 
OMB multiplier, 1.97869, yields a total of $989.35. When that number is 
rounded as required by section 5(a) of the 1990 Act, as amended the 
inflation-adjusted maximum increases to $989. The CMP in effect on 
November 2, 2015 was $750. Increasing the 2015 CMP of $750 by 150 
percent yields a total of $1,875. Since the new CMP maximum calculated 
with the 1988 OMB multiplier is less than the 150-percent maximum 
increase established by the 2015 Act

[[Page 32635]]

amendments, the new CMP maximum is $989.
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    \18\ 12 CFR 622.61(a)(2).
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3. New Penalty Amounts for Flood Insurance Violations Under Sec.  
622.61(b)
    The existing maximum CMP for a pattern or practice of flood 
insurance violations pursuant to 42 U.S.C. 4012a(f)(5) is $2,000. 
Multiplying $2,000 by the 2012 OMB multiplier, 1.02819, yields a total 
of $2,056.38. When that number is rounded as required by section 5(a) 
of the 1990 Act, as amended, the new maximum assessment of the CMP for 
violating 42 U.S.C. 4012a(f)(5) is $2,056. The CMP in effect on 
November 2, 2015 was $2,000. Increasing the 2015 CMP of $2,000 by 150 
percent yields $5,000. Since the new CMP maximum calculated with the 
OMB multiplier is lower than the 150-percent maximum increase 
established by the 2015 Act amendments, the new CMP maximum is $2,056.

IV. Notice and Comment Not Required by Administrative Procedure Act

    The 1990 Act, as amended, 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.

V. 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 this 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 in 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

0
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).

0
2. Revise Sec.  622.61 to read as follows:


Sec.  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 $2,188 for violations that occur 
on or after August 1, 2016.
    (2) Amount of civil money penalty for violation of the Act or 
regulations: The maximum daily amount is $989 for each violation that 
occurs on or after August 1, 2016.
    (b) The maximum civil money penalty amount assessed under 42 U.S.C. 
4012a(f) is: $385 for each violation that occurs on or after January 
16, 2009, but before July 1, 2013, with total penalties under such 
statute not to exceed $120,000 for any single institution during any 
calendar year; $2,000 for each violation that occurs on or after July 
1, 2013, but before August 1, 2016, with no cap on the total amount of 
penalties that can be assessed against any single institution during 
any calendar year; and $2,056 for each violation that occurs on or 
after August 1, 2016, with no cap on the total amount of penalties that 
can be assessed against any single institution during any calendar 
year.

    Dated: May 16, 2016.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2016-11862 Filed 5-23-16; 8:45 am]
 BILLING CODE 6705-01-P