Fair Hiring in Banking Act

<RULE> FEDERAL DEPOSIT INSURANCE CORPORATION <CFR>12 CFR Parts 303 and 308</CFR> <RIN>RIN 3064-AF92</RIN> <SUBJECT>Fair Hiring in Banking Act</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Deposit Insurance Corporation. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Federal Deposit Insurance Corporation (FDIC) is revising its regulations to conform with the Fair Hiring in Banking Act (FHBA)—which was enacted on and immediately effective as of December 23, 2022. Among other provisions, the FHBA excluded or exempted categories of otherwise-covered offenses from the scope of statutory prohibitions on participation in banking. These categories pertain to certain older offenses, offenses committed by individuals 21 or younger, and relatively minor offenses. The FHBA also clarified several definitions in section 19 and provided application-processing procedures. The FDIC considers most of the revisions to its regulations to be required by the FHBA. Most other revisions reflect the FDIC's interpretation of statutory prohibitions in light of the FHBA. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> rule will be effective on October 1, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Timothy Schuett, Senior Review Examiner, 763-614-9473, <E T="03">tschuett@fdic.gov;</E> Brian Zeller, Senior Review Examiner, 571-345-8170, <E T="03">bzeller@fdic.gov,</E> Division of Risk Management Supervision; or Graham Rehrig, Counsel, 703-314-3401, <E T="03">grehrig@fdic.gov,</E> Legal Division. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Policy Objective</HD> The policy objective of the rule is to revise the FDIC's regulations concerning section 19 of the Federal Deposit Insurance Act (section 19)  <SU>1</SU> <FTREF/> to conform with the FHBA. <SU>2</SU> <FTREF/> These regulations provide, among other things, the application process for insured depository institutions (IDIs) and individuals who seek relief from section 19 as well as information about section 19 and the FDIC's interpretation of the statute. <FTNT> <SU>1</SU>  12 U.S.C. 1829. </FTNT> <FTNT> <SU>2</SU>  The FHBA appears at section 5705 of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law 117-263, 136 Stat. 2395, 3411. </FTNT> <HD SOURCE="HD1">II. Background and Public Comments</HD> Section 19 prohibits, without the prior written consent of the FDIC (the FDIC refers to applications for such consent as “consent applications”, <SU>3</SU> <FTREF/> ) the participation in an IDI by any person who has been convicted of a crime involving dishonesty or breach of trust or money laundering or who has agreed to enter into a pretrial diversion or similar program in connection with the prosecution for such an offense (collectively, covered offenses). Further, this law forbids an IDI from permitting such a person to engage in any such conduct or to continue any relationship prohibited by section 19. Section 19 also imposes a separate 10-year minimum for the automatic prohibition of a person convicted of certain crimes enumerated in title 18 of the United States Code (U.S.C.), although an exception may be granted upon a motion by the FDIC and approval by the sentencing court. <FTNT> <SU>3</SU>  Under the FHBA, a “consent application” “means an application filed with [the FDIC] by an individual (or by an insured depository institution or depository institution holding company on behalf of an individual) seeking the written consent of the [FDIC] under [12 U.S.C. 1829(a)(1)].” 12 U.S.C. 1829(g)(1). </FTNT> From 1998 until 2020, the FDIC had a Statement of Policy that was issued related to section 19, occasionally revised, and published in the <E T="04">Federal Register</E> . <SU>4</SU> <FTREF/> The purpose of the Statement of Policy, as amended through the years, was “to provide the public with guidance relating to section 19 and the FDIC's application thereof.”  <SU>5</SU> <FTREF/> In 2020, following notice and comment, the FDIC revised and codified the Statement of Policy into the FDIC's Filing Procedures under 12 CFR part 303, subpart L, and Rules of Practice and Procedure under 12 CFR part 308, subpart M. <SU>6</SU> <FTREF/> <FTNT> <SU>4</SU>   <E T="03">See</E> 63 FR 66177 (Dec. 1, 1998); 72 FR 73823 (Dec. 28, 2007) with correction issued at 73 FR 5270 (Jan. 29, 2008); 76 FR 28031 (May 13, 2011); 77 FR 74847 (Dec. 18, 2012); 83 FR 38143 (Aug. 3, 2018). </FTNT> <FTNT> <SU>5</SU>   <E T="03">See</E> 84 FR 68353 (Dec. 16, 2019). </FTNT> <FTNT> <SU>6</SU>   <E T="03">See</E> 85 FR 51312 (Aug. 20, 2020). </FTNT> On December 23, 2022, the President signed into law the FHBA, which significantly revised section 19 and was effective immediately. The FHBA created several categories of exceptions or exemptions to the prohibition on participating in banking, including the following: • <E T="03">Certain older offenses:</E> (1) if it has been 7 years or more since the offense occurred; (2) if the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration; or (3) for individuals who committed an offense when they were 21 years of age or younger, if it has been more than 30 months since the sentencing occurred. <SU>7</SU> <FTREF/> <FTNT> <SU>7</SU>  These exceptions do not apply to the offenses described under 12 U.S.C. 1829(a)(2). </FTNT> • <E T="03">Offenses for which an order of expungement, sealing, or dismissal has been issued</E> in regard to the conviction in connection with such offense and it is intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record even if exceptions allow the record to be considered for certain character and fitness evaluation purposes. • <E T="03">De minimis</E> offenses: a category of relatively minor offenses that are either specified by the FHBA or by the FDIC through regulations. In the FHBA, a subcategory of <E T="03">de minimis</E> offenses is called “designated lesser offenses,” which offenses include the use of fake identification, shoplifting, trespass, fare evasion, driving with an expired license or tag (and such other low-risk offenses as the FDIC may designate), if 1 year or more has passed since the applicable conviction or program entry. • <E T="03">Misdemeanor criminal offenses involving dishonesty,</E> if the offense was committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration. • <E T="03">A criminal offense involving dishonesty that “involv[es] the possession of controlled substances.”</E> The FHBA clarifies several terms in section 19, including “criminal offense involving dishonesty” and “pretrial diversion or similar program.” It also provides conditions regarding <E T="03">de minimis</E> offenses, to the extent the FDIC provides <E T="03">de minimis</E> exemptions by rule. The FHBA codifies procedures for consent applications filed with the FDIC. It requires the FDIC to make all forms and instructions related to consent applications available to the public, including on the FDIC's website. It requires the FDIC to primarily rely on the criminal history record of the Federal Bureau of Investigation when evaluating consent applications and to provide such records to the applicant to review for accuracy. Further, it requires the FDIC to assess evidence of an individual's rehabilitation including: the applicant's age at the time of the conviction or program entry; the time that has elapsed since conviction or program entry; and the relationship of an individual's offense to the responsibilities of the applicable position. Other information, including an individual's employment history, letters of recommendation, certificates documenting participation in substance abuse programs, successful participation in job preparation and educational programs, other relevant mitigating evidence, and any additional information the FDIC determines necessary for safety and soundness shall also be considered. On November 14, 2023, the FDIC published a notice of proposed rulemaking (proposal) to conform the FDIC's section 19 regulations with the FHBA. <SU>8</SU> <FTREF/> The FDIC issued the proposal following consultation and coordination with the National Credit Union Administration (NCUA), the Board of Governors of the Federal Reserve System (FRB), and the Office of the Comptroller of the Currency (OCC) “to promote consistent implementation [of the FHBA] where appropriate.”  <SU>9</SU> <FTREF/> The FDIC proposed to revise its rules and procedures in order to conform them to the FHBA and to clarify certain provisions of that statute. For example, the FDIC proposed to revise 12 CFR part 303, subpart L, to reflect the FHBA's exclusion of certain older offenses from the scope of section 19. The FDIC requested comments on all aspects of its approach to section 19 and, specifically, the following topics of interpretation: <FTNT> <SU>8</SU>   <E T="03">See</E> 88 FR 77906 (Nov. 14, 2023). </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> 12 U.S.C. 1829(f)(9) (“In carrying out this section, the [FDIC] shall consult and coordinate with the National Credit Union Administration as needed to promote consistent implementation where appropriate”). </FTNT> • the date on which a criminal offense “occurred” or was “committed;” • the date on which “sentencing occurred;” • whether section 19 encompasses foreign convictions and pretrial diversions; • the standard for expungem ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 103k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━