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

<RULE> FARM CREDIT ADMINISTRATION <CFR>12 CFR Part 622</CFR> <RIN>RIN 3052-AD64</RIN> <SUBJECT>Rules of Practice and Procedure; Adjusting Civil Money Penalties for Inflation</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Farm Credit Administration. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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, and further amended by the Biggert-Waters Flood Insurance Reform Act of 2012 (Biggert-Waters Act) (collectively FDPA, as amended). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This regulation is effective on January 15, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Brian Camp, Accountant, Office of Regulatory Policy, Farm Credit Administration, (703) 883-4320, TTY (703) 883-4056, Or Heather LoPresti, Senior Counsel, Office of General Counsel, Farm Credit Administration, (703) 883-4318, TTY (703) 883-4056. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Objective</HD> The objective of this regulation is to adjust the maximum CMPs for inflation through a final rulemaking to retain the deterrent effect of such penalties. <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. Introduction</HD> 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 Improvements Act of 2015 (2015 Act) (collectively, 1990 Act, as amended), requires all Federal agencies with the authority to enforce CMPs to evaluate and adjust, if necessary, those CMPs each year to ensure that they continue to maintain their deterrent value and promote compliance with the law. Section 3(2) of the 1990 Act, as amended, defines a civil monetary penalty  <SU>1</SU> <FTREF/> 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. <SU>2</SU> <FTREF/> <FTNT> <SU>1</SU>  While the 1990 Act, as amended by the 1996 and 2015 Acts, uses the term “civil monetary penalties” for these penalties or other sanctions, the Farm Credit Act and 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. </FTNT> <FTNT> <SU>2</SU>   <E T="03">See</E> 28 U.S.C. 2461 <E T="03">note.</E> </FTNT> The FCA imposes and enforces CMPs through the Farm Credit Act  <SU>3</SU> <FTREF/> and the FDPA, as amended. <SU>4</SU> <FTREF/> 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 regarding persons who may practice before the FCA and the circumstances under which such persons may be suspended or debarred from practice before the FCA. <FTNT> <SU>3</SU>  Public Law 92-181, as amended. </FTNT> <FTNT> <SU>4</SU>  42 U.S.C. 4012a and Public Law 103-325, title V, 108 Stat. 2160, 2255-87 (September 23, 1994). </FTNT> <HD SOURCE="HD2">B. CMPs Issued Under the Farm Credit Act</HD> Section 5.32(a) of 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 an order that has become final pursuant to section 5.25 or 5.26 of the Farm Credit Act must pay a maximum daily amount of $1,000, <SU>5</SU> <FTREF/> for each day 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 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. <FTNT> <SU>5</SU>  The inflation-adjusted CMP in effect on January 15, 2024, for a violation of a final order is $2,830 per day, as set forth in § 622.61(a)(1) of FCA regulations. </FTNT> 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  <SU>6</SU> <FTREF/> per day for each day during which such violation continues.” This CMP maximum was set by section 423 of the Agricultural Credit Act of 1987, which was enacted in 1988 and amended the Farm Credit Act. Current inflation-adjusted CMP maximums are set forth in existing § 622.61 of FCA regulations. <SU>7</SU> <FTREF/> <FTNT> <SU>6</SU>  The inflation-adjusted CMP in effect on January 15, 2024, for a violation of the Farm Credit Act or a regulation issued under the Farm Credit Act is $1,280 per day for each violation, as set forth in § 622.61(a)(2) of FCA regulations. </FTNT> <FTNT> <SU>7</SU>  Prior adjustments were made under the 1990 Act and continue to be made each year. </FTNT> The FCA also enforces the FDPA, as amended, 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 FDPA states that the maximum CMP for a violation of that Act is $2,000. <E T="51">8 9</E> <FTREF/> <FTNT> <SU>8</SU>  Public Law 112-141, 126 Stat. 405 (July 6, 2012); 42 U.S.C. 4012a(f)(5). <SU>9</SU>  The inflation-adjusted CMP in effect on January 15, 2024, for a flood insurance violation is $2,661, as set forth in § 622.61(b) of FCA regulations. </FTNT> <HD SOURCE="HD2">C. Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015</HD> <HD SOURCE="HD3">1. In General</HD> The 2015 Act required all Federal agencies to adjust the CMPs yearly, starting January 15, 2017. Under section 4(b) of the 1990 Act, as amended, annual adjustments are to be made no later than January 15. <SU>10</SU> <FTREF/> Section 6 of the 1990 Act, as amended, states that any increase to a civil monetary penalty under this 1990 Act applies only to civil monetary penalties, including instances in which an associated violation predated the annual increase, which are assessed after the date the increase takes effect. <FTNT> <SU>10</SU>  Public Law 114-74, sec. 701(b)(1). </FTNT> 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 one 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. <SU>11</SU> <FTREF/> <FTNT> <SU>11</SU>  The CPI is published by the Department of Labor, Bureau of Statistics, and is available at its website: <E T="03">https://www.bls.gov/cpi/.</E> </FTNT> 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. <SU>12</SU> <FTREF/> <FTNT> <SU>12</SU>  Pursuant to section 5(a)(3) of the 2015 Act, any increase determined under the subsection shall be rounded to the nearest $1. </FTNT> <HD SOURCE="HD3">2. Other Adjustments</HD> 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. <SU>13</SU> <FTREF/> <FTNT> <SU>13</SU>  Pursuant to section 4(d) of the 1990 Act, as amended. </FTNT> <HD SOURCE="HD1">III. Yearly Adjustments</HD> <HD SOURCE="HD2">A. Mathematical Calculations of 2025 Adjustments</HD> The adjustment requirement affects two provisions of section 5.32(a) of the Farm Credit Act. For the 2025 yearly adjustments to the CMPs set forth by the Farm Credit Act, the calculation required by the 2024 White House Office of Management and Budget (OMB) guidance  <SU>14</SU> <FTREF/> is based on the percentage by which the CPI for October 2024 exceeds the CPI for October 2023. The OMB set forth guidance, as required by the 2015 Act, <SU>15</SU> <FTREF/> with a multiplier for calculating the new CMP values. <SU>16</SU> <FTREF/> The 2024 OMB multiplier for the 2025 CMPs is 1.02598. <FTNT> <SU>14</SU>  OMB Circular M-25-02, Implementation of Penalty Inflation Adjustments for 2025, Pursuant to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. </FTNT> <FTNT> <SU>15</SU>  28 U.S.C. 2461 <E T="03">note,</E> section 7(a). </FTNT> <FTNT> <SU>16</SU>  OMB Circular M-25-02, Implementation of Penalty Inflation Adjustments ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 16k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━