Supervisory Review Committee; Procedures for Appealing Material Supervisory Determinations, 26391-26403 [2017-11320]

Agencies

• National Credit Union Administration

[Federal Register Volume 82, Number 108 (Wednesday, June 7, 2017)]
[Proposed Rules]
[Pages 26391-26403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11320]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 746

RIN 3133-AE69


Supervisory Review Committee; Procedures for Appealing Material 
Supervisory Determinations

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The NCUA Board (Board) proposes to amend its procedures for 
appealing material supervisory determinations to the NCUA Supervisory 
Review Committee (SRC) to enhance due process and to be more consistent 
with the practices of the federal banking agencies. The proposed rule 
would expand the number of supervisory determinations appealable to the 
SRC and provide credit unions with the opportunity for additional 
review by the Director of the Office of Examinations and Insurance 
(E&I). The Board proposes to codify these procedures of our 
regulations.

DATES: Comments must be received on or before August 7, 2017.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web site: https://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx. Follow the instructions for submitting comments.
     Email: Address to regcomments@ncua.gov. Include ``[Your 
name]--Comments on Supervisory Review Committee; Proposed Procedures 
for Appealing Material Supervisory Determinations'' in the email 
subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard Poliquin, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You can view all public comments on NCUA's Web 
site at https://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as 
submitted, except for those we cannot post for technical reasons. NCUA 
will not edit or remove any identifying or contact information from the 
public comments submitted. You may inspect paper copies of comments in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an email to OGCMail@ncua.gov.

FOR FURTHER INFORMATION CONTACT: Michael J. McKenna, General Counsel, 
Frank S. Kressman, Associate General Counsel, or Benjamin M. 
Litchfield, Staff Attorney, National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-
6540.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 309(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Riegle Act) \1\ required the NCUA and the 
federal banking agencies to establish independent intra-agency 
appellate processes to review material supervisory determinations.\2\ 
The Riegle Act also required the NCUA and the federal banking agencies 
to ensure that appeals of material supervisory determinations are heard 
and decided expeditiously and that appropriate safeguards exist for 
protecting appellants from retaliation by agency examiners.\3\
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    \1\ Public Law 103-325, 108 Stat. 2160 (1994).
    \2\ 12 U.S.C. 4806(a).
    \3\ Id. at 4806(b)(1)-(2).
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    On November 17, 1994, the Board published proposed Interpretive 
Ruling and Policy Statement (IRPS) 94-2 ``Guidelines for the 
Supervisory Review Committee'' in the Federal Register and solicited 
public comment.\4\ The Board proposed to establish a committee of five 
regular members consisting of NCUA's Executive Director, General 
Counsel, Director of E&I, a regional director, and one additional 
senior or Board staff member. The regional director was to be selected 
on a rotating basis every two years and an alternate regional director 
was to be designated to consider matters arising in the regular 
regional director member's region. The Executive Director was to serve 
as chair. The jurisdiction of the SRC was to be limited to matters 
specifically listed as material supervisory determinations in the 
Riegle Act.\5\
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    \4\ 59 FR 59437 (Nov. 17, 1994).
    \5\ The Riegle Act defines ``material supervisory 
determination'' to include determinations relating to: (1) 
Examination ratings; (2) the adequacy of loan loss reserve 
provisions; and (3) classifications on loans that are significant to 
a federally insured credit union. 12 U.S.C. 4806(f)(1)(A)(i)-(iii).
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    After receiving and considering public comment, the Board adopted 
an IRPS and published it in the Federal Register on March 20, 1995 as 
IRPS 95-1.\6\ In the final IRPS, the Board reduced the size of the SRC 
from five members to three, with each member appointed by the NCUA 
Chairman. The jurisdiction of the SRC was limited to matters 
specifically listed as material supervisory determinations in the 
Riegle Act, although the Board reserved the right to expand the number 
of supervisory determinations appealable to the SRC after gaining some 
experience with the process. The final IRPS also clarified that 
material ``examination ratings'' included composite CAMEL ratings of 3, 
4, or 5,

[[Page 26392]]

as well as component ratings of those composite ratings.
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    \6\ 60 FR 14795 (Mar. 20, 1995).
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    The Board revised the IRPS in 2002 to expand the jurisdiction of 
the SRC to include decisions by a regional director to revoke a credit 
union's authority under NCUA's then Regulatory Flexibility Program 
(RegFlex).\7\ In 2011, the Board revised the IRPS again to expand the 
jurisdiction of the SRC to include denials of Technical Assistance 
Grant (TAG) reimbursements by the Director of the Office of Small 
Credit Union Initiatives (OSCUI).\8\ This revision was published in the 
Federal Register as IRPS 11-1, ``Supervisory Review Committee'' on 
April 29, 2011. The Board has not made material changes to IRPS 11-1 
since 2012, when it removed all references to RegFlex to reflect the 
elimination of that program.\9\
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    \7\ 67 FR 19778 (Apr. 23, 2002) (revocation of RegFlex 
authority).
    \8\ 76 FR 3674 (Jan. 20, 2011) (interim final rule); 76 FR 23871 
(Apr. 29, 2011) (final rule).
    \9\ 77 FR 32004 (Aug. 29, 2012). RegFlex permitted some federal 
credit unions with advanced levels of net worth and consistently 
strong supervisory examination ratings to request exemptions, in 
whole or in part, from certain NCUA regulations. See 66 FR 58655 
(Nov. 23, 2001). The Board eliminated this program in 2011, but made 
certain regulatory relief provisions previously available under the 
program widely available to all federal credit unions. See 77 FR 
31981 (May 31, 2012).
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II. Summary of Proposed Rule

    The proposed rule would: (1) Expand the number of material 
supervisory determinations appealable to the SRC; (2) create an 
optional intermediate level of review before an appeal is brought to 
the SRC; and (3) change the nature and composition of the SRC. The 
proposed rule would be codified as Subpart A to part 746. The Board is 
requesting comment on all aspects of this proposed rule.

A. Expansion of Supervisory Review Committee Jurisdiction

    Based on NCUA's experience in administering the current appellate 
process, the Board believes that it would be efficient and beneficial 
if the SRC appeals process is more transparent and objective and if 
more material supervisory determinations are appealable to the SRC. The 
proposed rule would, therefore, redefine the term ``material 
supervisory determination'' to include supervisory determinations that 
may affect the capital, earnings, operating flexibility, or that may 
otherwise affect the nature and level of supervisory oversight of a 
federally insured credit union (FICU). Certain exceptions would be made 
for material supervisory determinations that are specifically excluded 
by the Riegle Act or where other appeals procedures exist.

B. Addition of Optional Intermediate Level of Review

    The Board is also proposing to add an optional intermediate level 
of review by the Director of E&I, or his or her designee, before a FICU 
appeals to the SRC. A decision by the Director of E&I would be made in 
writing with no opportunity for oral presentations from either the 
petitioner or the program office. The Director of E&I, in addition to 
his or her supervisory expertise, would have the ability to consult 
with the parties either jointly or separately before rendering a 
decision. If the FICU or program office is unsatisfied with the 
decision rendered by the Director of E&I, or his or her designee, 
either may appeal that decision to the SRC. This optional level of 
review provides enhanced due process to FICUs that wish to use it.

C. Composition of the Supervisory Review Committee

    The proposed rule would restructure the SRC by creating a rotating 
SRC pool of not less than eight individuals appointed by the NCUA 
Chairman from among NCUA's senior staff in the regional and central 
offices. The Secretary of the Board would serve as the permanent SRC 
Chairman and would select three SRC members from this SRC pool to serve 
as the SRC for a particular appeal. As the permanent SRC Chairman, the 
Secretary of the Board would also be a member of the SRC pool and be 
eligible to serve as a member of the SRC for a particular appeal.\10\ 
The Special Counsel to the General Counsel (Special Counsel) would 
serve as a permanent non-voting member of each SRC to advise each 
committee on procedural and legal matters.
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    \10\ With the inclusion of the SRC Chairman, the total number of 
NCUA senior staff in the SRC pool will be not less than nine; eight 
or more of which would be appointed by the NCUA Chairman.
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    The SRC Chairman would not be permitted to select SRC members from 
the program office that rendered the material supervisory determination 
that is the subject of the appeal to hear that appeal. Likewise, in 
cases where the FICU requested review by the Director of E&I, staff 
from E&I would be ineligible to serve as SRC members for that appeal. 
The presence of two SRC members (physically, telephonically, or by 
video conference) would be required as a quorum, and a majority of 
votes present would be required for action on an appeal.

D. Summary Chart of Proposed SRC Appeals Procedures

    Under the proposed rule, an appeal to the SRC would resemble the 
following decision tree:

[[Page 26393]]

[GRAPHIC] [TIFF OMITTED] TP07JN17.001

III. Section by Section Analysis

Part 746--Appeals Procedures

Subpart A--Procedures for Appealing Material Supervisory Determinations
    The Board is proposing to create Subpart A to part 746 which would 
contain a comprehensive set of procedures to govern the appeal of 
material supervisory determinations. In a separate rulemaking issued 
together with this proposed rule, the Board is proposing significant 
changes to the administrative appeals process for matters that are 
outside of the jurisdiction of the SRC, which would be contained in 
Subpart B to part 746.
Section 746.101 Authority, Purpose, and Scope
    Proposed Sec.  746.101 states the legal authority for the Board to 
issue this proposed rule. As noted in the Background section above, the 
Board is issuing this proposed rule pursuant to its authority under 
Sec.  309(a) of the Riegle Act.\11\ The Board is also issuing this 
proposed rule under its plenary regulatory authority in the Federal 
Credit Union Act.\12\
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    \11\ 12 U.S.C. 4806(a).
    \12\ 12 U.S.C. 1766(a), 1789(a)(11).
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    This section also states the purpose and scope of the rule. The 
scope of the proposed rule is limited to appeals of ``material 
supervisory determinations,'' a term defined by the regulation, and 
does not apply to appeals where the petitioner has been granted a right 
to a hearing on the record or appeals governed by Subpart B to part 
746.
Section 746.102 Definitions
    In Sec.  746.102, the Board proposes to define certain terms. 
Unless defined, the Board expects FICUs and other affected parties to 
interpret terms or phrases consistently with the general definitions in 
Sec.  700.2 of NCUA's regulations or, where not defined, according to 
their plain meaning.
Petitioner
    The term ``petitioner'' refers to an entity, including a program 
office, requesting reconsideration or review, or filing an appeal 
pursuant to the procedures set forth in this subpart. As detailed more 
fully below, FICUs must first request reconsideration from the 
appropriate program office and then may request review from the 
Director of E&I. Either a FICU or a program office may appeal a partial 
or complete adverse decision by the Director of E&I, or his or her 
designee, to the SRC. Similarly, either a FICU or program office may 
appeal a partial or complete adverse decision by the SRC to the Board. 
Recognizing that, depending on the procedural posture of a particular 
appeal, the entity requesting review may be either a FICU or a program 
office, the Board is proposing to adopt a uniform term to describe all 
entities requesting agency action on a particular matter.

[[Page 26394]]

Program Office
    The Board is proposing to adopt a uniform term ``program office'' 
to refer to all offices within NCUA responsible for making material 
supervisory determinations. Several NCUA offices are responsible for 
administering various NCUA regulations. Rather than use different 
terminology, the Board is proposing to adopt ``program office'' as a 
uniform term to describe all of the different NCUA offices responsible 
for making material supervisory determinations.
Respondent
    The term ``respondent'' refers to an entity, including a program 
office, defending against an action by a petitioner. As noted above, 
depending on the procedural posture of a particular appeal, the entity 
requesting review may be either a FICU or a program office. Therefore, 
the Board is proposing to adopt a uniform term to describe all entities 
defending against a petitioner's action.
Section 746.103 Material Supervisory Determination
    In response to proposed IRPS 94-2, several commenters argued that 
the additional disputes other than those specifically listed in the 
Riegle Act should be appealable to the SRC. In IRPS 95-1, however, the 
Board adopted a narrow definition of ``material supervisory 
determination'' in order to allow for the opportunity to gain 
experience with the SRC appeals process. Having administered SRC 
appeals for over 20 years, the Board has gained sufficient experience 
with the SRC appeals process and believes that expanding the 
jurisdiction of the SRC to be consistent with the federal banking 
agencies is now appropriate to provide FICUs with enhanced due process.
    Proposed Sec.  746.103 defines the term ``material supervisory 
determination'' to mean a written decision by a program office (unless 
ineligible for appeal) that may significantly affect the capital, 
earnings, operating flexibility, or that may otherwise affect the 
nature and level of supervisory oversight of a FICU subject to the 
exclusions detailed below. Examples of material supervisory 
determinations include, but are not limited to, determinations related 
to the adequacy of loan loss reserve provisions; classification of 
loans and other assets that are significant to a FICU; and 
determinations related to restitution orders under the Truth in Lending 
Act (TILA). This proposed definition is similar to the definition used 
by the Federal Deposit Insurance Corporation (FDIC).\13\
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    \13\ FDIC currently defines ``material supervisory 
determination'' to include, among other things, ``any supervisory 
determination (unless otherwise not eligible for appeal) that may 
affect the capital, earnings, operating flexibility, or capital 
category for prompt corrective action purposes of an institution, or 
otherwise affect the nature and level of supervisory oversight 
accorded an institution.'' 77 FR 17055 (Mar. 20, 2012).
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CAMEL Ratings
    The proposed definition limits the ability to appeal CAMEL ratings 
to composite ratings. Component ratings would no longer be appealable 
to the SRC unless those ratings may affect the nature and level of 
supervisory oversight of a FICU. For example, if eligibility for an 
extended examination cycle is contingent on a component rating of 1 or 
2 in management, a management rating of 3 would be appealable to the 
SRC. Based on its experience with administering the current appellate 
process, the Board does not believe that component ratings are 
``material'' in most cases if the FICU otherwise maintains an overall 
composite CAMEL rating of 1 or 2. Therefore, the proposed definition of 
``material supervisory determination'' limits the ability of FICUs to 
appeal examination ratings only to those cases where the FICU has 
received a composite rating of 3, 4, or 5, or a component rating that 
could trigger supervisory action.
TILA Restitution Orders
    The proposed rule specifically lists a restitution order pursuant 
to TILA as a material supervisory determination appealable to the 
SRC.\14\ Section 108 of TILA permits the Board, where appropriate, to 
order federal credit unions (FCUs) to make restitution to consumers 
that have been harmed by inaccurate disclosures.\15\ Determining 
whether restitution is appropriate often depends on whether there is a 
clear and consistent pattern or practice of violations, gross 
negligence, or a willful disregard for the requirements of TILA. 
Examiners are in the best position, in the first instance, to determine 
whether FCUs demonstrate clear and consistent patterns of TILA 
violations. Because review of these determinations requires 
consideration of the facts and circumstances before the examiner, the 
Board believes the SRC appeals process is the most appropriate method 
for considering these appeals before taking an appeal to the Board.
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    \14\ On September 30, 2010, the Board delegated the authority to 
examine and supervise FCUs for compliance with consumer laws and 
regulations to the Office of Consumer Financial Protection and 
Access. This includes the authority to order an FCU to make 
restitution to consumers where permitted under TILA.
    \15\ 15 U.S.C. 1607(e); see also 63 FR 47495 (Sept. 8, 1998).
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Exclusions From Coverage
    Notwithstanding the broad definition of ``material supervisory 
determination,'' the Board proposes to exclude certain material 
supervisory determinations from the jurisdiction of the SRC. The Riegle 
Act specifically excludes the decision to appoint a conservator or 
liquidating agent for a FICU and the decision to take prompt corrective 
action.\16\ The proposed rule also excludes enforcement-related actions 
and decisions, including appeals related to the underlying facts and 
circumstances that form the basis of a recommended or pending 
enforcement action, because NCUA has explicit rules governing the 
adjudication of these matters that provide affected parties with trial-
like protections.\17\
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    \16\ 12 U.S.C. 4806(f)(1)(B).
    \17\ See 12 CFR 747.
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    The purpose of excluding enforcement-related actions and decisions 
(including the underlying facts and circumstances that form the basis 
of a pending formal enforcement action) is to ensure that the 
enforcement and SRC processes remain separate. Therefore, once an 
enforcement action is pending against a FICU, the proposed rule would 
prohibit FICUs from requesting review by the Director of E&I, or his or 
her designee, or appealing to the SRC any material supervisory 
determination that serves as the basis of that enforcement action. In 
other words, once an enforcement action is initiated, the SRC appeals 
process is suspended, regardless of how far along the FICU may be in 
that process, until the enforcement action is resolved.
    The proposed rule also excludes supervisory determinations for 
which other appeals procedures exist such as a capital classification 
for prompt corrective action purposes.\18\ This recognizes that there 
are some situations where the Board may, in its discretion, draft rules 
with explicit appeals procedures or explicitly state that certain 
matters are governed by particular appeals procedures set forth 
elsewhere in NCUA's regulations. In those cases, the Board expects 
FICUs to follow the explicit procedures stated in the regulation rather 
than attempting to appeal matters to the SRC.
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    \18\ See 12 CFR 747.2003.
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Section 746.104 General Provisions
    Proposed Sec.  746.104 addresses a series of general procedural 
issues that apply

[[Page 26395]]

throughout the proposed rule. These matters include the standard of 
review, the effect of an appeal on the commencement of enforcement 
actions, the effect of an appeal on applications for additional 
authority or waiver requests, and the tolling of timing requirements.
Standard of Review
    The goal of the proposed rule is to enhance due process for credit 
unions and to apply NCUA's policies and practices fairly and 
consistently among all FICUs. Therefore, the Board proposes to place 
the burden of showing an error in an appealed determination on the 
petitioner. The objective of appellate review by the Director of E&I, 
the SRC, and the Board is to ensure that the appealed determination is 
correct and not just reasonable. If the Director of E&I, the SRC, or 
the Board, as applicable, determines that the appealed determination is 
incorrect upon their respective de novo review, then they will render a 
corrected determination.
Dismissal and Withdrawal
    The proposed rule permits an appeal to be dismissed if it is not 
timely filed, if the basis for the appeal is not discernable, if the 
petitioner asks to withdraw the request in writing, or for reasons 
deemed appropriate by the reviewing authority, including, for example, 
if a petitioner in an appeal acts in bad faith by knowingly withholding 
evidence from the appropriate reviewing official. FICUs are encouraged 
to make good-faith efforts to resolve supervisory issues, including 
those concerning a material supervisory determination, at the most 
direct level possible, starting with their examiners or program office 
staff, and as efficiently as possible. If the Director of E&I, the SRC, 
or the Board, as applicable, finds that a FICU has engaged in bad faith 
by knowingly withholding evidence from an examiner, the program office, 
the Director of E&I, the SRC, or the Board, that withholding may serve 
as a basis for dismissing an appeal.
Supervisory or Enforcement Actions Not Affected
    Under the proposed rule, an appeal at any level would not affect, 
delay, or impede any formal or informal supervisory or enforcement 
action in progress, nor would it affect NCUA's authority to take any 
supervisory or enforcement action against a FICU. Unless otherwise 
specified in a written decision on appeal, the material supervisory 
determination would remain in effect until the SRC appeals process has 
been exhausted.
Additional Authority and Waiver Requests During the Pendency of an 
Appeal
    Likewise, under the proposed rule, an appeal would delay action on 
a waiver request or an application for additional authority that could 
be affected by the outcome of the appeal unless the FICU specifically 
requests that the waiver request or application for additional 
authority be considered notwithstanding the appeal. Any deadline for a 
program office to make a determination on a waiver request or 
application for additional authority set out in any part of NCUA's 
regulations would be suspended until the FICU has exhausted its 
administrative remedies under Subpart A or is no longer eligible to 
pursue an appeal. The purpose of this provision is to avoid situations 
where a FICU receives an adverse determination on a waiver request or 
an application for additional authority based on a material supervisory 
determination, only to have the material supervisory determination 
subsequently reversed by the SRC. It also prevents a waiver request or 
an application for additional authority from being automatically denied 
by operation of other parts of NCUA's regulations.
Section 746.105 Procedures for Reconsideration From the Appropriate 
Program Office
    FICUs are encouraged to resolve supervisory issues with their 
examiners and other NCUA staff as efficiently as possible without the 
need to appeal supervisory matters to the SRC. The Board anticipates 
that most disputes will be handled in that manner. Proposed Sec.  
746.105 reflects this policy by requiring a FICU to request 
reconsideration of a material supervisory determination from the 
program office that rendered the determination and by establishing 
procedures that control such a request. The Director of E&I or the SRC 
would only assume jurisdiction over a material supervisory 
determination after the FICU has requested reconsideration from the 
appropriate program office and that program office has had an 
opportunity to render a decision on that request.
    As the Board explained in IRPS 94-2, it is NCUA policy that the SRC 
should only assume jurisdiction over a material supervisory 
determination after the FICU establishes that it has been unsuccessful 
in attempting to resolve the matter with the FICU's examiner or the 
appropriate program office. Early involvement by the Director of E&I or 
the SRC would be disruptive to the established organizational structure 
of NCUA and the relationships between FICUs and NCUA program offices. 
Therefore, the Board believes that requesting reconsideration from the 
appropriate program office should continue to be a mandatory part of 
the process of appealing a material supervisory determination to the 
SRC.
    Nevertheless, to avoid unnecessary delays, a second request for 
reconsideration will be treated as either a request for review by the 
Director of E&I or an appeal to the SRC as determined by the Secretary 
of the Board after consultation with the petitioner. While the 
reconsideration process promotes greater efficiency by facilitating 
dispute resolution at the program office level, allowing multiple 
requests for reconsideration would be inefficient. Upon receiving a 
second request for reconsideration, the program office will forward 
that to the Secretary of the Board to be processed as either a request 
for review pursuant to Sec.  746.106 or an appeal pursuant to Sec.  
746.107.
Section 746.106 Procedures for Requesting Review by the Director of the 
Office of Examination and Insurance
    Proposed Sec.  746.106 provides an optional intermediate level of 
review by the Director of E&I, or his or her designee, before a FICU 
appeals a material supervisory determination to the SRC. The purpose of 
this intermediate level of review is to give FICUs another opportunity 
to resolve supervisory issues and to refine the issues that may be 
presented to the SRC and the Board on appeal. A request for review by 
the Director of E&I must be in writing and filed with the Secretary of 
the Board.
    The Board believes that the Director of E&I, or his or her 
designee, is the appropriate official for these intermediate reviews 
because E&I is NCUA's central office in charge of examination policy. 
E&I staff are expert in nearly all examination-related matters. 
Additionally, E&I is not in the direct line of supervision over any 
program office, thus avoiding any bias or predisposition to affirm a 
material supervisory determination by a program office.
    Under the proposed rule, the Director of E&I, or his or her 
designee, will issue a written decision based on written submissions by 
the FICU and the program office. The Director of E&I, or his or her 
designee, will have the ability to consult with parties jointly or 
separately before rendering a decision. Either the FICU or the program 
office will be able to appeal any adverse

[[Page 26396]]

decision by the Director of E&I, or his or her designee, to the SRC.
    Neither party may make a request for reconsideration of the 
decision rendered by the Director of E&I, or his or her designee. If a 
party disagrees with the decision rendered by the Director of E&I, or 
his or her designee, the next step for further review is to file an 
appeal to the SRC.
Section 746.107 Procedures for Appealing to the Supervisory Review 
Committee
    Proposed Sec.  746.107 codifies many of the existing procedures 
contained in IRPS 11-1, as amended by IRPS 12-1, and expands on them by 
permitting the SRC Chairman to: (1) Adopt supplemental rules governing 
its operations; (2) order that material be kept confidential; and (3) 
consolidate appeals that present similar issues of law or fact. The 
Board believes that with the expanded jurisdiction of the SRC, 
additional procedures may be necessary to address operational issues. 
For example, after some experience with the appeals process, the SRC 
Chairman may determine that supplemental rules allowing all appeals to 
be presented through teleconference rather than in person at NCUA 
headquarters are necessary to ensure that appeals are conducted 
efficiently and promptly. The proposed rule grants the SRC Chairman the 
flexibility to adopt such supplemental rules.
    In addition, proposed Sec.  746.107 creates an explicit right for a 
FICU to request that an appeal be conducted entirely based on the 
written record. As the Board explained in IRPS 95-1, the decision of 
whether to make a personal appearance should be up to the FICU involved 
in a particular appeal because FICUs are responsible for all costs 
associated with a personal appearance. While IRPS 95-1 attempted to 
save resources of both FICUs and NCUA by permitting the SRC Chairman to 
work out disputes via teleconference, the Board believes that more can 
be done to provide enhanced due process. Therefore, the proposed rule 
explicitly grants FICUs the right to request that an appeal be 
conducted entirely based on the written record.
    The proposed rule also requires the SRC Chairman to notify the 
Director of E&I of an appeal that involves the interpretation of 
material supervisory policy or generally accepted accounting principles 
and solicit input from E&I on how to interpret the policy or accounting 
principle that applies to the subject matter of the appeal. E&I staff 
are responsible for setting supervisory policy and interpreting 
accounting principles for NCUA. Therefore, it is appropriate to require 
the SRC to solicit input from the Director of E&I and E&I staff on 
these matters. Furthermore, the proposed rule requires the SRC Chairman 
to notify the General Counsel and solicit input from the Office of 
General Counsel on the interpretation of laws, including NCUA 
regulations, which may apply to the subject matter of an appeal. The 
Office of General Counsel serves as legal counsel for NCUA and, 
therefore, consultation with that office on these issues is necessary 
and proper.\19\
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    \19\ See 12 CFR 790.2(b)(7) (describing the role of the Office 
of General Counsel).
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Effect of Requesting Review by the Director of the Office of 
Examination and Insurance
    The proposed rule encourages a FICU to resolve supervisory matters 
as efficiently as possible by allowing the FICU to request an optional 
review by the Director of E&I, or his or her designee. Accordingly, for 
FICUs that have elected to request review by the Director of E&I, or 
his or her designee, the proposed rule suspends the deadline to file an 
appeal with the SRC until after the Director of E&I, or his or her 
designee, has rendered a decision. In practice, this means that a FICU 
could potentially delay the deadline to file an appeal with the SRC 
until after the Director of E&I, or his or her designee, has considered 
the matter. While this could potentially give FICUs additional time to 
file an appeal with the SRC, the Board believes that the potential 
benefits of reduced caseloads at the SRC and Board levels exceed any 
potential risks of delay, especially because material supervisory 
determinations would remain in place during the pendency of a review by 
the Director of E&I, or his or her designee. Additionally, during this 
time, NCUA would not be prohibited from taking supervisory or 
enforcement actions.
Section 746.108 Composition of Supervisory Review Committee
    The Board proposes to create a rotating pool of not less than eight 
individuals appointed by the NCUA Chairman from among NCUA's senior 
staff in the regional offices, the Office of the Executive Director 
(OED), the Office of Examination and Insurance (E&I), the Office of 
National Examination and Supervision (ONES), the Office of Small Credit 
Union Initiatives (OSCUI), and the Office of Consumer Financial 
Protection and Access (OCFPA) to serve with the SRC Chairman as a SRC 
pool from which individual members may be selected by the SRC Chairman 
to serve as the SRC for a particular appeal.\20\ Each member of the SRC 
pool, with the exception of the SRC Chairman, will serve for a one-year 
term and is eligible to be reappointed for additional terms. A regional 
director, associate regional director, executive director, deputy 
executive director, a general counsel, and a senior policy advisor or 
chief of staff to a Board Member will be ineligible to serve as a 
member of the SRC pool.
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    \20\ With the inclusion of the SRC Chairman, the total number of 
NCUA senior staff in the SRC pool will be not less than nine; eight 
or more of which would be appointed by the NCUA Chairman.
---------------------------------------------------------------------------

    The Secretary of the Board will serve as permanent SRC Chairman and 
will select three SRC members (one of whom may be the SRC Chairman) 
from this SRC pool to serve as the SRC for each particular appeal. The 
Special Counsel will serve as a permanent non-voting member of the SRC 
to advise the SRC on procedural and legal matters. When selecting SRC 
members to hear a particular appeal, the SRC Chairman will consider any 
real or apparent conflicts of interest that may impact the SRC member's 
objectivity as well as that individual's experience with the subject 
matter of the appeal. Members of the SRC pool from the program office 
rendering the material supervisory determination that is the subject of 
the appeal will be ineligible to serve as SRC members for that appeal. 
Likewise, E&I staff will be ineligible to serve as SRC members for 
appeals where the FICU is appealing a determination following a request 
for review by the Director of E&I.
    The Board believes that creating a rotating SRC pool of individuals 
eligible to serve on the SRC from among NCUA's senior staff in the 
regional offices, OED, E&I, ONES, OSCUI, and OCFPA is appropriate 
because these individuals are well-suited to understand supervisory 
issues and render consistent, well-reasoned decisions. Senior staff 
from the regional offices, E&I, and ONES are actively engaged in 
examination-related activities and have in-depth knowledge of current 
trends in the credit union industry. Likewise, senior staff from OSCUI 
have specialized knowledge of the needs of small and low-income FICUs. 
Moreover, senior staff from OCFPA have specialized knowledge of the 
latest issues in chartering, field of membership, and consumer 
protection. Each of these program offices brings a unique and diverse 
set of skills that will greatly benefit the SRC appeals process.

[[Page 26397]]

    In addition, expanding the number of individuals eligible to serve 
on the SRC enhances due process by eliminating the potential for 
conflicts of interest. Having a wider pool from which to draw when 
selecting SRC members allows the SRC Chairman to avoid conflicts of 
interest by selecting SRC members without any direct ties to the 
program office that rendered the material supervisory determination. 
Moreover, having additional members in the SRC pool means that the 
Board can expand the jurisdiction of the SRC, while still providing an 
expeditious process for a FICU to appeal a material supervisory 
determination.
    Nevertheless, the Board continues to believe that regional 
directors and associate regional directors should not serve in the pool 
of individuals eligible to serve on the SRC. The Riegle Act mandated 
NCUA to establish an ``independent appellate process,'' which it 
defines as ``a review by an agency official who does not directly or 
indirectly report to the agency official who made the material 
supervisory determination under review.'' \21\ This reflects a clear 
Congressional intent to afford a FICU a separate and meaningful appeal 
of a material supervisory determination. As the Board explained in IRPS 
95-1, allowing regional directors and associate regional directors to 
serve as members of the SRC pool would place these individuals in the 
untenable position of potentially reviewing material supervisory 
determinations made by their colleagues. While the Board does not 
believe that these individuals would be predisposed to support other 
regional directors or associate regional directors, the Board wishes to 
eliminate any perception that the SRC appeals process may be biased 
against FICUs.
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 4806(f)(2).
---------------------------------------------------------------------------

    Likewise, the Board continues to believe that the executive 
director, deputy executive director, policy advisors and chiefs of 
staff to Board Members should not serve as members of the SRC pool.\22\ 
These individuals serve in positions that report to and represent the 
interests of Board Members. In order to ensure a separate and 
meaningful final appeal to the Board, these individuals should not 
serve as members of the SRC pool. Likewise, the Board believes that 
attorneys from the Office of General Counsel should not serve as 
members of the SRC pool. These individuals are responsible for 
providing legal advice to NCUA including the SRC and the Board. In 
order to prevent any conflicts of interest, these individuals should 
not serve as members of the SRC pool.
---------------------------------------------------------------------------

    \22\ See IRPS 95-1.
---------------------------------------------------------------------------

Section 746.109 Procedures for Appealing to the NCUA Board
    This section of the proposed rule describes the filings that must 
be made with the Secretary of the Board in order to appeal a decision 
by the SRC to the Board. It also addresses timing requirements. A 
request for appeal must include a statement of facts on which the 
appeal is based, a statement of the petitioner's principal objections 
to the SRC's decision, and, for FICUs, a certification that the FICU's 
board of directors has authorized the appeal to be filed. The proposed 
rule cross references procedures set out in Sec.  746.111 that must be 
followed to request an oral hearing.
Granting an Appeal
    Consistent with IRPS 11-1, as amended by IRPS 12-1, appeals to the 
Board would not be granted as a matter of right. Rather, at least one 
Board Member would be required to agree to hear an appeal from a 
decision by the SRC within 20 calendar days from the date the 
petitioner first filed the appeal with the Secretary of the Board. The 
purpose of this provision is to reserve Board review for only those 
cases involving significant issues of supervisory policy that cannot be 
addressed at the several lower appellate levels provided by this rule 
or through a request for reconsideration from the appropriate program 
office. At this stage, petitioners would have had the opportunity to 
obtain potentially three levels of review (i.e., reconsideration from 
the program office, review by the Director of E&I or his or her 
designee, and appeal to the SRC). Therefore, the Board believes that 
limiting Board review to only certain matters is not unfairly 
prejudicial. Furthermore, if a request for an appeal is denied, the 
decision of the SRC would be treated as a final agency action 
permitting the petitioner to seek judicial review in federal court 
under the Administrative Procedure Act (APA).
    If a request for an appeal is granted, the Board generally will 
decide the matter based solely on written submissions by the parties. 
However, if a request for an appeal is granted with an oral hearing, 
the Secretary of the Board would notify the parties of the date and 
time where the appeal shall be heard. As discussed in more detail 
below, an oral hearing may be either in person (including through 
counsel) or through video or teleconference.
    Within 15 calendar days from the date the Secretary of the Board 
receives an appeal, the petitioner may amend or supplement the appeal 
in writing. The respondent would then be permitted 15 calendar days to 
respond to any supplemental filings.
Certain Actions Not Reviewable
    Under the proposed rule, petitioners are permitted to request an 
appeal to the Board in all circumstances except denials of TAG 
reimbursements. As the Board explained in its rulemaking regarding the 
Community Development Revolving Loan Fund, TAG reimbursements are 
subject to the discretion of the Director of OSCUI and availability of 
funds.\23\ Therefore, such determinations are not subject to 
administrative appeal to the Board. However, whether a FICU meets the 
qualifications set forth in a Notice of Funding Opportunity, which is 
different from whether the FICU should be granted a TAG reimbursement, 
is subject to administrative appeal to the Board under separate 
procedures and not through the SRC appeals process.
---------------------------------------------------------------------------

    \23\ 76 FR 67583, 67586 (Nov. 11, 2011).
---------------------------------------------------------------------------

Section 746.110 Administration of the Appeal
    Proposed Sec.  746.110 sets out the standard procedures followed by 
the Board upon receipt of a timely appeal. These proposed procedures 
are, in some respects, a codification of informal practices that the 
Board currently follows when reviewing other types of appeals that were 
not heard by the SRC. To date, the Board has only received one appeal 
of a decision by the SRC.
    Proposed paragraph (b) requires the Board to render a written 
decision stating the reasons for the decision within 90 calendar days, 
unless extended by the Board, from the date of receipt of an appeal by 
the Secretary of the Board. Such a decision would constitute a final 
agency action permitting the petitioner to seek judicial review in 
federal court under the APA. If the Board does not reach a decision 
within 90 calendar days, unless otherwise extended, from the date of 
receipt, then it would be treated as a denial. Building this deadline 
into the rule ensures that the Board has adequate time to decide a 
matter on appeal while avoiding any undue prejudice to petitioners from 
unnecessary delays.
Section 746.111 Oral Hearing
    This section of the proposed rule sets out the process for 
requesting and conducting an oral hearing. The Board recognizes that, 
in some unusual cases, the opportunity to make an oral presentation in 
person (or through video

[[Page 26398]]

or teleconference) is necessary or useful to ensure a thorough 
understanding of the issues in a case. Therefore, the Board proposes to 
allow a FICU to make an oral presentation to the Board where at least 
one Board Member agrees with the petitioner that good cause exists for 
holding an oral hearing. Individual Board Members must act on such a 
request within 20 days of receiving a request for an oral hearing.
Request for Oral Hearing; Action on Request; Effect of Denial
    Paragraph (a) describes the process for requesting an oral hearing. 
The request must accompany the notice of appeal itself, set out in a 
separate document titled ``Request for Oral Hearing.'' The petitioner 
would be required to show good cause for holding an oral hearing, 
stating reasons why the case cannot be presented adequately with just 
written statements. Proposed paragraph (b) specifies that an oral 
hearing would be scheduled provided at least one Board Member agrees to 
the oral hearing. The Secretary of the Board would notify the parties 
of the Board's determination regarding the request for an oral hearing. 
Proposed paragraph (c) specifies that, in the event the request does 
not receive the support of at least one Board Member, the appeal will 
proceed on the basis of written submissions.
Procedures for Oral Hearing--Appearances; Representation
    At an oral hearing, the petitioner would be permitted to be 
represented by one or more representatives of its choice (but not more 
than two without prior approval by the NCUA Chairman). This proposed 
paragraph recognizes the general right granted in the APA for 
individuals appearing in person before an agency to be ``accompanied, 
represented, and advised by counsel or, if permitted by the agency, by 
other qualified representative[s].'' \24\ In general, courts have found 
the right to counsel to be a fundamental aspect of procedural due 
process in both informal and formal agency adjudications.\25\
---------------------------------------------------------------------------

    \24\ 5 U.S.C. 555(b).
    \25\ See Goldberg v. Kelly, 397 U.S. 254, 270 (1970) (``The 
right to be heard would be, in many cases, of little avail if it did 
not comprehend the right to be heard by counsel. We do not say that 
counsel must be provided at the pre-termination hearing, but only 
that the recipient must be allowed to retain an attorney if he so 
desires. Counsel can help delineate the issues, present factual 
contentions in an orderly manner, conduct cross-examination, and 
generally safeguard the interests of the recipient.'').
---------------------------------------------------------------------------

Conduct of Oral Hearing
    Proposed paragraph (d)(3) permits the use of presentations based on 
written evidence submitted as part of the appeal documents. The 
submission of written evidence or witness testimony at the oral hearing 
would not be permitted. The petitioner would be given the opportunity 
to argue first, followed by a representative of the opposing party.
Section 746.112 Retaliation Prohibited
    The Riegle Act required the Board to appoint an official to handle 
any problems FICUs may have as a result of appealing a material 
supervisory determination.\26\ NCUA policy prohibits any retaliation, 
abuse, or retribution by NCUA personnel against a FICU in this regard. 
FICUs that believe they are victims of impermissible retaliation would 
be able to file complaints with the NCUA Office of Inspector General, 
who will investigate such claims and recommend appropriate action.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 4806(d).
---------------------------------------------------------------------------

Section 746.113 Coordination With State Supervisory Authority
    In the event that a material supervisory determination becomes the 
subject of a request for review by the Director of E&I and is the joint 
product of NCUA and a state supervisory authority (SSA), proposed Sec.  
746.113 requires the Director of E&I, or his or her designee, to 
promptly notify the SSA of the request for review, provide the SSA with 
a copy of the request and any other related materials, solicit the 
SSA's views regarding the merits of the request before making a 
determination, and notify the SSA of the Director's determination.
    In the event that an appeal is subsequently filed with the SRC, the 
SRC is required to notify the SSA of the appeal, provide the SSA with a 
copy of the appeal and any other related materials, solicit the SSA's 
views regarding the merits of the appeal before making a determination, 
and notify the SSA of the SRC's determination. Once the SRC issues a 
determination, any other issues not addressed by the SRC that may 
remain between the FICU and the SSA would be left to those parties to 
resolve. Similar procedures would be followed for appeals to the Board.

IV. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a regulation may have on a 
substantial number of small entities (primarily those under $100 
million in assets).\27\ This rule has no economic impact on small 
credit unions because it only impacts internal NCUA procedures and 
provides voluntary options for credit unions. Accordingly, NCUA 
certifies the rule will not have a significant economic impact on a 
substantial number of small credit unions.
---------------------------------------------------------------------------

    \27\ 5 U.S.C. 603(a).
---------------------------------------------------------------------------

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency by rule creates a new paperwork burden on regulated 
entities or increases an existing burden.\28\ For purposes of the PRA, 
a paperwork burden may take the form of a reporting or recordkeeping 
requirement, both referred to as information collections. Information 
collected as part of a civil action or administrative action, 
investigation, or audit, however, is not considered an information 
collection for purposes of the PRA.
    Proposed Subpart A to part 746 establishes procedures for appealing 
material supervisory determinations to the NCUA Supervisory Review 
Committee. Because the only paperwork burden in this proposed rule 
relates to activities that are not considered to be information 
collections, NCUA has determined that this rule is exempt from the 
requirements of the PRA.\29\
---------------------------------------------------------------------------

    \28\ 44 U.S.C. 3507(d); 5 CFR 1320.
    \29\ 44 U.S.C. 3518(c)(1)(B)(ii).
---------------------------------------------------------------------------

Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this rule will not affect family well-
being within the meaning of Sec.  654 of the Treasury and General 
Government Appropriations Act, 1999.\30\
---------------------------------------------------------------------------

    \30\ Public Law 105-277, 654, 112 Stat. 2681, 2681-581 (1998).
---------------------------------------------------------------------------

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests.\31\ 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order to adhere to fundamental 
federalism principles. The rule will not have substantial direct 
effects on the states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. NCUA has 
therefore determined that this rule does not constitute a policy that 
has federalism implications for purposes of the executive order.
---------------------------------------------------------------------------

    \31\ 64 FR 43255 (Aug. 4, 1999).

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[[Page 26399]]

List of Subjects

12 CFR Part 746

    Administrative practice and procedure, Claims, Credit Unions, 
Investigations.

    By the National Credit Union Administration Board on May 25, 
2017.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the NCUA Board proposes to add 
Subpart A to 12 CFR part 746 as follows:

PART 746--APPEALS PROCEDURES

0
1. The authority citation for part 746 reads as follows:

    Authority:  12 U.S.C. 1766, 1787, and 1789.

0
2. Add a new subpart A to read as follows:

Subpart A--Procedures for Appealing Material Supervisory 
Determinations

Sec.
746.101 Authority, Purpose, and Scope.
746.102 Definitions.
746.103 Material Supervisory Determinations.
746.104 General Provisions.
746.105 Procedures for Reconsideration from the Appropriate Program 
Office.
746.106 Procedures for Requesting Review by the Director of the 
Office of Examination and Insurance.
746.107 Procedures for Appealing to the Supervisory Review 
Committee.
746.108 Composition of Supervisory Review Committee.
746.109 Procedures for Appealing to the NCUA Board.
746.110 Administration of the Appeal.
746.111 Oral Hearing.
746.112 Retaliation Prohibited.
746.113 Coordination with State Supervisory Authority.


Sec.  746.101   Authority, Purpose, and Scope.

    (a) Authority. This subpart is issued pursuant to section 309 of 
the Riegle Community Development and Regulatory Improvement Act of 1994 
(12 U.S.C. 4806), which requires the NCUA Board to establish an 
independent intra-agency process to review appeals of material 
supervisory determinations made by agency officials, and sections 120 
and 209 of the Federal Credit Union Act (12 U.S.C. 1766, 1789).
    (b) Purpose. The purpose of this subpart is to establish an 
expeditious review process for federally insured credit unions to 
appeal material supervisory determinations to an independent 
supervisory panel and, if applicable, to the NCUA Board. This subpart 
is also intended to establish appropriate safeguards for protecting 
appellants from retaliation by agency officials.
    (c) Scope. This subpart applies to the appeal of material 
supervisory determinations made by agency officials. This subpart does 
not apply to the appeal of determinations for which an independent 
right to appeal exists such as a decision to appoint a conservator or 
liquidating agent for a federally insured credit union or to take 
prompt corrective action pursuant to section 216 of the Federal Credit 
Union Act (12 U.S.C. 1790d) and part 702 of this chapter. This subpart 
also does not apply to enforcement-related actions and decisions, 
including determinations and the underlying facts and circumstances 
that form the basis of a pending enforcement action.


Sec.  746.102   Definitions.

    For purposes of this subpart:
    Board means the NCUA Board.
    Committee means the Supervisory Review Committee.
    Director of the Office of Examination and Insurance has the same 
meaning as used in Sec.  790.2 of this chapter but also includes 
individuals designated by the Director of the Office of Examination and 
Insurance from among senior Office of Examination and Insurance staff 
to handle requests for review by the Director of the Office of 
Examination and Insurance pursuant to Sec.  746.106 of this subpart.
    Material Supervisory Determination is defined in Sec.  746.103 of 
this subpart.
    Petitioner means an entity, including a program office, requesting 
reconsideration, review, or filing an appeal pursuant to the procedures 
set forth in this subpart.
    Program Office means the office within NCUA responsible for making 
a material supervisory determination.
    Respondent means an entity, including a program office, defending 
against an action by a petitioner.
    Special Counsel to the General Counsel or Special Counsel means an 
individual within the Office of General Counsel providing legal or 
procedural advice to the Committee in accordance with the procedures 
set forth in this subpart.


Sec.  746.103   Material Supervisory Determination.

    (a) Material Supervisory Determination. The term ``material 
supervisory determination'' means a written decision by a program 
office that may significantly affect the capital, earnings, operating 
flexibility, or that may otherwise affect the nature and level of 
supervisory oversight of a federally insured credit union. The term 
includes, but is not limited to:
    (1) Composite examination ratings of 3, 4, or 5;
    (2) Determinations relating to the adequacy of loan loss reserve 
provisions;
    (3) Classifications of loans and other assets that are significant 
to a federally insured credit union;
    (4) Restitution orders pursuant to the Truth in Lending Act (15 
U.S.C. 1601 et seq.) and its implementing regulation, Regulation Z (12 
CFR part 1026); and
    (5) Determinations on a waivers request or an application for 
additional authority where independent appeal procedures have not been 
specified in other NCUA regulations.
    (b) Exclusions from Coverage. The term ``material supervisory 
determination'' does not include:
    (1) Composite examination ratings of 1 or 2;
    (2) Component examination ratings unless such ratings have a 
significant adverse effect on the nature and level of supervisory 
oversight of a federally insured credit union;
    (3) The scope and timing of supervisory contacts;
    (4) Decisions to appoint a conservator or liquidating agent for a 
federally insured credit union;
    (5) Decisions to take prompt corrective action pursuant to section 
216 of the Federal Credit Union Act (12 U.S.C. 1790d) and part 702 of 
this chapter;
    (6) Enforcement-related actions and decisions, including 
determinations and the underlying facts and circumstances that form the 
basis of a pending enforcement action;
    (7) Preliminary examination conclusions communicated to a federally 
insured credit union before a final exam report or other written 
communication is issued;
    (8) Formal and informal rulemakings pursuant to the Administrative 
Procedure Act (5 U.S.C. 500 et seq.);
    (9) Requests for NCUA records or information under the Freedom of 
Information Act (5 U.S.C. 552) and part 792 of this chapter and the 
submission of information to NCUA that is governed by this statute and 
this regulation; and
    (10) Determinations for which other appeals procedures exist.


Sec.  746.104   General Provisions.

    (a) Standard of Review. The burden of showing an error in an 
appealed determination shall rest solely with the petitioner. Review 
shall be de novo.
    (b) Dismissal and Withdrawal. Any appeal under this subpart may be 
dismissed by written notice if it is not timely filed; if the basis for 
the appeal is not discernable; if the petitioner asks to withdraw the 
request in writing; if any party fails to provide additional

[[Page 26400]]

information requested pursuant to any authority granted in this 
subpart; if any party engages in bad faith; or for reasons deemed 
appropriate by the reviewing authority.
    (c) Discovery. No provision of this subpart is intended to create 
any right to discovery or similar process.
    (d) Supervisory or Enforcement Actions Not Affected. No provision 
of this subpart is intended to affect, delay, or impede any formal or 
informal supervisory or enforcement action in progress or affect NCUA's 
authority to take any supervisory or enforcement action against a 
federally insured credit union.
    (e) Additional Authority and Waiver Requests During the Pendency of 
an Appeal. A program office will not consider a waiver request or an 
application for additional authority that could be affected by the 
outcome of an appeal of a material supervisory determination unless 
specifically requested by the federally insured credit union appealing 
the material supervisory determination. Any deadline for a program 
office to decide a waiver request or an application for additional 
authority set forth in any part of this chapter shall be suspended 
until the federally insured credit union appealing a material 
supervisory determination has exhausted its administrative remedies 
under this subpart or may no longer appeal the material supervisory 
determination, whichever is later.


Sec.  746.105   Procedures for Reconsideration From the Appropriate 
Program Office.

    (a) Reconsideration. A federally insured credit union must make a 
written request for reconsideration from the appropriate program office 
prior to requesting review by the Director of the Office of Examination 
and Insurance pursuant to Sec.  746.106 or filing an appeal with the 
Committee pursuant to Sec.  746.107. Such a request must be made within 
30 calendar days after receiving an examination report containing a 
material supervisory determination or other official written 
communication of a material supervisory determination. A request for 
reconsideration must be in writing and filed with the appropriate 
program office.
    (b) Content of Request. Any request for reconsideration must 
include:
    (1) A statement of the facts on which the request for 
reconsideration is based;
    (2) A statement of the basis for the material supervisory 
determination to which the petitioner objects and the alleged error in 
such determination; and
    (3) Any other evidence relied upon by the petitioner that was not 
previously provided to the appropriate program office making the 
material supervisory determination.
    (c) Decision. Within 30 calendar days after receiving a request for 
reconsideration, the appropriate program office shall issue a written 
decision, stating the reasons for the decision, and provide written 
notice of the right to file a request for review by the Director of the 
Office of Examination and Insurance pursuant to Sec.  746.106 or file 
an appeal with the Committee pursuant to Sec.  746.107. If a written 
decision is not issued within 30 calendar days, the request for 
reconsideration will be deemed to have been denied.
    (d) Subsequent Requests for Reconsideration. Any subsequent request 
for reconsideration following an initial request made pursuant to this 
section will be treated as a request for review by the Director of the 
Office of Examination and Insurance pursuant to Sec.  746.106 or an 
appeal to the Committee pursuant to Sec.  746.107 as determined by the 
Secretary of the Board after consultation with the federally insured 
credit union.


Sec.  746.106   Procedures for Requesting Review by the Director of 
Office of Examination and Insurance.

    (a) Request for Review. Prior to filing an appeal with the 
Committee pursuant to Sec.  746.107, but after receiving a written 
decision by the appropriate program office in response to a request for 
reconsideration pursuant to Sec.  746.105, a federally insured credit 
union may make a written request for review by the Director of the 
Office of Examination and Insurance of the program office's material 
supervisory determination. Such a request must be made within 30 
calendar days after a final decision on reconsideration is made by the 
appropriate program office. A request for review must be in writing and 
filed with the Secretary of the Board, National Credit Union 
Administration, 1775 Duke Street, Alexandria, VA 22314-3428.
    (b) Content of Request. Any request for review by a federally 
insured credit union must include:
    (1) A statement that the federally insured credit union is 
requesting review by the Director of the Office of Examination and 
Insurance;
    (2) A statement of the facts on which the request for review is 
based;
    (3) A statement of the basis for the material supervisory 
determination to which the federally insured credit union objects and 
the alleged error in such determination;
    (4) Any other evidence relied upon by the federally insured credit 
union that was not previously provided to the appropriate program 
office making the material supervisory determination; and
    (5) A certification that the board of directors of the federally 
insured credit union has authorized the request for review to be filed.
    (c) Conduct of Review. Review of a material supervisory 
determination shall be based on the written submissions provided under 
paragraph (b) of this section. The Director of the Office of 
Examination and Insurance may request additional information from the 
appropriate program office or the federally insured credit union within 
15 calendar days after the Secretary of the Board receives a request 
for review by the Director of the Office of Examination and Insurance. 
The relevant party must submit the requested information to the 
Director of the Office of Examination and Insurance within 15 calendar 
days after receiving such request for additional information. The 
Director of the Office of Examination and Insurance may consult with 
the parties jointly or separately before rendering a decision and may 
solicit input from any other pertinent program office as necessary.
    (d) Decision. Within 30 calendar days after the Secretary of the 
Board receives a request for review, the Director of the Office of 
Examination and Insurance shall issue a written decision, stating the 
reasons for the decision, and provide written notice of the right to 
file an appeal with the Committee pursuant to Sec.  746.107. The 30 
calendar day deadline is extended by the time period during which the 
Director of the Office of Examination and Insurance is gathering 
additional information. If a written decision is not issued within 30 
calendar days, as extended by additional time during which the 
information is being gathered, the request for review will be deemed to 
have been denied.
    (e) Subsequent Requests for Review. No party may request 
reconsideration of the decision rendered by the Director of the Office 
of Examination and Insurance. Any subsequent request for review 
following the rendering of a decision by the Director of the Office of 
Examination and Insurance will be treated as an appeal to the 
Committee.


Sec.  746.107   Procedures for Appealing to the Supervisory Review 
Committee.

    (a) Request for Appeal. After receiving a written decision by the 
appropriate program office in response to a request for reconsideration 
pursuant to Sec.  746.105, a petitioner may file an

[[Page 26401]]

appeal with the Committee. Such an appeal must be filed within 30 
calendar days after receiving a written decision by the appropriate 
program office on reconsideration or, if the petitioner requests review 
by the Director of the Office of Examination and Insurance pursuant to 
Sec.  746.106, within 30 calendar days after a final decision is made 
by the Director of the Office of Examination and Insurance. An appeal 
must be in writing and filed with the Secretary of the Board, National 
Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314-
3428.
    (b) Content of Appeal. Any appeal must include:
    (1) A statement that the petitioner is filing an appeal with the 
Committee;
    (2) A statement of the facts on which the appeal is based;
    (3) A statement of the basis for the determination to which the 
petitioner objects and the alleged error in such determination;
    (4) Any other evidence relied upon by the petitioner that was not 
previously provided to the appropriate program office or, if 
applicable, the Director of the Office of Examination and Insurance; 
and
    (5) For federally insured credit unions, a certification that its 
board of directors has authorized the appeal to be filed.
    (c) Conduct of Appeal. The following procedures shall govern the 
conduct of an appeal to the Committee:
    (1) Submission of Written Materials. The Committee may request 
additional information from either of the parties within 15 calendar 
days after the filing of an appeal. The parties must submit the 
requested information to the Committee within 15 calendar days after 
receiving a request for additional information.
    (2) Oral Hearing; Duration; Location. Except where a federally 
insured credit union, as either petitioner or respondent, has requested 
that an appeal be based entirely on the written record, an appeal shall 
also consist of oral presentations to the Committee at NCUA 
headquarters. The introduction of written evidence or witness testimony 
may also be permitted at the oral hearing. The petitioner shall argue 
first. Each side shall be allotted a specified and equal amount of time 
for its presentation, of which a portion may be reserved for purposes 
of rebuttal. This time limit shall be set by the Committee and will be 
based on the complexity of the appeal. Committee members may ask 
questions of any individual appearing before it.
    (3) Appearances; Representation. The parties shall submit a notice 
of appearance identifying the individual(s) who will be representing 
them in the oral presentation. The federally insured credit union shall 
designate not more than two officers, employees, or other 
representatives including counsel, unless authorized by the Committee. 
The program office shall designate not more than two individuals, one 
of whom may be an enforcement attorney from NCUA's Office of General 
Counsel, unless authorized by the Committee.
    (d) Decision. Within 30 calendar days after the oral presentation 
of the appeal to the Committee, the Committee shall issue a decision in 
writing, stating the reasons for the decision, and provide the 
petitioner with written notice of the right to file an appeal with the 
NCUA Board (if applicable). If a federally insured credit union has 
requested that an appeal be entirely based on the written record, the 
Committee shall issue a decision within 30 calendar days from the date 
of receipt of an appeal by the Secretary of the Board. The 30 calendar 
day deadline to decide an appeal based entirely on the written record 
is extended by any time period during which the Committee is gathering 
additional information pursuant to paragraph (c)(1) of this section.
    (e) Publication. The Committee shall publish its decisions on 
NCUA's Web site with appropriate redactions to protect confidential or 
exempt information. In cases where redaction is insufficient to prevent 
improper disclosure, published decisions may be presented in summary 
form. Published decisions may be cited as precedent in appeals to the 
Committee.
    (f) Consultation With Office of Examination and Insurance or Office 
of General Counsel Required. If an appeal involves the interpretation 
of material supervisory policy or generally accepted accounting 
principles, the Committee shall notify the Director of the Office of 
Examination and Insurance of the appeal and solicit input from the 
Office of Examination and Insurance. If an appeal involves the 
interpretation of legal requirements, including NCUA's regulations, the 
Committee shall notify the General Counsel of the appeal and solicit 
input from the Office of General Counsel.
    (g) Supplemental Procedures Authorized. In addition to the 
procedures contained in this subpart, the Committee Chairman may adopt 
supplemental procedures governing the operations of the Committee, 
order that material be kept confidential, or consolidate appeals that 
present similar issues of law or fact.


Sec.  746.108   Composition of Supervisory Review Committee.

    (a) Formation and Composition of Committee Pool. The NCUA Chairman 
shall select not less than eight members from among senior staff in the 
regional offices, the Office of the Executive Director, the Office of 
Examination and Insurance, the Office of National Examination and 
Supervision, the Office of Small Credit Union Initiatives, and the 
Office of Consumer Financial Protection and Access to serve along with 
the Committee Chairman as a Committee pool from which the Committee 
Chairman may select Committee members. None of the members appointed by 
the NCUA Chairman shall also serve as a regional director, associate 
regional director, executive director, deputy executive director, 
general counsel, or a senior policy advisor or chief of staff to a 
Board Member.
    (b) Term of Office for Members of Committee Pool. Each member of 
the Committee pool shall serve for a one year term and may be 
reappointed by the NCUA Chairman for additional terms.
    (c) Designation and Role of Committee Chairman. The Secretary of 
the Board shall serve as permanent Committee Chairman. The Committee 
Chairman shall be responsible for designating three Committee members 
(one of whom may be the Committee Chairman) from among the Committee 
pool to hear a particular appeal.
    (d) Selection Criteria. When selecting Committee members to hear an 
appeal pursuant to paragraph (c), the Committee Chairman shall consider 
any real or apparent conflicts of interest that may impact the 
objectivity of the Committee member as well as that individual's 
experience with the subject matter of the appeal.
    (e) Interested Staff Ineligible. Members of the Committee pool from 
the program office that made the material supervisory determination 
that is the subject of the appeal are ineligible to serve on the 
Committee for that appeal. Members of the Committee pool from the 
Office of Examination and Insurance are ineligible to serve on the 
Committee for appeals where the petitioner previously requested review 
by the Director of the Office of Examination and Insurance pursuant to 
Sec.  746.106.
    (f) Role of the Special Counsel. The Special Counsel to the General 
Counsel shall serve as a permanent nonvoting member of the Committee to 
advise on procedural and legal matters.
    (g) Quorum; Meetings. A quorum of two Committee members (excluding 
the

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Special Counsel) shall be present at each Committee meeting and a 
majority vote of a quorum is required for an action on an appeal. 
Meetings of the Committee will not be open to the public.


Sec.  746.109   Procedures for Appealing to the NCUA Board.

    (a) Request for Appeal. A petitioner may file an appeal with the 
Board challenging a decision by the Committee within 30 calendar days 
after receiving that decision. An appeal must be in writing and filed 
with the Secretary of the Board, National Credit Union Administration, 
1775 Duke Street, Alexandria, VA 22314-3428.
    (b) Granting an Appeal. At least one Board Member must agree to 
consider an appeal from a decision by the Committee. If a request for 
an oral hearing pursuant to Sec.  746.111 is granted, the Secretary of 
the Board will notify the parties of the time and location where the 
oral hearing shall be heard. Except in unusual circumstances, any 
appeal shall be held at NCUA headquarters. If at least one Board Member 
does not agree to consider an appeal from a decision by the Committee 
within 20 days of receiving a request, the request will be deemed to 
have been denied.
    (c) Failure to File a Timely Appeal. A petitioner that fails to 
file an appeal within the specified 30-day period shall be deemed to 
have waived all claims pertaining to the matters in issue.
    (d) Certain Actions Not Reviewable. Notwithstanding any other 
provision of this subpart, Committee decisions on the denial of a 
technical assistance grant reimbursement are final decisions of NCUA 
and may not be appealed to the Board.
    (e) Content of Appeal. Any request for appeal must include:
    (1) A statement of the facts on which the appeal is based;
    (2) A statement of the basis for the determination to which the 
petitioner objects and the alleged error in such determination; and
    (3) For federally insured credit unions, a certification that its 
board of directors has authorized the appeal to be filed.
    (f) Amending or Supplementing the Appeal. The petitioner may amend 
or supplement the appeal in writing within 15 calendar days from the 
date the Secretary of the Board receives an appeal. If the petitioner 
amends or supplements the appeal, the respondent will be permitted to 
file responsive materials within 15 calendar days.
    (g) Request for Oral Hearing. In accordance with Sec.  746.111, the 
petitioner may request an opportunity to appear before the Board to 
make an oral presentation in support of the appeal.


Sec.  746.110   Administration of the Appeal.

    (a) Conduct of Appeal. Except as otherwise provided in Sec.  
746.111, the following procedures shall govern the conduct of an appeal 
to the Board:
    (1) Review Based on Written Record. The appeal of a material 
supervisory determination shall be entirely based on the written 
record.
    (2) Submission of Written Materials. The Board or the Special 
Counsel to the General Counsel may request additional information to be 
provided in writing from either of the parties within 15 calendar days 
after the filing of an appeal, any amendments or supplementary 
information to the appeal documents by the petitioner, or any 
responsive materials by the respondent, whichever is later. The parties 
must submit the requested information to the Board or the Special 
Counsel within 15 calendar days of receiving a request for additional 
information.
    (b) Decision. The Board shall issue a decision within 90 calendar 
days, unless there is an oral hearing, from the date of receipt of an 
appeal by the Secretary of the Board. The decision by the Board shall 
be in writing, stating the reasons for the decision, and shall 
constitute a final agency action for purposes of chapter 7 of title 5 
of the United States Code. Failure by the Board to issue a decision on 
an appeal within the 90-day period, unless there is an oral hearing, 
shall be deemed to be a denial of the appeal.
    (c) Publication. The Board shall publish its decisions on NCUA's 
Web site with appropriate redactions to protect confidential or exempt 
information. In cases where redaction is insufficient to prevent 
improper disclosure, published decisions may be presented in summary 
form. Published decisions may be cited as precedent.


Sec.  746.111   Oral Hearing.

    (a) Request for Oral Hearing. The petitioner may request to appear 
before the Board to make an oral presentation in support of the appeal. 
The request must be submitted with the initial appeal documents and 
should be in the form of a separate written document titled ``Request 
for Oral Hearing.'' The request must show good cause for an oral 
presentation and state reasons why the appeal cannot be presented 
adequately in writing.
    (b) Action on the Request. The Board shall determine whether to 
grant the request for oral hearing and shall direct the Secretary of 
the Board to serve notice of the Board's determination in writing to 
the parties. A request for oral hearing shall be granted with the 
approval of any Board Member within 20 days of receiving a request for 
an oral hearing.
    (c) Effect of Denial. In the event a request for an oral hearing is 
denied, the appeal shall be reviewed by the Board on the basis of the 
written record.
    (d) Procedures for Oral Hearing. The following procedures shall 
govern the conduct of any oral hearing:
    (1) Scheduling of Oral Hearing; Location. The Secretary of the 
Board shall notify the parties of the date and time for the oral 
hearing, making sure to provide reasonable lead time and schedule 
accommodations. The oral hearing will be held at NCUA headquarters; 
provided, however, that on its own initiative or at the request of the 
petitioner, the NCUA Chairman may in his or her sole discretion allow 
for an oral hearing to be conducted via teleconference or video 
conference facilities.
    (2) Appearances; Representation. The parties shall submit a notice 
of appearance identifying the individual(s) who will be representing 
them in the oral presentation. The federally insured credit union shall 
designate not more than two officers, employees, or other 
representatives including counsel, unless authorized by the NCUA 
Chairman. The program office shall designate not more than two 
individuals one of whom may be an enforcement attorney from NCUA's 
Office of General Counsel, unless authorized by the NCUA Chairman.
    (3) Conduct of Oral Hearing. The oral hearing shall consist 
entirely of oral presentations. The introduction of written evidence or 
witness testimony shall not be permitted at the oral hearing. The 
petitioner shall argue first. Each side shall be allotted a specified 
and equal amount of time for its presentation, of which a portion may 
be reserved for purposes of rebuttal. This time limit shall be set by 
the Board and will be based on the complexity of the appeal. Members of 
the Board may ask questions of any individual appearing before the 
Board.
    (4) Transcript. The oral hearing shall be on the record and 
transcribed by a stenographer, who will prepare a transcript of the 
proceedings. The stenographer will make the transcript available to the 
federally insured credit union upon payment of the cost thereof.
    (e) Confidentiality. An oral hearing as provided for herein 
constitutes a meeting of the Board within the meaning of the Government 
in the

[[Page 26403]]

Sunshine Act (5 U.S.C. 552b). The Chairman shall preside over the 
conduct of the oral hearing. The meeting will be closed to the public 
to the extent that one or more of the exemptions from public meetings 
apply as certified by NCUA's Office of General Counsel. The Board shall 
maintain the confidentiality of any information or materials submitted 
or otherwise obtained in the course of the procedures outlined herein, 
subject to applicable law and regulations.
    (f) Conclusion of the Oral Hearing. The Board shall take the oral 
presentations under advisement. The Board shall render its decision on 
the appeal in accordance with Sec.  746.110.


Sec.  746.112   Retaliation Prohibited.

    (a) Retaliation Prohibited. NCUA staff may not retaliate against a 
federally insured credit union making any type of appeal. Alleged acts 
of retaliation should be reported to the NCUA Office of Inspector 
General, which is authorized to receive and investigate complaints and 
other information regarding abuse in agency programs and operations.
    (b) Submission of Complaints. Federally insured credit unions may 
submit complaints of suspected retaliation to the NCUA Office of 
Inspector General, 1775 Duke Street, Alexandria, VA 22314-3428. 
Complaints should include an explanation of the circumstances 
surrounding the complaint and evidence of any retaliation. Information 
submitted as part of a complaint shall be kept confidential.
    (c) Disciplinary Action. Any retaliation by NCUA staff will subject 
the employee to appropriate disciplinary or remedial action by the 
appropriate supervisor. Such disciplinary or remedial action may 
include oral or written warning or admonishment, reprimand, suspension 
or separation from employment, change in assigned duties, or 
disqualification from a particular assignment, including prohibition 
from participating in any examination of the federally insured credit 
union that was the subject of the retaliation.


Sec.  746.113   Coordination with State Supervisory Authority.

    (a) Coordination when Request for Review by the Director of the 
Office of Examination and Insurance Filed. In the event that a material 
supervisory determination subject to a request for review by the 
Director of the Office of Examination and Insurance is the joint 
product of NCUA and a state supervisory authority, the Director of the 
Office of Examination and Insurance will promptly notify the 
appropriate state supervisory authority of the request for review, 
provide the state supervisory authority with a copy of the request for 
review and any other related materials, solicit the state supervisory 
authority's views regarding the merits of the request for review before 
making a determination, and notify the state supervisory authority of 
the Director's determination.
    (b) Coordination when Appeal to Supervisory Review Committee Filed. 
In the event that a material supervisory determination appealed to the 
Committee is the joint product of NCUA and a state supervisory 
authority, the Committee will promptly notify the state supervisory 
authority of the appeal, provide the state supervisory authority with a 
copy of the appeal and any other related materials, solicit the state 
supervisory authority's views regarding the merits of the appeal before 
making a determination, and notify the state supervisory authority of 
the Committee's determination. Once the Committee has issued its 
determination, any other issues that may remain between the federally 
insured credit union and the state supervisory authority will be left 
to those parties to resolve.
    (c) Coordination when Appeal to Board Filed. In the event that a 
material supervisory determination appealed to the Board is the joint 
product of NCUA and a state supervisory authority, the Board will 
promptly notify the state supervisory authority of the appeal, provide 
the state supervisory authority with a copy of the appeal and any other 
related materials, solicit the state supervisory authority's views 
regarding the merits of the appeal before making a determination, and 
notify the state supervisory authority of the Board's determination. 
Once the Board has issued its determination, any other issues that may 
remain between the federally insured credit union and the state 
supervisory authority will be left to those parties to resolve.

[FR Doc. 2017-11320 Filed 6-6-17; 8:45 am]
 BILLING CODE 7535-01-P