Fees Paid by Federal Credit Unions, 86797-86803 [2020-28490]
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Federal Register / Vol. 85, No. 251 / Thursday, December 31, 2020 / Rules and Regulations
86797
PENALTIES APPLICABLE TO FEDERAL SAVINGS ASSOCIATIONS—Continued
U.S. Code citation
Maximum
penalty
amount
(in dollars) 1
CMP description
12 U.S.C. 1467(d) .................................................
12 U.S.C. 1467a(r) ................................................
12 U.S.C. 1817(j)(16) ............................................
12 U.S.C. 1818(i)(2) 3 ...........................................
12 U.S.C. 1820(k)(6)(A)(ii) ....................................
12 U.S.C. 1832(c) .................................................
12 U.S.C. 1884 .....................................................
12 U.S.C. 1972(2)(F) ............................................
15 U.S.C. 78u–2(b) ...............................................
15 U.S.C. 1639e(k) ...............................................
42 U.S.C. 4012a(f)(5) ...........................................
1st Tier .......................................................................................................................................
2nd Tier ......................................................................................................................................
3rd Tier .......................................................................................................................................
Refusal of Affiliate to Cooperate in Examination ..............................................................................
Late/Inaccurate Reports:
1st Tier .......................................................................................................................................
2nd Tier ......................................................................................................................................
3rd Tier .......................................................................................................................................
Violation of Change in Bank Control Act:
Tier 1 ..........................................................................................................................................
Tier 2 ..........................................................................................................................................
Tier 3 ..........................................................................................................................................
Violation of Law, Unsafe or Unsound Practice, or Breach of Fiduciary Duty:
Tier 1 ..........................................................................................................................................
Tier 2 ..........................................................................................................................................
Tier 3 ..........................................................................................................................................
Violation of Post-Employment Restrictions:
Per violation ................................................................................................................................
Violation of Withdrawals by Negotiable or Transferable Instruments for Transfers to Third Parties:
Per violation ................................................................................................................................
Violation of the Bank Protection Act .................................................................................................
Violation of Provisions regarding Correspondent Accounts, Unsafe or Unsound Practices, or
Breach of Fiduciary Duty:
Tier 1 ..........................................................................................................................................
Tier 2 ..........................................................................................................................................
Tier 3 ..........................................................................................................................................
Violations of Various Provisions of the Securities Act, the Securities Exchange Act, the Investment Company Act, or the Investment Advisers Act:
Tier 1 (natural person)—Per violation ........................................................................................
Tier 1 (other person)—Per violation ...........................................................................................
Tier 2 (natural person)—Per violation ........................................................................................
Tier 2 (other person)—Per violation ...........................................................................................
Tier 3 (natural person)—Per violation ........................................................................................
Tier 3 (other person)—Per violation ...........................................................................................
Violation of Appraisal Independence Requirements:
First violation ..............................................................................................................................
Subsequent violations ................................................................................................................
Flood Insurance:
Per violation ................................................................................................................................
4,146
41,463
2 2,073,133
10,366
4,146
41,463
2 2,073,133
10,366
51,827
2 2,073,133
10,366
51,827
2 2,073,133
341,000
2,737
301
10,366
51,827
2 2,073,133
9,753
97,523
97,523
487,616
195,047
975,230
11,906
23,811
2,252
1 The
maximum penalty amount is per day, unless otherwise indicated.
2 The maximum penalty amount for a federal savings association is the lesser of this amount or 1 percent of total assets.
3 These amounts also apply to statutes that cross-reference 12 U.S.C. 1818, such as 12 U.S.C. 2804, 3108, 3349, 4309, and 4717 and 15 U.S.C. 1607, 1681s,
1691c, and 1692l.
Jonathan V. Gould,
Senior Deputy Comptroller and Chief
Counsel, Office of the Comptroller of the
Currency.
[FR Doc. 2020–28942 Filed 12–30–20; 8:45 am]
BILLING CODE 4810–33–P
NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 701
RIN 3133–AF24
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Fees Paid by Federal Credit Unions
National Credit Union
Administration (NCUA).
ACTION: Final rule.
AGENCY:
The NCUA Board (Board) is
amending its regulation governing
assessment of an annual operating fee to
Federal credit unions (FCUs). First, for
SUMMARY:
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purposes of calculating the annual
operating fee, the final rule amends the
current rule to exclude from total assets
any loan an FCU reports under the
Small Business Administration’s
Paycheck Protection Program (PPP) or
similar future programs approved for
exclusion by the NCUA Board. Second,
the final rule deletes from the current
regulation references to the Credit
Union System Investment Program and
the Credit Union Homeowners
Affordability Relief Program, both of
which no longer exist. Third, the final
rule amends the period used for the
calculation of an FCU’s total assets.
Currently, total assets are calculated
using the FCU’s December 31st Call
Report of the preceding year. Under the
final rule, total assets will be calculated
as the average total assets reported on
the FCU’s previous four Call Reports
available at the time the NCUA Board
approves the agency’s budget for the
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upcoming year, adjusted for any
excludable programs as determined by
the Board. Finally, the final rule makes
some minor technical changes.
This final rule is effective on
February 1, 2021.
DATES:
FOR FURTHER INFORMATION CONTACT:
James Holm, Supervisory Budget
Analyst, Office of the Chief Financial
Officer, at (703) 518–6570; Kevin
Tuininga, Associate General Counsel, or
John H. Brolin, Senior Staff Attorney,
Office of General Counsel, at (703) 518–
6540; or by mail at 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
II. Legal Authority
III. Summary of the Proposal and Public
Comments
IV. Summary of the Final Rule
V. Regulatory Procedures
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I. Introduction
At its July 2020 meeting, the Board
issued a proposed rule 1 to amend the
NCUA’s regulation governing
assessment of an annual operating fee to
Federal credit unions (FCUs), 12 CFR
701.6. For purposes of calculating the
annual operating fee, the proposed
amendments would have: (1) Excluded
from total assets any loan an FCU
reports under the Small Business
Administration’s (SBA) Paycheck
Protection Program (PPP), or similar
future programs approved for exclusion
by the NCUA Board; (2) deleted from
the current regulation references to the
Credit Union System Investment
Program and the Credit Union
Homeowners Affordability Relief
Program, both of which no longer exist;
and (3) revised the period used for the
calculation of an FCU’s total assets.
Currently, total assets are calculated
using the FCU’s December 31st Call
Report of the preceding year. Under the
proposal, total assets would be
calculated as the average total assets
reported on the FCU’s previous four Call
Reports available at the time the NCUA
Board approves the agency’s budget for
the upcoming year, adjusted for any
excludable programs as determined by
the Board. Finally, the proposal would
have made some minor technical
conforming changes.
A. Background on the NCUA Annual
Budget and Fees Paid by FCUs
The NCUA charters, regulates, and
insures deposits in FCUs and insures
deposits in state-chartered credit unions
that have their shares insured through
the National Credit Union Share
Insurance Fund (Share Insurance Fund).
To cover expenses related to the
NCUA’s tasks, the Board adopts an
annual budget in the fall of each year.
The Federal Credit Union Act (FCU Act)
provides two primary sources to fund
the budget: (1) Requisitions from the
Share Insurance Fund; 2 and (2)
operating fees charged against FCUs.3
The Board uses an allocation formula,
the Overhead Transfer Rate (OTR), to
determine the amount of the budget that
it will requisition from the Share
1 85
FR 53708 (Aug 31, 2020).
e.g., 12 U.S.C. 1783(a) (making the Share
Insurance Fund available ‘‘for such administrative
and other expenses incurred in carrying out the
purpose of [Subchapter II of the FCU Act] as [the
Board] may determine to be proper.’’).
3 12 U.S.C. 1755(a) (‘‘In accordance with rules
prescribed by the Board, each Federal credit union
shall pay to the Administration an annual operating
fee which may be composed of one or more charges
identified as to the function or functions for which
assessed.’’).
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2 See,
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Insurance Fund.4 Remaining amounts
needed to fund the annual budget are
charged to FCUs in the form of
operating fees, based on each FCU’s
total assets.5
The FCU Act requires each FCU to,
‘‘in accordance with rules prescribed by
the Board [. . .] pay to the [NCUA] an
annual operating fee which may be
composed of one or more charges
identified as to the function or functions
for which assessed.’’ 6 The fee must ‘‘be
determined according to a schedule, or
schedules, or other method determined
by the Board to be appropriate, which
gives due consideration to the expenses
of the [NCUA] in carrying out its
responsibilities under the [FCU Act] and
to the ability of [FCUs] to pay the fee.’’ 7
The statute requires the Board to, among
other things, ‘‘determine the periods for
which the fee shall be assessed and the
date or dates for the payment of the fee
or increments thereof.’’ 8
Section 701.6 of the NCUA’s
regulations governs operating fee
processes.9 The regulation establishes
the following: (1) The basis for charging
operating fees (i.e., total assets of the
FCU, with certain exclusions, as of
December 31st of the preceding year);
(2) the notice the NCUA must provide
to FCUs regarding the fees; (3) coverage
provisions providing certain exceptions
for new FCU charters, conversions,
mergers, and liquidations; and (4) the
assessment of administrative fees and
interest for late payment, among other
principles and processes.10 Certain
aspects of and adjustments to the
operating fee process, such as the
multipliers used to determine fees
applicable to designated asset tiers, are
not included in the NCUA’s regulations.
Instead, the Board generally adopts an
operating fee schedule at an open
meeting each year and publishes the
schedule in the agency’s annual budget
and on its website.11
4 See, e.g., Request for Comment Regarding
Revised Overhead Transfer Rate Methodology, 82
FR 29935 (June 30, 2017).
5 12 CFR 701.6(a).
6 12 U.S.C. 1755(a).
7 12 U.S.C. 1755(b).
8 Id.
9 12 CFR 701.6.
10 Id.
11 In November 2015, the Board delegated
authority to the Chief Financial Officer to
administer the Board-approved methodology and to
set the operating fees as calculated per the approved
methodology each annual budget cycle beginning
with 2016. See Board Action Memorandum on 2016
Operating Fee (Nov. 19, 2015), https://
www.ncua.gov/About/Documents/
Agenda%20Items/AG20151119Item6a.pdf. Since
that time, the operating fee schedule has been
published in the NCUA’s annual budget. See 2020–
2021 Budget Justification (December 12, 2019),
https://www.ncua.gov/files/agenda-items/
AG20191212Item1b.pdf.
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Section 701.6(a) sets out the basis on
which the NCUA assesses the operating
fee. Paragraph (a) provides that FCUs
must pay the NCUA an annual operating
fee based on the credit union’s total
assets.12 The NCUA calculates an FCU’s
operating fee by multiplying the dollar
amount of its total assets by a
percentage set by the Board based on
asset tiers after considering the expenses
of the NCUA and the ability of FCUs to
pay the fee. The term ‘‘total assets’’ for
purposes of the operating fee presently
includes all assets, with certain
exclusions, reported on an FCU’s Call
Report as of December 31st of the
previous fiscal year.
Operating fee payments are due from
FCUs in April each year, and the NCUA
prepares invoices using reported assets
from the prior year’s December Call
Report.13 In order to provide clarity to
FCUs about their operating fee charges
for the upcoming year, the Board
typically approves the budget and sets
the associated operating fee rates in
November or December of the year
before the operating fee is billed.
Because the budget and operating fee
rates are approved before December Call
Report data is available, the Chief
Financial Officer uses projected FCU
asset growth to set the operating fee
rates. Therefore, if actual total assets
reported in December Call Reports are
below the projected asset growth used
for setting the operating fee rates, the
NCUA will collect less in operating fee
revenue than it requires to fund the
budget. Conversely, if total assets
reported in December Call Reports are
greater than projected growth, the
NCUA may collect more than is
required.
B. Background on the CARES Act and
the SBA’s Paycheck Protection Program
On March 27, 2020, President Trump
signed the Coronavirus Aid, Relief, and
Economic Security Act, or CARES Act,
into law.14 The law is designed to
provide aid to the U.S. economy in the
midst of the COVID–19 pandemic. The
CARES Act authorized the SBA to create
a loan guarantee program, the PPP, to
help certain businesses affected by the
COVID–19 pandemic meet payroll
needs (including employee salaries, sick
leave, other paid leave, and health
insurance expenses), as well as
mortgage, rent, and utilities expenses.
Provided credit union lenders comply
with the applicable lender obligations
set forth in the SBA’s interim final rule,
the SBA will fully guarantee loans
12 12
CFR 701.6(a).
13 Id.
14 Public
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issued under the PPP, backed by the full
faith and credit of the United States.
Most federally insured credit unions
were eligible to make PPP loans to
members.15 Under the CARES Act, PPP
loans must receive a zero percent risk
weighting for purposes of the NCUA’s
risk-based capital requirements.16
Following enactment of the CARES
Act, the Board issued an interim final
rule to make several amendments to the
NCUA’s regulations relating to PPP
loans.17 The April 27, 2020 interim final
rule provided that if a covered PPP loan
made by a federally insured credit
union is pledged as collateral for a nonrecourse loan that is provided as part of
the Board of Governors of the Federal
Reserve System’s (FRB) PPP Liquidity
Facility,18 the covered loan can be
excluded from a credit union’s
calculation of total assets for the
purposes of calculating its net worth
ratio.19 The exclusion of PPP loans
pledged to the FRB’s Liquidity Facility
was comparable to an interim final rule
issued by the other banking agencies
with respect to their capital
regulations,20 which is consistent with
the statutory requirement for the Board
to prescribe a system of prompt
corrective action that is, among other
things, comparable to the section of the
Federal Deposit Insurance Act that
established prompt corrective action
requirements for banks.
That change applied to only the
calculation of the net worth ratio and
not to other requirements or
calculations in the NCUA’s regulations
that depend on a credit union’s total
assets. At present, an FCU must report
the value of all of its PPP loans in its
Call Reports, whether the FCU
originated the loans, purchased them in
the secondary market, or has pledged
them to the FRB Liquidity Facility.21
15 Credit unions that are currently permitted to
make loans under the SBA’s 7(a) program are
automatically approved to make PPP loans.
Federally insured credit unions that are not current
SBA 7(a) lenders can receive approval by
submitting an application to the SBA, unless they
are currently designated as being in troubled
condition or are subject to a formal enforcement
action that addresses unsafe and unsound lending
practices. Non-depository financing providers, such
as credit union service organizations, may qualify
as a PPP lender subject to the requirements listed
in the interim final rule.
16 Public Law 116–135, section 1102(a)(2).
17 85 FR 23212 (Apr. 27, 2020).
18 The program was named as both the PPP
Lending Facility and the PPP Liquidity Facility
when the Board approved the interim final rule. It
is now named the PPP Liquidity Facility in FRB
documentation on the program.
19 85 FR 23212.
20 85 FR 20387 (Apr. 13, 2020).
21 See SBA Procedural Notice, Guidance on
Whole Loan Sales of Paycheck Protection Program
Loans (May 1, 2020), available at https://
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The value of PPP loans reported in Call
Reports could therefore increase the
total asset amounts the NCUA uses to
compute the annual operating fees due.
Without a change to the NCUA’s current
operating fee regulation,22 an FCU’s PPP
loans could subject the FCU to a higher
operating fee, and this could impose a
burden for participation in the program,
or a disincentive to participate now that
the program has been extended. As the
PPP serves an important public purpose,
the Board believes PPP loans warrant
exclusion from total assets when
determining operating fees to avoid
these harms.
Under the FCU Act, the Board
considers, among other things, FCUs’
ability to pay assessments.23 The Board
finds that an increase in an FCU’s assets
based on PPP loans—regardless of
whether they are pledged to the PPP
Liquidity Facility—poses no undue risk
to the credit union’s capital strength.
Additionally, given the short-term and
low-fee nature of PPP loans, FCUs that
report increased total assets as a result
of them are unlikely to have a
corresponding increase in their ability
to pay a higher assessment.
Furthermore, excluding PPP loans from
operating fee assessments makes the
program more affordable to the
participants and avoids imposing a
burden based on participation in a
program designed to provide an
important public benefit. These benefits
closely align with the mission of credit
unions to support their member
communities through trusted and
affordable financial services.
Accordingly, based on this statutory
analysis and application, the NCUA’s
proposal had a broader scope of
exclusion than the Board’s April 27,
2020, interim final rule on PPP loans.24
In a separate Federal Register
document,25 the Board requested
comment on the methodologies it uses
to set the rate schedule for operating
fees and how it determines the OTR.
Members of the public were encouraged
to comment about these methodologies
by responding to that Federal Register
notice.
II. Legal Authority
The Board is issuing this final rule
pursuant to its authority under the FCU
Act.26 The FCU Act grants the Board a
broad mandate to issue regulations
governing both FCUs and, more
www.sba.gov/sites/default/files/2020-05/500020024.pdf.
22 12 CFR 701.6(a).
23 12 U.S.C. 1755.
24 85 FR 23212 (Apr. 27, 2020).
25 85 FR 53854 (Aug. 31 2020).
26 12 U.S.C. 1751 et seq.
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86799
generally, all federally insured credit
unions. For example, section 120 of the
FCU Act is a general grant of regulatory
authority and authorizes the Board to
prescribe rules and regulations for the
administration of the FCU Act.27
Section 105 of the FCU Act requires
FCUs to pay an annual operating fee to
the NCUA.28 In particular, section
105(b) provides that the fee assessed
under this section 105 shall be
determined according to a schedule, or
schedules, or other method determined
by the Board to be appropriate, which
gives due consideration to the expenses
of the Administration in carrying out its
responsibilities under this chapter and
to the ability of Federal credit unions to
pay the fee.29 Section 105(b) provides
further that the Board shall, among
other things, determine the periods for
which the fee shall be assessed and the
date or dates for the payment of the fee
or increments thereof. 30
Accordingly, the FCU Act provides
the Board with broad discretion to
decide how the amount of the operating
fee is determined.
III. Summary of the Proposed Rule and
Public Comments
At its July 30, 2020 meeting, the
NCUA Board (Board) proposed
amending the agency’s regulation
governing assessment of an annual
operating fee to Federal credit unions
(FCUs). The proposal provided for a 60day comment period, which ended on
October 30, 2020. The NCUA received
nine comment letters in response to the
proposed rule. In general, all of the
letters received from commenters—two
from credit union trade associations and
seven from state credit union leagues—
expressed broad support for the
proposal. A few of the commenters,
however, did raise issues for the
NCUA’s consideration, which are
discussed in more detail below.
The proposed rule would have
amended § 701.6(a) by excluding PPP
loans from FCUs’ total assets for
purposes of calculating its operating fee.
In particular, the proposal would have
amended current § 701.6(a) to provide,
among other things, that the operating
fee shall be based on the total assets of
each FCU, less loans made under the
PPP.31 Under the proposed rule,
participating FCUs would have
continued to report their assets in the
quarterly Call Report. For purposes of
determining the operating fee, the
27 12
U.S.C. 1766(a).
U.S.C. 1755(a).
29 12 U.S.C. 1755(b).
30 Id.
31 15 U.S.C. 636(a)(36).
28 12
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NCUA would have excluded reported
PPP loans in the calculation of total
assets. The NCUA believed the change
would ensure that FCUs interested in
making PPP loans did not bear greater
financial burdens for doing so. The
Board proposed excluding PPP loans
from the calculation of total assets even
if the PPP loans were not pledged to the
FRB PPP Liquidity Facility because PPP
loans pose no undue risk to the FCU’s
capital strength and, due to their unique
structure, do not increase an FCU’s
ability to pay a higher operating fee.
Excluding all reported PPP loans when
determining total assets would also
ensure that FCUs that do not pledge
their PPP loans to the FRB are treated
consistently with those FCUs that do.
Absent such consistent treatment, FCUs
that do not pledge their PPP loans to the
FRB’s Liquidity Facility would bear a
larger relative cost burden of the
operating fee compared to those FCUs
that do pledge their PPP loans.
Comments Received: None of the
commenters objected to this change. All
nine of the commenters stated that they
supported excluding from total assets
any loan an FCU reports under the PPP
and agreed with the NCUA’s rationale
supporting this change. Four of the
commenters specifically stated further
that they supported excluding PPP loans
from the calculation of total assets even
if the PPP loans are not pledged to the
Federal Reserve Board’s (FRB) PPP
Liquidity Facility.
Proposing to exclude PPP loans from
the calculation of total assets was
similar to the amendment the Board
made to the calculation of total assets in
a 2009 final rule to encourage FCU
participation in the Credit Union
System Investment Program (CU SIP) or
the Credit Union Homeowners
Affordability Relief Program (CU
HARP).32 Investments in those programs
were excluded from the computation of
total assets because the instruments
were guaranteed by the Share Insurance
Fund, posed no credit risk to the
participating credit unions, and the
exclusion was intended to encourage a
greater participation rate in programs
with a clear public benefit. The CU SIP
ended in 2010. Similarly, CU HARP
investments were issued by the U.S.
Central Federal Credit Union and all of
those investments matured prior to that
credit union’s liquidation in 2012.
Because these programs no longer exist
and have no remaining investments, the
Board proposed to amend current
§ 701.6(a) to delete references to them.
Comments Received: None of the
commenters objected to this change.
32 74
FR 29934 (June 24, 2009).
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Two commenters expressly stated that
they supported deleting references to
the programs and agreed with the
NCUA’s rationale supporting this
change.
Given the potential for additional
programs similar to the PPP to arise in
the near future or as a result of future
economic crises, the Board proposed
adding regulatory language that would
allow for the exclusion of assets in the
future under similar programs without
requiring a reference to the specific
program in the regulation. Under the
proposed new language, the Board
anticipated making exclusions of similar
future programs by issuing an order,
which could be published in a letter to
FCUs or a similar notice.
Comments Received: None of
commenters objected to the language,
and eight of the commenters stated that
they supported including the general
language allowing the exclusion of such
programs to be approved by the Board.
One of the commenters, however,
suggested that the NCUA also include
provisions to exclude assets related to
programs that provide relief during
nationwide and regional crises; for
example, disaster declarations and
associated SBA disaster lending
authorized as a result of hurricanes or
other national disasters.
NCUA Response: In response to the
comment suggesting the NCUA also
exclude assets related to programs that
provide relief during nationwide and
regional crises, the agency has decided
not to make that change in the final rule.
Such a change is beyond the scope of
the proposal. The NCUA, however, does
plan to evaluate the feasibility and
impact of such exclusions in its next
cyclical review of the operating fee rule.
In particular, the NCUA plans to
evaluate whether SBA disaster lending
presents the same general low level of
risk to credit unions’ balance sheets,
and whether excluding SBA disaster
lending from total assets would have a
material impact on the regional
distribution of operating fees.
In addition, the Board proposed
amending current § 701.6(a) to use the
average of FCUs’ four most-recently
reported quarterly assets to calculate
operating fees and to make conforming
amendments to the regulatory text to
ensure this same approach was applied
to merged and recently converted FCUs.
The Board proposed to use an average
of total assets because it believed that
doing so would reduce the effect of
seasonal fluctuation in the total assets of
FCUs, and would provide more
certainty to FCUs about their operating
fee charges for the forthcoming year.
The change to a four-quarter average of
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reported assets would also reduce the
risk that the Board would collect less in
operating fee revenue than it requires if
actual assets reported in FCUs’
December Call Reports were below the
asset growth assumption used to set the
operating fee rates in the budget.
In particular, the proposed rule would
have amended current § 701.6(a) to
provide, among other things, that the
operating fee shall be based on the
average of total assets of each FCU based
on data reported in the preceding four
Call Reports (as reported on NCUA
Form 5300 for natural person FCUs and
Form 5310 for corporate FCUs), or as
otherwise determined pursuant to
paragraph (b) of § 701.6. When
determining the operating fee rate and
the invoice amounts due under the
proposal, the NCUA Board would have
used the average of FCUs’ four mostrecent Call Reports available at the time
the Board approved the budget for the
forthcoming year.
The Board anticipated that the
proposed change would have no impact
on current billing practices for newly
chartered FCUs because such credit
unions do not receive an operating fee
invoice until the second year after they
are chartered. The Board proposed
continuing its current practice of
treating merged FCUs and conversions
of non-FCUs into FCUs as a single entity
for purposes of calculating the average
total assets that are the basis for
determining the amount of operating
fees due. For purposes of calculating the
average total assets of an FCU that
converts from or merges with a federally
insured, state-chartered credit union
(FISCU), the Board proposed computing
comparable quarterly total assets using
the Call Report data in the agency’s
possession. For conversions to an FCU
charter from entities not insured by the
NCUA, the Board proposed to average
assets based only on Call Reports filed
by the time the Board finalized its
budget because the NCUA cannot
validate the accuracy or consistency of
other data sources that may be similar
to NCUA Call Reports.
Under the proposed rule, in
circumstances in which a conversion to
an FCU charter from an entity not
insured by the NCUA occurs in the
fourth quarter of the year before the
operating fee is due, no Call Report data
would have been available at the time
the Board finalized its budget, and the
converted entity would therefore pay no
operating fee in the year following
conversion. While this approach would
have produced a different result based
only on insured status prior to
conversion for entities that are
otherwise of the same FCU status after
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the conversion, the Board believed its
lack of access to verified Call Report
data for non-NCUA insured entities
supported the distinction. In addition,
the Board expected such circumstances
to be rare occurrences, with relatively
small impacts, as the maximum amount
of forgone revenue is one quarter of
reported assets for which a converted
entity could be exempt from paying an
operating fee.
While this discrepancy could be
avoided if the Board continued its
current practice of estimating December
Call Report data as the sole point of
reference for determining total assets for
the operating fee, the Board believed the
four-quarter average was more equitable
on the whole because it could account
for seasonal share account fluctuations
that some FCUs experience based on the
characteristics and transaction patterns
engaged in by their fields of
membership. As discussed above, the
proposed four-quarter average approach
also would have eliminated the risk that
the Board could over- or under-collect
operating fees based on differences
between its estimation of and actual
December Call Report data.33
With respect to mergers in which an
entity not insured by the NCUA merges
into a continuing FCU, the same issue
existed under the proposed rule with
regard to the Board’s access to data
comparable to the Call Report for
periods prior to the merger date. Here
again, the proposed rule would have
combined assets looking back four
quarters for mergers involving two FCUs
or where a FISCU merges into a
continuing FCU. On the other hand, for
mergers into FCUs of entities that are
not insured by the NCUA, the proposed
rule would not have required the
combination of assets prior to the
merger date, because the NCUA does
not collect asset data for entities it does
not insure. Instead, the continuing FCU
would have paid a fee based only on
assets reported on its own Call Reports
filed prior to the effective date of the
merger. Depending on the specific
timing of when the merger occurred,
this could have resulted in multiple
quarters where the assets acquired from
the non-NCUA insured entity were not
included in the calculated average
assets used to bill the continuing FCU.
For the same reasons expressed above
with respect to conversions, the Board
33 While the proposed regulatory language
introducing § 701.6(b)(2)(i)(B) could be read to
require an entity not insured by the NCUA that
converts to a FCU charter in the fourth quarter to
pay a fee in the year following conversion, the lack
of available Call Report data prior to the date the
Board adopts the budget would preclude a fee in
that scenario.
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believed the benefits of the four-quarter
average outweighed the different
treatment for mergers with FISCUs
compared to mergers with entities not
insured by the NCUA.
With respect to purchase and
assumption transactions, the regulation
presently designates that such
transactions will be treated as mergers
in circumstances in which an FCU
purchases all or essentially all of the
assets of another credit union. Under
the proposal, the Board retained that
language, but requested comments on
alternative approaches the Board may
wish to consider. The Board
acknowledged that, in some
circumstances, determining whether a
purchase and assumption included all
or essentially all assets could be a
difficult determination.
Comments Received: All nine
commenters stated that they supported
these change and generally agreed with
the NCUA’s rationale supporting this
change. While all of the commenters
supported this change, four of the
commenters did ask that the NCUA also
regularly review this change and its
impact to ensure it does not cause any
unintended consequences.
Although beyond the scope of this
proposal, one commenter did suggested
that the NCUA further amend § 701.6 to
treat mergers into and conversions with
federally insured, state-chartered credit
unions (FISCUs) differently. The
commenter stated that, while the
current rule bars the payment of a fee
refund when a conversion to or merger
into a FISCU occurs, the NCUA should
reconsider this issue since the resulting
credit union’s NCUSIF deposit will
reflect the merger, unlike a combination
with an entity that is not NCUSIFinsured, and the resulting entity is not
an FCU. The commenter suggested that
the NCUA provide pro rata fee refunds
if an FCU converts to or merges into a
FISCU.
NCUA Response: In response to the
comment suggesting that the NCUA
regularly review these changes and their
impact, the NCUA reviews all of its
existing regulations every three years.
The NCUA’s Office of General Counsel
maintains a rolling review schedule that
identifies one-third of the NCUA’s
existing regulations for review each year
and provides notice to the public of
those regulations under review so the
public may have an opportunity to
comment. The changes made by this
final rule will be regularly reviewed as
part of that process and the credit union
industry and public will be given a
regular opportunity to raise any
concerns they may have.
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86801
In response to the comment
suggesting that the NCUA issue a pro
rata fee refund to an FCU that converts
to or merges into a FISCU, the agency
has made no changes in the final rule.
Such a change would be outside the
scope of the proposal. Moreover, the
operating fees charged to FCUs are
based on a detailed workload projection
of the agency’s examination program,
which is used to inform the agency’s
annual budget formulation and
calculation of operating fee collections.
The agency generally does not have
insight into the future merger or charter
conversion plans of a given FCU, and
therefore must base its workload
estimates on the population of FCUs
that exist in the year before the budget
is set and the fee is calculated. If the
NCUA were to issue pro rata refunds to
FCUs that subsequently merge with or
convert to a FISCU, it would face
continuing, unfunded liabilities for staff
salaries and associated expenses that
could not be recouped from other
sources since the operating fee is billed
only once annually. Similarly, the OTR
share of the annual operating budget is
determined in part based on the relative
distribution of projected workload
between FCUs and FISCUs in the year
before the OTR is applied to actual
operating expenses. Although the
NCUA’s actual workload may be
marginally reduced if an FCU converts
to or merges with a FISCU, such a
change cannot be retroactively applied
to the OTR used in a given year.
The Board also proposed some
technical changes to existing rule
language. First, the proposed rule
clarified that the NCUA would not issue
refunds of operating fees to FCUs that
convert to any other type of charter, not
just a state charter. The proposed rule
was intended to ensure the same
treatment for a conversion to a mutual
savings bank or any other charter type.
The Board also proposed removing the
language ‘‘in the year in which the
conversion takes place’’ from the
provision, as a refund is never provided
to any converting FCU, regardless of
timing. The Board proposed the same
changes to the rule text on refunds in
the context of mergers.
Comments Received: The NCUA
received no objections to this change.
In addition, the Board proposed to
expand the situations expressly covered
in the regulation to include conversions
and mergers involving entities not
insured by the NCUA. Such transactions
could involve privately insured, statechartered credit unions or banking
institutions. To support this expansion,
the proposed regulatory language
introduced the phrase ‘‘entity not
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insured by the NCUA.’’ In the language
specifying that certain purchase and
assumption transactions would be
treated as mergers, the Board proposed
changing the term ‘‘credit union’’ to
‘‘depository institution’’ to clarify that a
purchase and assumption involving a
bank, for example, would be treated in
the same manner. Finally, the proposed
rule would have divided paragraph (b)
of the regulation into additional
subparagraphs to improve readability.
Comments Received: The NCUA
received no objections to this change.
III. Summary of the Final Rule
For the reasons discussed above, the
Board is issuing this final rule without
change from the proposed rule. Revised
§ 701.6(a) provides that each calendar
year, or as otherwise directed by the
Board, each Federal credit union shall
pay an operating fee to the NCUA for
the current fiscal year (January 1 to
December 31) in accordance with a
schedule fixed by the Board from time
to time. New § 701.6(a)(1) provides that
the operating fee shall be based on the
average of total assets of each Federal
credit union based on data reported in
NCUA Forms 5300 and 5310 from the
four quarters immediately preceding the
time the Board approves the agency’s
budget or as otherwise determined
pursuant to paragraph (b) of this section.
New § 701.6(a)(2) provides that for
purposes of calculating the operating
fee, total assets shall not include any
loans on the books of a natural person
Federal credit union made under the
Small Business Administration’s
Paycheck Protection Program, 15 U.S.C.
636(a)(36), or any similar program
approved for exclusion by the Board.
Revised § 701.6(b), Coverage, provides
that the operating fee shall be paid by
each Federal credit union engaged in
operations as of January 1 of each
calendar year in accordance with
paragraph (a), except as otherwise
provided by this paragraph. Section
701.6(b)(1), New Charters, continues to
provide that a newly chartered FCU will
not pay an operating fee until the year
following the first full calendar year
after the date chartered. Revised
§ 701.6(b)(2), Coverage, continues to
address coverage issues, but now
includes several new subsections. New
§ 701.6(b)(2)(i)(A) provides that in the
first calendar year following conversion:
A FISCU that converts to an FCU charter
must pay an operating fee based on the
average assets reported in the year of
conversion on NCUA Forms 5300 or
5310 from the four quarters immediately
preceding the time the Board approves
the agency’s budget in the year of
conversion. New § 701.6(b)(2)(i)(B)
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provides that in the first calendar year
following conversion: An entity not
insured by the NCUA that converts to an
FCU charter must pay an operating fee
based on the assets, or average thereof,
reported on NCUA Forms 5300 or 5310
for any one or more quarters
immediately preceding the time the
Board approves the agency’s budget in
the year of conversion. New
§ 701.6(b)(2)(ii) provides that an FCU
converting to a different charter will not
receive a refund of any operating fees
paid to the NCUA.
Revised § 701.6(b)(3), Mergers,
continues to address merger issues, but
now includes several new subsections.
New § 701.6(b)(3)(i)(A) provides that in
the first calendar year following merger:
A continuing FCU that has merged with
one or more federally insured credit
unions must pay an operating fee based
on the average combined total assets of
the FCU and any merged federally
insured credit unions as reported on
NCUA Forms 5300 or 5310 in the four
quarters immediately preceding the time
the Board approves the agency’s budget
in the merger year. New
§ 701.6(b)(3)(i)(B) provides that for
purposes of paragraph (b)(3), a purchase
and assumption transaction in which
the continuing FCU purchases all or
essentially all of the assets of another
depository institution shall be deemed a
merger. New § 701.6(b)(3)(ii) provides
that an FCU that merges with a Federal
or state-chartered credit union, or an
entity not insured by the NCUA, will
not receive a refund of any operating fee
paid to the NCUA.
Finally, § 701.6(b)(4), Liquidations,
continues to provide that an FCU placed
in liquidation will not pay any
operating fee after the date of
liquidation.
IV. Regulatory Procedures
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
generally requires that, in connection
with a final rule, an agency prepare and
make available for public comment an
final regulatory flexibility analysis that
describes the impact of a proposed rule
on small entities. A regulatory flexibility
analysis is not required, however, if the
agency certifies that the rule will not
have a significant economic impact on
a substantial number of small entities
(defined for purposes of the RFA to
include federally insured credit unions
with assets less than $100 million) and
publishes its certification and a short,
explanatory statement in the Federal
Register together with the rule. This
final rule will make a technical change
to the period for measuring total assets
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for calculating the Operating Fee.
However, the Board does not believe the
impact will disproportionally impact
small credit unions such that a
regulatory flexibility analysis is
required. First, small credit unions are
still required to report assets on a
quarterly basis, and the regulation only
increases the number of quarters the
NCUA will consider in adjusting the
operating fee. Nor does the exclusion of
PPP loans from assets increase reporting
requirements, as the NCUA already has
the information necessary to make that
exclusion. Finally, although exclusion
of PPP loans will decrease fee amounts
for some small credit unions, the Board
does not believe the change will amount
to a significant impact on a substantial
number of small entities. Accordingly,
the NCUA certifies that this final rule
will not have a significant economic
impact on a substantial number of small
credit unions.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which
an agency creates a new or amends
existing information collection
requirements.34 For the purpose of the
PRA, an information collection
requirement may take the form of a
reporting, recordkeeping, or a thirdparty disclosure requirement. This final
rule does not contain information
collection requirements that require
approval by OMB under the PRA.35
C. Small Business Regulatory
Enforcement Fairness Act
The Small Business Regulatory
Enforcement Fairness Act of 1996 (Pub.
L. 104–121) (SBREFA) generally
provides for congressional review of
agency rules.36 A reporting requirement
is triggered in instances where the
NCUA issues a final rule as defined by
Section 551 of the APA.37 An agency
rule, in addition to being subject to
congressional oversight, may also be
subject to a delayed effective date if the
rule is a ‘‘major rule.’’ 38 The NCUA
does not believe this rule is a ‘‘major
rule’’ within the meaning of the relevant
sections of SBREFA. As required by
SBREFA, the NCUA will submit this
final rule to OMB for it to determine if
the final rule is a ‘‘major rule’’ for
purposes of SBREFA. The NCUA also
will file appropriate reports with
Congress and the Government
34 44
U.S.C. 3507(d); 5 CFR part 1320.
U.S.C. Chap. 35.
36 5 U.S.C. 801–804.
37 5 U.S.C. 552.
38 5 U.S.C. 804(2).
35 44
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Accountability Office so this rule may
be reviewed.
D. Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests. In adherence to
fundamental federalism principles, the
NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the Executive
order. This final rule will not have a
substantial direct effect on the states, on
the connection between the National
Government and the states, or on the
distribution of power and
responsibilities among the various
levels of government. The NCUA has
determined that this final rule does not
constitute a policy that has federalism
implications for purposes of the
Executive order.
D. Assessment of Federal Regulations
and Policies on Families
The NCUA has determined that this
final rule will not affect family wellbeing within the meaning of Section 654
of the Treasury and General
Government Appropriations Act,
1999.39
List of Subjects in 12 CFR Part 701
Credit unions, Low income,
Nonmember deposits, Secondary
capital, Shares.
By the National Credit Union
Administration Board on December 17, 2020.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the
Board amends 12 CFR part 701 as
follows:
PART 701—Organization and
Operations of Federal Credit Unions
1. The authority citation for part 701
continues to read as follows:
■
Authority: 12 U.S.C. 1752(5), 1755, 1756,
1757, 1758, 1759, 1761a, 1761b, 1766, 1767,
1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C.
3717. Section 701.31 is also authorized by 15
U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601–
3610. Section 701.35 is also authorized by 42
U.S.C. 4311–4312.
2. In § 701.6, revise paragraphs (a) and
(b) to read as follows:
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■
§ 701.6
Fees paid by Federal credit unions.
(a) Basis for assessment. Each
calendar year, or as otherwise directed
by the NCUA Board, each Federal credit
union shall pay an operating fee to the
NCUA for the current fiscal year
39 Public
Law 105–277, 112 Stat. 2681 (1998).
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17:03 Dec 30, 2020
Jkt 253001
(January 1 to December 31) in
accordance with a schedule fixed by the
Board from time to time.
(1) General. The operating fee shall be
based on the average of total assets of
each Federal credit union based on data
reported in NCUA Forms 5300 and 5310
from the four quarters immediately
preceding the time the Board approves
the agency’s budget or as otherwise
determined pursuant to paragraph (b) of
this section.
(2) Exclusions from total assets. For
purposes of calculating the operating
fee, total assets shall not include any
loans on the books of a natural person
Federal credit union made under the
Small Business Administration’s
Paycheck Protection Program, 15 U.S.C.
636(a)(36), or any similar program
approved for exclusion by the NCUA
Board.
(b) Coverage. The operating fee shall
be paid by each Federal credit union
engaged in operations as of January 1 of
each calendar year in accordance with
paragraph (a) of this section, except as
otherwise provided by this paragraph
(b).
(1) New charters. A newly chartered
Federal credit union will not pay an
operating fee until the year following
the first full calendar year after the date
chartered.
(2) Conversions. (i) In the first
calendar year following conversion:
(A) A federally insured state-chartered
credit union that converts to a Federal
credit union charter must pay an
operating fee based on the average assets
reported in the year of conversion on
NCUA Forms 5300 or 5310 from the
four quarters immediately preceding the
time the Board approves the agency’s
budget in the year of conversion.
(B) An entity not insured by the
NCUA that converts to a Federal credit
union charter must pay an operating fee
based on the assets, or average thereof,
reported on NCUA Forms 5300 or 5310
for any one or more quarters
immediately preceding the time the
Board approves the agency’s budget in
the year of conversion.
(ii) A Federal credit union converting
to a different charter will not receive a
refund of any operating fees paid to the
NCUA.
(3) Mergers. (i) In the first calendar
year following merger:
(A) A continuing Federal credit union
that has merged with one or more
federally insured credit unions must
pay an operating fee based on the
average combined total assets of the
Federal credit union and any merged
federally insured credit unions as
reported on NCUA Forms 5300 or 5310
in the four quarters immediately
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86803
preceding the time the Board approves
the agency’s budget in the merger year.
(B) For purposes of this paragraph
(b)(3), a purchase and assumption
transaction where the continuing
Federal credit union purchases all or
essentially all of the assets of another
depository institution shall be deemed a
merger.
(ii) A Federal credit union that merges
with a Federal or state-chartered credit
union, or an entity not insured by the
NCUA, will not receive a refund of any
operating fee paid to the NCUA.
(4) Liquidations. A Federal credit
union placed in liquidation will not pay
any operating fee after the date of
liquidation.
*
*
*
*
*
[FR Doc. 2020–28490 Filed 12–30–20; 8:45 am]
BILLING CODE 7535–01–P
LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 210
[Docket No. 2020–8]
The Public Musical Works Database
and Transparency of the Mechanical
Licensing Collective
U.S. Copyright Office, Library
of Congress.
ACTION: Interim rule.
AGENCY:
The U.S. Copyright Office is
issuing an interim rule regarding the
Musical Works Modernization Act, title
I of the Orrin G. Hatch-Bob Goodlatte
Music Modernization Act. The law
establishes a new blanket compulsory
license that will be administered by a
mechanical licensing collective, which
will make available a public musical
works database as part of its statutory
duties. Having solicited public
comments through previous
notifications of inquiry and a notice of
proposed rulemaking, the Office is
issuing interim regulations prescribing
categories of information to be included
in the public musical works database, as
well as rules related to the usability,
interoperability, and usage restrictions
of the database. The Office is also
issuing interim regulations related to
ensuring appropriate transparency of
the mechanical licensing collective
itself.
SUMMARY:
DATES:
Effective February 16, 2021.
FOR FURTHER INFORMATION CONTACT:
Regan A. Smith, General Counsel and
Associate Register of Copyrights, by
email at regans@copyright.gov or Anna
B. Chauvet, Associate General Counsel,
E:\FR\FM\31DER1.SGM
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Agencies
[Federal Register Volume 85, Number 251 (Thursday, December 31, 2020)]
[Rules and Regulations]
[Pages 86797-86803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28490]
=======================================================================
-----------------------------------------------------------------------
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AF24
Fees Paid by Federal Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is amending its regulation governing
assessment of an annual operating fee to Federal credit unions (FCUs).
First, for purposes of calculating the annual operating fee, the final
rule amends the current rule to exclude from total assets any loan an
FCU reports under the Small Business Administration's Paycheck
Protection Program (PPP) or similar future programs approved for
exclusion by the NCUA Board. Second, the final rule deletes from the
current regulation references to the Credit Union System Investment
Program and the Credit Union Homeowners Affordability Relief Program,
both of which no longer exist. Third, the final rule amends the period
used for the calculation of an FCU's total assets. Currently, total
assets are calculated using the FCU's December 31st Call Report of the
preceding year. Under the final rule, total assets will be calculated
as the average total assets reported on the FCU's previous four Call
Reports available at the time the NCUA Board approves the agency's
budget for the upcoming year, adjusted for any excludable programs as
determined by the Board. Finally, the final rule makes some minor
technical changes.
DATES: This final rule is effective on February 1, 2021.
FOR FURTHER INFORMATION CONTACT: James Holm, Supervisory Budget
Analyst, Office of the Chief Financial Officer, at (703) 518-6570;
Kevin Tuininga, Associate General Counsel, or John H. Brolin, Senior
Staff Attorney, Office of General Counsel, at (703) 518-6540; or by
mail at 1775 Duke Street, Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
II. Legal Authority
III. Summary of the Proposal and Public Comments
IV. Summary of the Final Rule
V. Regulatory Procedures
[[Page 86798]]
I. Introduction
At its July 2020 meeting, the Board issued a proposed rule \1\ to
amend the NCUA's regulation governing assessment of an annual operating
fee to Federal credit unions (FCUs), 12 CFR 701.6. For purposes of
calculating the annual operating fee, the proposed amendments would
have: (1) Excluded from total assets any loan an FCU reports under the
Small Business Administration's (SBA) Paycheck Protection Program
(PPP), or similar future programs approved for exclusion by the NCUA
Board; (2) deleted from the current regulation references to the Credit
Union System Investment Program and the Credit Union Homeowners
Affordability Relief Program, both of which no longer exist; and (3)
revised the period used for the calculation of an FCU's total assets.
Currently, total assets are calculated using the FCU's December 31st
Call Report of the preceding year. Under the proposal, total assets
would be calculated as the average total assets reported on the FCU's
previous four Call Reports available at the time the NCUA Board
approves the agency's budget for the upcoming year, adjusted for any
excludable programs as determined by the Board. Finally, the proposal
would have made some minor technical conforming changes.
---------------------------------------------------------------------------
\1\ 85 FR 53708 (Aug 31, 2020).
---------------------------------------------------------------------------
A. Background on the NCUA Annual Budget and Fees Paid by FCUs
The NCUA charters, regulates, and insures deposits in FCUs and
insures deposits in state-chartered credit unions that have their
shares insured through the National Credit Union Share Insurance Fund
(Share Insurance Fund). To cover expenses related to the NCUA's tasks,
the Board adopts an annual budget in the fall of each year. The Federal
Credit Union Act (FCU Act) provides two primary sources to fund the
budget: (1) Requisitions from the Share Insurance Fund; \2\ and (2)
operating fees charged against FCUs.\3\ The Board uses an allocation
formula, the Overhead Transfer Rate (OTR), to determine the amount of
the budget that it will requisition from the Share Insurance Fund.\4\
Remaining amounts needed to fund the annual budget are charged to FCUs
in the form of operating fees, based on each FCU's total assets.\5\
---------------------------------------------------------------------------
\2\ See, e.g., 12 U.S.C. 1783(a) (making the Share Insurance
Fund available ``for such administrative and other expenses incurred
in carrying out the purpose of [Subchapter II of the FCU Act] as
[the Board] may determine to be proper.'').
\3\ 12 U.S.C. 1755(a) (``In accordance with rules prescribed by
the Board, each Federal credit union shall pay to the Administration
an annual operating fee which may be composed of one or more charges
identified as to the function or functions for which assessed.'').
\4\ See, e.g., Request for Comment Regarding Revised Overhead
Transfer Rate Methodology, 82 FR 29935 (June 30, 2017).
\5\ 12 CFR 701.6(a).
---------------------------------------------------------------------------
The FCU Act requires each FCU to, ``in accordance with rules
prescribed by the Board [. . .] pay to the [NCUA] an annual operating
fee which may be composed of one or more charges identified as to the
function or functions for which assessed.'' \6\ The fee must ``be
determined according to a schedule, or schedules, or other method
determined by the Board to be appropriate, which gives due
consideration to the expenses of the [NCUA] in carrying out its
responsibilities under the [FCU Act] and to the ability of [FCUs] to
pay the fee.'' \7\ The statute requires the Board to, among other
things, ``determine the periods for which the fee shall be assessed and
the date or dates for the payment of the fee or increments thereof.''
\8\
---------------------------------------------------------------------------
\6\ 12 U.S.C. 1755(a).
\7\ 12 U.S.C. 1755(b).
\8\ Id.
---------------------------------------------------------------------------
Section 701.6 of the NCUA's regulations governs operating fee
processes.\9\ The regulation establishes the following: (1) The basis
for charging operating fees (i.e., total assets of the FCU, with
certain exclusions, as of December 31st of the preceding year); (2) the
notice the NCUA must provide to FCUs regarding the fees; (3) coverage
provisions providing certain exceptions for new FCU charters,
conversions, mergers, and liquidations; and (4) the assessment of
administrative fees and interest for late payment, among other
principles and processes.\10\ Certain aspects of and adjustments to the
operating fee process, such as the multipliers used to determine fees
applicable to designated asset tiers, are not included in the NCUA's
regulations. Instead, the Board generally adopts an operating fee
schedule at an open meeting each year and publishes the schedule in the
agency's annual budget and on its website.\11\
---------------------------------------------------------------------------
\9\ 12 CFR 701.6.
\10\ Id.
\11\ In November 2015, the Board delegated authority to the
Chief Financial Officer to administer the Board-approved methodology
and to set the operating fees as calculated per the approved
methodology each annual budget cycle beginning with 2016. See Board
Action Memorandum on 2016 Operating Fee (Nov. 19, 2015), https://www.ncua.gov/About/Documents/Agenda%20Items/AG20151119Item6a.pdf.
Since that time, the operating fee schedule has been published in
the NCUA's annual budget. See 2020-2021 Budget Justification
(December 12, 2019), https://www.ncua.gov/files/agenda-items/AG20191212Item1b.pdf.
---------------------------------------------------------------------------
Section 701.6(a) sets out the basis on which the NCUA assesses the
operating fee. Paragraph (a) provides that FCUs must pay the NCUA an
annual operating fee based on the credit union's total assets.\12\ The
NCUA calculates an FCU's operating fee by multiplying the dollar amount
of its total assets by a percentage set by the Board based on asset
tiers after considering the expenses of the NCUA and the ability of
FCUs to pay the fee. The term ``total assets'' for purposes of the
operating fee presently includes all assets, with certain exclusions,
reported on an FCU's Call Report as of December 31st of the previous
fiscal year.
---------------------------------------------------------------------------
\12\ 12 CFR 701.6(a).
---------------------------------------------------------------------------
Operating fee payments are due from FCUs in April each year, and
the NCUA prepares invoices using reported assets from the prior year's
December Call Report.\13\ In order to provide clarity to FCUs about
their operating fee charges for the upcoming year, the Board typically
approves the budget and sets the associated operating fee rates in
November or December of the year before the operating fee is billed.
Because the budget and operating fee rates are approved before December
Call Report data is available, the Chief Financial Officer uses
projected FCU asset growth to set the operating fee rates. Therefore,
if actual total assets reported in December Call Reports are below the
projected asset growth used for setting the operating fee rates, the
NCUA will collect less in operating fee revenue than it requires to
fund the budget. Conversely, if total assets reported in December Call
Reports are greater than projected growth, the NCUA may collect more
than is required.
---------------------------------------------------------------------------
\13\ Id.
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B. Background on the CARES Act and the SBA's Paycheck Protection
Program
On March 27, 2020, President Trump signed the Coronavirus Aid,
Relief, and Economic Security Act, or CARES Act, into law.\14\ The law
is designed to provide aid to the U.S. economy in the midst of the
COVID-19 pandemic. The CARES Act authorized the SBA to create a loan
guarantee program, the PPP, to help certain businesses affected by the
COVID-19 pandemic meet payroll needs (including employee salaries, sick
leave, other paid leave, and health insurance expenses), as well as
mortgage, rent, and utilities expenses. Provided credit union lenders
comply with the applicable lender obligations set forth in the SBA's
interim final rule, the SBA will fully guarantee loans
[[Page 86799]]
issued under the PPP, backed by the full faith and credit of the United
States. Most federally insured credit unions were eligible to make PPP
loans to members.\15\ Under the CARES Act, PPP loans must receive a
zero percent risk weighting for purposes of the NCUA's risk-based
capital requirements.\16\
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\14\ Public Law 116-136 (Mar. 27, 2020).
\15\ Credit unions that are currently permitted to make loans
under the SBA's 7(a) program are automatically approved to make PPP
loans. Federally insured credit unions that are not current SBA 7(a)
lenders can receive approval by submitting an application to the
SBA, unless they are currently designated as being in troubled
condition or are subject to a formal enforcement action that
addresses unsafe and unsound lending practices. Non-depository
financing providers, such as credit union service organizations, may
qualify as a PPP lender subject to the requirements listed in the
interim final rule.
\16\ Public Law 116-135, section 1102(a)(2).
---------------------------------------------------------------------------
Following enactment of the CARES Act, the Board issued an interim
final rule to make several amendments to the NCUA's regulations
relating to PPP loans.\17\ The April 27, 2020 interim final rule
provided that if a covered PPP loan made by a federally insured credit
union is pledged as collateral for a non-recourse loan that is provided
as part of the Board of Governors of the Federal Reserve System's (FRB)
PPP Liquidity Facility,\18\ the covered loan can be excluded from a
credit union's calculation of total assets for the purposes of
calculating its net worth ratio.\19\ The exclusion of PPP loans pledged
to the FRB's Liquidity Facility was comparable to an interim final rule
issued by the other banking agencies with respect to their capital
regulations,\20\ which is consistent with the statutory requirement for
the Board to prescribe a system of prompt corrective action that is,
among other things, comparable to the section of the Federal Deposit
Insurance Act that established prompt corrective action requirements
for banks.
---------------------------------------------------------------------------
\17\ 85 FR 23212 (Apr. 27, 2020).
\18\ The program was named as both the PPP Lending Facility and
the PPP Liquidity Facility when the Board approved the interim final
rule. It is now named the PPP Liquidity Facility in FRB
documentation on the program.
\19\ 85 FR 23212.
\20\ 85 FR 20387 (Apr. 13, 2020).
---------------------------------------------------------------------------
That change applied to only the calculation of the net worth ratio
and not to other requirements or calculations in the NCUA's regulations
that depend on a credit union's total assets. At present, an FCU must
report the value of all of its PPP loans in its Call Reports, whether
the FCU originated the loans, purchased them in the secondary market,
or has pledged them to the FRB Liquidity Facility.\21\ The value of PPP
loans reported in Call Reports could therefore increase the total asset
amounts the NCUA uses to compute the annual operating fees due. Without
a change to the NCUA's current operating fee regulation,\22\ an FCU's
PPP loans could subject the FCU to a higher operating fee, and this
could impose a burden for participation in the program, or a
disincentive to participate now that the program has been extended. As
the PPP serves an important public purpose, the Board believes PPP
loans warrant exclusion from total assets when determining operating
fees to avoid these harms.
---------------------------------------------------------------------------
\21\ See SBA Procedural Notice, Guidance on Whole Loan Sales of
Paycheck Protection Program Loans (May 1, 2020), available at
https://www.sba.gov/sites/default/files/2020-05/5000-20024.pdf.
\22\ 12 CFR 701.6(a).
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Under the FCU Act, the Board considers, among other things, FCUs'
ability to pay assessments.\23\ The Board finds that an increase in an
FCU's assets based on PPP loans--regardless of whether they are pledged
to the PPP Liquidity Facility--poses no undue risk to the credit
union's capital strength. Additionally, given the short-term and low-
fee nature of PPP loans, FCUs that report increased total assets as a
result of them are unlikely to have a corresponding increase in their
ability to pay a higher assessment. Furthermore, excluding PPP loans
from operating fee assessments makes the program more affordable to the
participants and avoids imposing a burden based on participation in a
program designed to provide an important public benefit. These benefits
closely align with the mission of credit unions to support their member
communities through trusted and affordable financial services.
Accordingly, based on this statutory analysis and application, the
NCUA's proposal had a broader scope of exclusion than the Board's April
27, 2020, interim final rule on PPP loans.\24\
---------------------------------------------------------------------------
\23\ 12 U.S.C. 1755.
\24\ 85 FR 23212 (Apr. 27, 2020).
---------------------------------------------------------------------------
In a separate Federal Register document,\25\ the Board requested
comment on the methodologies it uses to set the rate schedule for
operating fees and how it determines the OTR. Members of the public
were encouraged to comment about these methodologies by responding to
that Federal Register notice.
---------------------------------------------------------------------------
\25\ 85 FR 53854 (Aug. 31 2020).
---------------------------------------------------------------------------
II. Legal Authority
The Board is issuing this final rule pursuant to its authority
under the FCU Act.\26\ The FCU Act grants the Board a broad mandate to
issue regulations governing both FCUs and, more generally, all
federally insured credit unions. For example, section 120 of the FCU
Act is a general grant of regulatory authority and authorizes the Board
to prescribe rules and regulations for the administration of the FCU
Act.\27\ Section 105 of the FCU Act requires FCUs to pay an annual
operating fee to the NCUA.\28\ In particular, section 105(b) provides
that the fee assessed under this section 105 shall be determined
according to a schedule, or schedules, or other method determined by
the Board to be appropriate, which gives due consideration to the
expenses of the Administration in carrying out its responsibilities
under this chapter and to the ability of Federal credit unions to pay
the fee.\29\ Section 105(b) provides further that the Board shall,
among other things, determine the periods for which the fee shall be
assessed and the date or dates for the payment of the fee or increments
thereof. \30\
---------------------------------------------------------------------------
\26\ 12 U.S.C. 1751 et seq.
\27\ 12 U.S.C. 1766(a).
\28\ 12 U.S.C. 1755(a).
\29\ 12 U.S.C. 1755(b).
\30\ Id.
---------------------------------------------------------------------------
Accordingly, the FCU Act provides the Board with broad discretion
to decide how the amount of the operating fee is determined.
III. Summary of the Proposed Rule and Public Comments
At its July 30, 2020 meeting, the NCUA Board (Board) proposed
amending the agency's regulation governing assessment of an annual
operating fee to Federal credit unions (FCUs). The proposal provided
for a 60-day comment period, which ended on October 30, 2020. The NCUA
received nine comment letters in response to the proposed rule. In
general, all of the letters received from commenters--two from credit
union trade associations and seven from state credit union leagues--
expressed broad support for the proposal. A few of the commenters,
however, did raise issues for the NCUA's consideration, which are
discussed in more detail below.
The proposed rule would have amended Sec. 701.6(a) by excluding
PPP loans from FCUs' total assets for purposes of calculating its
operating fee. In particular, the proposal would have amended current
Sec. 701.6(a) to provide, among other things, that the operating fee
shall be based on the total assets of each FCU, less loans made under
the PPP.\31\ Under the proposed rule, participating FCUs would have
continued to report their assets in the quarterly Call Report. For
purposes of determining the operating fee, the
[[Page 86800]]
NCUA would have excluded reported PPP loans in the calculation of total
assets. The NCUA believed the change would ensure that FCUs interested
in making PPP loans did not bear greater financial burdens for doing
so. The Board proposed excluding PPP loans from the calculation of
total assets even if the PPP loans were not pledged to the FRB PPP
Liquidity Facility because PPP loans pose no undue risk to the FCU's
capital strength and, due to their unique structure, do not increase an
FCU's ability to pay a higher operating fee. Excluding all reported PPP
loans when determining total assets would also ensure that FCUs that do
not pledge their PPP loans to the FRB are treated consistently with
those FCUs that do. Absent such consistent treatment, FCUs that do not
pledge their PPP loans to the FRB's Liquidity Facility would bear a
larger relative cost burden of the operating fee compared to those FCUs
that do pledge their PPP loans.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 636(a)(36).
---------------------------------------------------------------------------
Comments Received: None of the commenters objected to this change.
All nine of the commenters stated that they supported excluding from
total assets any loan an FCU reports under the PPP and agreed with the
NCUA's rationale supporting this change. Four of the commenters
specifically stated further that they supported excluding PPP loans
from the calculation of total assets even if the PPP loans are not
pledged to the Federal Reserve Board's (FRB) PPP Liquidity Facility.
Proposing to exclude PPP loans from the calculation of total assets
was similar to the amendment the Board made to the calculation of total
assets in a 2009 final rule to encourage FCU participation in the
Credit Union System Investment Program (CU SIP) or the Credit Union
Homeowners Affordability Relief Program (CU HARP).\32\ Investments in
those programs were excluded from the computation of total assets
because the instruments were guaranteed by the Share Insurance Fund,
posed no credit risk to the participating credit unions, and the
exclusion was intended to encourage a greater participation rate in
programs with a clear public benefit. The CU SIP ended in 2010.
Similarly, CU HARP investments were issued by the U.S. Central Federal
Credit Union and all of those investments matured prior to that credit
union's liquidation in 2012. Because these programs no longer exist and
have no remaining investments, the Board proposed to amend current
Sec. 701.6(a) to delete references to them.
---------------------------------------------------------------------------
\32\ 74 FR 29934 (June 24, 2009).
---------------------------------------------------------------------------
Comments Received: None of the commenters objected to this change.
Two commenters expressly stated that they supported deleting references
to the programs and agreed with the NCUA's rationale supporting this
change.
Given the potential for additional programs similar to the PPP to
arise in the near future or as a result of future economic crises, the
Board proposed adding regulatory language that would allow for the
exclusion of assets in the future under similar programs without
requiring a reference to the specific program in the regulation. Under
the proposed new language, the Board anticipated making exclusions of
similar future programs by issuing an order, which could be published
in a letter to FCUs or a similar notice.
Comments Received: None of commenters objected to the language, and
eight of the commenters stated that they supported including the
general language allowing the exclusion of such programs to be approved
by the Board. One of the commenters, however, suggested that the NCUA
also include provisions to exclude assets related to programs that
provide relief during nationwide and regional crises; for example,
disaster declarations and associated SBA disaster lending authorized as
a result of hurricanes or other national disasters.
NCUA Response: In response to the comment suggesting the NCUA also
exclude assets related to programs that provide relief during
nationwide and regional crises, the agency has decided not to make that
change in the final rule. Such a change is beyond the scope of the
proposal. The NCUA, however, does plan to evaluate the feasibility and
impact of such exclusions in its next cyclical review of the operating
fee rule. In particular, the NCUA plans to evaluate whether SBA
disaster lending presents the same general low level of risk to credit
unions' balance sheets, and whether excluding SBA disaster lending from
total assets would have a material impact on the regional distribution
of operating fees.
In addition, the Board proposed amending current Sec. 701.6(a) to
use the average of FCUs' four most-recently reported quarterly assets
to calculate operating fees and to make conforming amendments to the
regulatory text to ensure this same approach was applied to merged and
recently converted FCUs. The Board proposed to use an average of total
assets because it believed that doing so would reduce the effect of
seasonal fluctuation in the total assets of FCUs, and would provide
more certainty to FCUs about their operating fee charges for the
forthcoming year. The change to a four-quarter average of reported
assets would also reduce the risk that the Board would collect less in
operating fee revenue than it requires if actual assets reported in
FCUs' December Call Reports were below the asset growth assumption used
to set the operating fee rates in the budget.
In particular, the proposed rule would have amended current Sec.
701.6(a) to provide, among other things, that the operating fee shall
be based on the average of total assets of each FCU based on data
reported in the preceding four Call Reports (as reported on NCUA Form
5300 for natural person FCUs and Form 5310 for corporate FCUs), or as
otherwise determined pursuant to paragraph (b) of Sec. 701.6. When
determining the operating fee rate and the invoice amounts due under
the proposal, the NCUA Board would have used the average of FCUs' four
most-recent Call Reports available at the time the Board approved the
budget for the forthcoming year.
The Board anticipated that the proposed change would have no impact
on current billing practices for newly chartered FCUs because such
credit unions do not receive an operating fee invoice until the second
year after they are chartered. The Board proposed continuing its
current practice of treating merged FCUs and conversions of non-FCUs
into FCUs as a single entity for purposes of calculating the average
total assets that are the basis for determining the amount of operating
fees due. For purposes of calculating the average total assets of an
FCU that converts from or merges with a federally insured, state-
chartered credit union (FISCU), the Board proposed computing comparable
quarterly total assets using the Call Report data in the agency's
possession. For conversions to an FCU charter from entities not insured
by the NCUA, the Board proposed to average assets based only on Call
Reports filed by the time the Board finalized its budget because the
NCUA cannot validate the accuracy or consistency of other data sources
that may be similar to NCUA Call Reports.
Under the proposed rule, in circumstances in which a conversion to
an FCU charter from an entity not insured by the NCUA occurs in the
fourth quarter of the year before the operating fee is due, no Call
Report data would have been available at the time the Board finalized
its budget, and the converted entity would therefore pay no operating
fee in the year following conversion. While this approach would have
produced a different result based only on insured status prior to
conversion for entities that are otherwise of the same FCU status after
[[Page 86801]]
the conversion, the Board believed its lack of access to verified Call
Report data for non-NCUA insured entities supported the distinction. In
addition, the Board expected such circumstances to be rare occurrences,
with relatively small impacts, as the maximum amount of forgone revenue
is one quarter of reported assets for which a converted entity could be
exempt from paying an operating fee.
While this discrepancy could be avoided if the Board continued its
current practice of estimating December Call Report data as the sole
point of reference for determining total assets for the operating fee,
the Board believed the four-quarter average was more equitable on the
whole because it could account for seasonal share account fluctuations
that some FCUs experience based on the characteristics and transaction
patterns engaged in by their fields of membership. As discussed above,
the proposed four-quarter average approach also would have eliminated
the risk that the Board could over- or under-collect operating fees
based on differences between its estimation of and actual December Call
Report data.\33\
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\33\ While the proposed regulatory language introducing Sec.
701.6(b)(2)(i)(B) could be read to require an entity not insured by
the NCUA that converts to a FCU charter in the fourth quarter to pay
a fee in the year following conversion, the lack of available Call
Report data prior to the date the Board adopts the budget would
preclude a fee in that scenario.
---------------------------------------------------------------------------
With respect to mergers in which an entity not insured by the NCUA
merges into a continuing FCU, the same issue existed under the proposed
rule with regard to the Board's access to data comparable to the Call
Report for periods prior to the merger date. Here again, the proposed
rule would have combined assets looking back four quarters for mergers
involving two FCUs or where a FISCU merges into a continuing FCU. On
the other hand, for mergers into FCUs of entities that are not insured
by the NCUA, the proposed rule would not have required the combination
of assets prior to the merger date, because the NCUA does not collect
asset data for entities it does not insure. Instead, the continuing FCU
would have paid a fee based only on assets reported on its own Call
Reports filed prior to the effective date of the merger. Depending on
the specific timing of when the merger occurred, this could have
resulted in multiple quarters where the assets acquired from the non-
NCUA insured entity were not included in the calculated average assets
used to bill the continuing FCU. For the same reasons expressed above
with respect to conversions, the Board believed the benefits of the
four-quarter average outweighed the different treatment for mergers
with FISCUs compared to mergers with entities not insured by the NCUA.
With respect to purchase and assumption transactions, the
regulation presently designates that such transactions will be treated
as mergers in circumstances in which an FCU purchases all or
essentially all of the assets of another credit union. Under the
proposal, the Board retained that language, but requested comments on
alternative approaches the Board may wish to consider. The Board
acknowledged that, in some circumstances, determining whether a
purchase and assumption included all or essentially all assets could be
a difficult determination.
Comments Received: All nine commenters stated that they supported
these change and generally agreed with the NCUA's rationale supporting
this change. While all of the commenters supported this change, four of
the commenters did ask that the NCUA also regularly review this change
and its impact to ensure it does not cause any unintended consequences.
Although beyond the scope of this proposal, one commenter did
suggested that the NCUA further amend Sec. 701.6 to treat mergers into
and conversions with federally insured, state-chartered credit unions
(FISCUs) differently. The commenter stated that, while the current rule
bars the payment of a fee refund when a conversion to or merger into a
FISCU occurs, the NCUA should reconsider this issue since the resulting
credit union's NCUSIF deposit will reflect the merger, unlike a
combination with an entity that is not NCUSIF-insured, and the
resulting entity is not an FCU. The commenter suggested that the NCUA
provide pro rata fee refunds if an FCU converts to or merges into a
FISCU.
NCUA Response: In response to the comment suggesting that the NCUA
regularly review these changes and their impact, the NCUA reviews all
of its existing regulations every three years. The NCUA's Office of
General Counsel maintains a rolling review schedule that identifies
one-third of the NCUA's existing regulations for review each year and
provides notice to the public of those regulations under review so the
public may have an opportunity to comment. The changes made by this
final rule will be regularly reviewed as part of that process and the
credit union industry and public will be given a regular opportunity to
raise any concerns they may have.
In response to the comment suggesting that the NCUA issue a pro
rata fee refund to an FCU that converts to or merges into a FISCU, the
agency has made no changes in the final rule. Such a change would be
outside the scope of the proposal. Moreover, the operating fees charged
to FCUs are based on a detailed workload projection of the agency's
examination program, which is used to inform the agency's annual budget
formulation and calculation of operating fee collections. The agency
generally does not have insight into the future merger or charter
conversion plans of a given FCU, and therefore must base its workload
estimates on the population of FCUs that exist in the year before the
budget is set and the fee is calculated. If the NCUA were to issue pro
rata refunds to FCUs that subsequently merge with or convert to a
FISCU, it would face continuing, unfunded liabilities for staff
salaries and associated expenses that could not be recouped from other
sources since the operating fee is billed only once annually.
Similarly, the OTR share of the annual operating budget is determined
in part based on the relative distribution of projected workload
between FCUs and FISCUs in the year before the OTR is applied to actual
operating expenses. Although the NCUA's actual workload may be
marginally reduced if an FCU converts to or merges with a FISCU, such a
change cannot be retroactively applied to the OTR used in a given year.
The Board also proposed some technical changes to existing rule
language. First, the proposed rule clarified that the NCUA would not
issue refunds of operating fees to FCUs that convert to any other type
of charter, not just a state charter. The proposed rule was intended to
ensure the same treatment for a conversion to a mutual savings bank or
any other charter type. The Board also proposed removing the language
``in the year in which the conversion takes place'' from the provision,
as a refund is never provided to any converting FCU, regardless of
timing. The Board proposed the same changes to the rule text on refunds
in the context of mergers.
Comments Received: The NCUA received no objections to this change.
In addition, the Board proposed to expand the situations expressly
covered in the regulation to include conversions and mergers involving
entities not insured by the NCUA. Such transactions could involve
privately insured, state-chartered credit unions or banking
institutions. To support this expansion, the proposed regulatory
language introduced the phrase ``entity not
[[Page 86802]]
insured by the NCUA.'' In the language specifying that certain purchase
and assumption transactions would be treated as mergers, the Board
proposed changing the term ``credit union'' to ``depository
institution'' to clarify that a purchase and assumption involving a
bank, for example, would be treated in the same manner. Finally, the
proposed rule would have divided paragraph (b) of the regulation into
additional subparagraphs to improve readability.
Comments Received: The NCUA received no objections to this change.
III. Summary of the Final Rule
For the reasons discussed above, the Board is issuing this final
rule without change from the proposed rule. Revised Sec. 701.6(a)
provides that each calendar year, or as otherwise directed by the
Board, each Federal credit union shall pay an operating fee to the NCUA
for the current fiscal year (January 1 to December 31) in accordance
with a schedule fixed by the Board from time to time. New Sec.
701.6(a)(1) provides that the operating fee shall be based on the
average of total assets of each Federal credit union based on data
reported in NCUA Forms 5300 and 5310 from the four quarters immediately
preceding the time the Board approves the agency's budget or as
otherwise determined pursuant to paragraph (b) of this section. New
Sec. 701.6(a)(2) provides that for purposes of calculating the
operating fee, total assets shall not include any loans on the books of
a natural person Federal credit union made under the Small Business
Administration's Paycheck Protection Program, 15 U.S.C. 636(a)(36), or
any similar program approved for exclusion by the Board.
Revised Sec. 701.6(b), Coverage, provides that the operating fee
shall be paid by each Federal credit union engaged in operations as of
January 1 of each calendar year in accordance with paragraph (a),
except as otherwise provided by this paragraph. Section 701.6(b)(1),
New Charters, continues to provide that a newly chartered FCU will not
pay an operating fee until the year following the first full calendar
year after the date chartered. Revised Sec. 701.6(b)(2), Coverage,
continues to address coverage issues, but now includes several new
subsections. New Sec. 701.6(b)(2)(i)(A) provides that in the first
calendar year following conversion: A FISCU that converts to an FCU
charter must pay an operating fee based on the average assets reported
in the year of conversion on NCUA Forms 5300 or 5310 from the four
quarters immediately preceding the time the Board approves the agency's
budget in the year of conversion. New Sec. 701.6(b)(2)(i)(B) provides
that in the first calendar year following conversion: An entity not
insured by the NCUA that converts to an FCU charter must pay an
operating fee based on the assets, or average thereof, reported on NCUA
Forms 5300 or 5310 for any one or more quarters immediately preceding
the time the Board approves the agency's budget in the year of
conversion. New Sec. 701.6(b)(2)(ii) provides that an FCU converting
to a different charter will not receive a refund of any operating fees
paid to the NCUA.
Revised Sec. 701.6(b)(3), Mergers, continues to address merger
issues, but now includes several new subsections. New Sec.
701.6(b)(3)(i)(A) provides that in the first calendar year following
merger: A continuing FCU that has merged with one or more federally
insured credit unions must pay an operating fee based on the average
combined total assets of the FCU and any merged federally insured
credit unions as reported on NCUA Forms 5300 or 5310 in the four
quarters immediately preceding the time the Board approves the agency's
budget in the merger year. New Sec. 701.6(b)(3)(i)(B) provides that
for purposes of paragraph (b)(3), a purchase and assumption transaction
in which the continuing FCU purchases all or essentially all of the
assets of another depository institution shall be deemed a merger. New
Sec. 701.6(b)(3)(ii) provides that an FCU that merges with a Federal
or state-chartered credit union, or an entity not insured by the NCUA,
will not receive a refund of any operating fee paid to the NCUA.
Finally, Sec. 701.6(b)(4), Liquidations, continues to provide that
an FCU placed in liquidation will not pay any operating fee after the
date of liquidation.
IV. Regulatory Procedures
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a final rule, an agency prepare and make available for
public comment an final regulatory flexibility analysis that describes
the impact of a proposed rule on small entities. A regulatory
flexibility analysis is not required, however, if the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities (defined for purposes of the RFA
to include federally insured credit unions with assets less than $100
million) and publishes its certification and a short, explanatory
statement in the Federal Register together with the rule. This final
rule will make a technical change to the period for measuring total
assets for calculating the Operating Fee. However, the Board does not
believe the impact will disproportionally impact small credit unions
such that a regulatory flexibility analysis is required. First, small
credit unions are still required to report assets on a quarterly basis,
and the regulation only increases the number of quarters the NCUA will
consider in adjusting the operating fee. Nor does the exclusion of PPP
loans from assets increase reporting requirements, as the NCUA already
has the information necessary to make that exclusion. Finally, although
exclusion of PPP loans will decrease fee amounts for some small credit
unions, the Board does not believe the change will amount to a
significant impact on a substantial number of small entities.
Accordingly, the NCUA certifies that this final rule will not have a
significant economic impact on a substantial number of small credit
unions.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency creates a new or amends existing information collection
requirements.\34\ For the purpose of the PRA, an information collection
requirement may take the form of a reporting, recordkeeping, or a
third-party disclosure requirement. This final rule does not contain
information collection requirements that require approval by OMB under
the PRA.\35\
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\34\ 44 U.S.C. 3507(d); 5 CFR part 1320.
\35\ 44 U.S.C. Chap. 35.
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C. Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) (SBREFA) generally provides for congressional review
of agency rules.\36\ A reporting requirement is triggered in instances
where the NCUA issues a final rule as defined by Section 551 of the
APA.\37\ An agency rule, in addition to being subject to congressional
oversight, may also be subject to a delayed effective date if the rule
is a ``major rule.'' \38\ The NCUA does not believe this rule is a
``major rule'' within the meaning of the relevant sections of SBREFA.
As required by SBREFA, the NCUA will submit this final rule to OMB for
it to determine if the final rule is a ``major rule'' for purposes of
SBREFA. The NCUA also will file appropriate reports with Congress and
the Government
[[Page 86803]]
Accountability Office so this rule may be reviewed.
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\36\ 5 U.S.C. 801-804.
\37\ 5 U.S.C. 552.
\38\ 5 U.S.C. 804(2).
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D. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the Executive order. This final rule will not
have a substantial direct effect on the states, on the connection
between the National Government and the states, or on the distribution
of power and responsibilities among the various levels of government.
The NCUA has determined that this final rule does not constitute a
policy that has federalism implications for purposes of the Executive
order.
D. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\39\
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\39\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects in 12 CFR Part 701
Credit unions, Low income, Nonmember deposits, Secondary capital,
Shares.
By the National Credit Union Administration Board on December
17, 2020.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons discussed above, the Board amends 12 CFR part 701
as follows:
PART 701--Organization and Operations of Federal Credit Unions
0
1. The authority citation for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
0
2. In Sec. 701.6, revise paragraphs (a) and (b) to read as follows:
Sec. 701.6 Fees paid by Federal credit unions.
(a) Basis for assessment. Each calendar year, or as otherwise
directed by the NCUA Board, each Federal credit union shall pay an
operating fee to the NCUA for the current fiscal year (January 1 to
December 31) in accordance with a schedule fixed by the Board from time
to time.
(1) General. The operating fee shall be based on the average of
total assets of each Federal credit union based on data reported in
NCUA Forms 5300 and 5310 from the four quarters immediately preceding
the time the Board approves the agency's budget or as otherwise
determined pursuant to paragraph (b) of this section.
(2) Exclusions from total assets. For purposes of calculating the
operating fee, total assets shall not include any loans on the books of
a natural person Federal credit union made under the Small Business
Administration's Paycheck Protection Program, 15 U.S.C. 636(a)(36), or
any similar program approved for exclusion by the NCUA Board.
(b) Coverage. The operating fee shall be paid by each Federal
credit union engaged in operations as of January 1 of each calendar
year in accordance with paragraph (a) of this section, except as
otherwise provided by this paragraph (b).
(1) New charters. A newly chartered Federal credit union will not
pay an operating fee until the year following the first full calendar
year after the date chartered.
(2) Conversions. (i) In the first calendar year following
conversion:
(A) A federally insured state-chartered credit union that converts
to a Federal credit union charter must pay an operating fee based on
the average assets reported in the year of conversion on NCUA Forms
5300 or 5310 from the four quarters immediately preceding the time the
Board approves the agency's budget in the year of conversion.
(B) An entity not insured by the NCUA that converts to a Federal
credit union charter must pay an operating fee based on the assets, or
average thereof, reported on NCUA Forms 5300 or 5310 for any one or
more quarters immediately preceding the time the Board approves the
agency's budget in the year of conversion.
(ii) A Federal credit union converting to a different charter will
not receive a refund of any operating fees paid to the NCUA.
(3) Mergers. (i) In the first calendar year following merger:
(A) A continuing Federal credit union that has merged with one or
more federally insured credit unions must pay an operating fee based on
the average combined total assets of the Federal credit union and any
merged federally insured credit unions as reported on NCUA Forms 5300
or 5310 in the four quarters immediately preceding the time the Board
approves the agency's budget in the merger year.
(B) For purposes of this paragraph (b)(3), a purchase and
assumption transaction where the continuing Federal credit union
purchases all or essentially all of the assets of another depository
institution shall be deemed a merger.
(ii) A Federal credit union that merges with a Federal or state-
chartered credit union, or an entity not insured by the NCUA, will not
receive a refund of any operating fee paid to the NCUA.
(4) Liquidations. A Federal credit union placed in liquidation will
not pay any operating fee after the date of liquidation.
* * * * *
[FR Doc. 2020-28490 Filed 12-30-20; 8:45 am]
BILLING CODE 7535-01-P