The Federal Civil Penalties Inflation Adjustment Act of 1990 (FCPIA Act)requires Federal agencies to adjust, by regulation, the Civil Monetary Penalties (CMPs) within their jurisdiction by a prescribed inflation adjustment at least once every four years. The Federal Reserve Board (FRB) made its last adjustment to its CMPs on October 6, 2008, On November 16, 2012 the FRB issued a final rule to set forth the newly-adjusted CMPs which will apply to violations that occur after the rule’s effective date. A copy of the rule is available at www.federalregister.gov/articles/2012/11/16/2012-27857/rules-of-practice-for-hearings.
The FCPIA Act defines the inflation adjustment as a cost-of-living adjustment based on the percentage change in the Consumer Price Index between June of the calendar year in which the particular CMP was last set or adjusted and June of the calendar year preceding the current adjustment (in this case, June 2011).
Because the Biggert-Waters Flood Insurance Reform Act of 2012 amended 42 U.S.C. 4012a(f)(5) by increasing the CMP for each violation under 42 U.S.C. 4012a(f) to $2,000, the FRB did not calculate an inflation adjustment for this CMP. It should also be noted that the amendment to 42 U.S.C. 4012a(f)(5) removed the $100,000 calendar-year limit on penalties assessed against any regulated lending institution or enterprise.
Any increase in CMPs is significant, but this announcement is particularly noteworthy because it is the first notice of the increased Flood penalties. The Biggert-Waters Act became law on July 6, 2012. The increased penalties were effective on that date; but there has been no mention of increased penalties until now. The FRB announcement may be the event that alerts the examiners to the higher penalties.
