FR 2021-01796

Summary of the Document

The document is a regulation issued by the Farm Credit Administration (FCA) concerning adjustments in civil money penalties (CMPs) for inflation. These penalties are imposed under the authority of the Farm Credit Act and the Flood Disaster Protection Act. The regulation is part of an annual process mandated by federal law to ensure penalties retain their effectiveness as deterrents. As of January 15, 2021, the adjusted penalties are $2,395 for specific violations under the Farm Credit Act and $2,252 for flood insurance violations. The document clarifies that these changes are automatic and do not require public input due to their noncontroversial nature.

Significant Issues and Concerns

One of the main issues within this document is the reliance on a range of legislative acts and sections without providing comprehensive context or summaries. This could confuse readers who are not familiar with these specific laws. Additionally, the document references other materials, such as the OMB Circular M-21-10, which further complicates understanding for those not versed in such documents.

Moreover, the mention of a transposition error in the penalty amounts ($2,404 vs. $2,367) raises concerns about accuracy and transparency in legal documentation. Readers may question the reliability of the data presented when such errors are noted without extensive explanation.

The decision to bypass public notice and commentary due to the mandatory nature of these adjustments might also cause some stakeholders to feel that the process lacks transparency and inclusivity.

Public Impact

For the general public, this document might seem dense and technical. While the changes primarily impact financial regulatory frameworks, an average person might find the specifics difficult to comprehend fully. However, the adjustments are mostly administrative and are unlikely to directly affect the day-to-day lives of individuals outside the financial sector.

Impact on Stakeholders

The regulation primarily impacts institutions like those in the Farm Credit System and entities involved in flood insurance. For these stakeholders, the annual adjustments mean aligning operational compliance with the updated penalty amounts. This may require revising budgets and compliance strategies to address potential violations' increased costs.

On a positive note, maintaining the deterrent effect of penalties through these adjustments could encourage continued compliance, benefiting both regulatory authorities and compliant institutions. However, the automatic nature of these changes without room for stakeholder input might leave some feeling their concerns are not considered, despite the noncontroversial intent of the regulation.

In conclusion, while the document accomplishes its primary goal of adjusting penalties for inflation, the complexity and technical language could alienate those without a legal or financial background, limiting broader public understanding.

The regulation discussed in this document centers around updating civil money penalties (CMPs) to account for inflation. This update is crucial because it maintains the penalties' effectiveness as a deterrent against violations. The Farm Credit Administration (FCA) is responsible for imposing these penalties per various federal laws, including the Farm Credit Act and the Flood Disaster Protection Act.

The adjustments to these penalties arise from the need to align them with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended. This regulatory requirement ensures that penalties continue to reflect their intended financial impact despite inflation.

Summary of Financial Adjustments

1. Cease-and-Desist Orders

2. Under the Farm Credit Act, any violation of a cease-and-desist order incurs a maximum daily penalty of $1,000. With inflation adjustments, this has increased over the years, reflecting the Act's original enforcement intentions.

3. Other Violations Under the Farm Credit Act

4. A separate provision mandates penalties for violations of the Act or its regulations. Initially set at a maximum of $500 per day, these penalties have been adjusted for inflation, with the current daily maximum set at $1,084.

5. Flood Disaster Protection Act Violations

6. The original maximum penalty for violating the Flood Disaster Protection Act was $2,000. Ordinary inflation adjustments have increased this penalty, with the current maximum set at $2,252 per violation based on the year's calculations.

Relating Financial Adjustments to Identified Issues

The document's financial references highlight several issues related to transparency and public understanding. The frequent mentioning of specific laws and sections without adequate context could lead to confusion, particularly when calculating inflation adjustments. For instance, the CMPs' value is derived from a multiplier based on the Consumer Price Index (CPI), a complex calculation that might not be familiar to the average reader.

One critical issue is the mention of a transposition error—where the maximum daily penalty was mistakenly listed as $2,404 instead of $2,367. This discrepancy underscores the importance of accuracy in legal documents, especially where financial penalties are concerned.

The document also notes that these changes to penalties are ministerial and do not require public notice or comment. This procedural approach might raise concerns among stakeholders about the transparency of governmental processes, particularly when significant financial implications are involved.

Technical Nature and Public Understanding

The final issue worth noting is the highly technical nature of adjusting these penalties for inflation, which can be challenging to understand without the necessary financial literacy. The specificity in numerical adjustments and the reliance on external documents (e.g., the OMB Circular) for calculations might discourage wider engagement from the public.

Overall, the financial adjustments detailed in this document aim to ensure that penalties remain a potent deterrent against legal violations while highlighting the need for clear, transparent, and easily understandable regulatory communications.