Civil Fines Jump Across Agencies Under Inflation Adjustment Act

Civil Fines Jump Across Agencies Under Inflation Adjustment Act

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Civil fines across federal agencies have recently been increased dramatically under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (2015 Act) (Sec. 701 of Public Law 114-74), with some more than doubling. Companies violating the Hart-Scott-Rodino (HSR) Improvements Act, the Securities Exchange Act, or the Occupational Safety and Health Act (OSHA), among others, could soon face civil monetary penalties that are up to 150% higher than the existing levels. According to the Congressional Budget Office, the 2015 Act would increase the federal government's revenue by $1.3 billion over the next ten years.1  

The 2015 Act requires federal agencies to (1) adjust the level of civil monetary penalties with an initial “catch-up” adjustment through interim final rulemaking; and (2) implement subsequent annual adjustments for inflation based on the Office of Management and Budget (OMB)'s annual guidance.2 The 2015 Act takes effect on August 1, 2016, when agencies will begin applying the new penalty levels to any penalties assessed on and after that date. Accordingly, the penalty increases can apply to ongoing investigations of conduct that occurred long before August 1 (if the relevant agency decides to assess penalties on or after August 1).3 The 2015 Act, however, does not retrospectively change any previously assessed or enforced penalties.4 Also, penalties under the Internal Revenue Code and the Tariff Act are exempt from the 2015 Act's inflation adjustment.5

Below are some of the notable increases in federal civil fines under the 2015 Act:  

Agency  Relevant LawUnderlying Violations Current Penalty Adjusted Penalty Increase (%) 
 FTC6      Federal Trade Commission Act, 15 U.S.C. 45(l)Violations of cease and desist orders issued under Section 5(b) of the FTC Act (e.g., breach of terms under FTC consent order) $16,000 $40,000 150%
FTC Act, 15 U.S.C. 45(m)(1)Unfair or deceptive acts or practice in violation of Section 5(m)(1) of the FTC Act  $16,000 $40,000 150%
Hart-Scott-Rodino (HSR) Improvements Act, 15 U.S.C. 18a(g)(1) Violations of premerger reporting and waiting requirements under the HSR Act (e.g., failure to file or late filing of premerger notification) $16,000  (per day) $40,000  (per day) 150%
Clayton Act, 15 U.S.C. 21(l)Violations of cease and desist orders issued under Section 11(b) of the Clayton Act $8,500 $21,250 150%
 DOJ7      False Claims Act (FCA), 31 U.S.C. 3729(a)Violations of FCA (e.g., healthcare fraud, housing and mortgage fraud, and false claims for payment under government contracts) $5,500 –   $11,000 $10,781 –   $21,563  96%
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), 12 U.S.C. 1833a(b)(1)Violations of FIRREA (e.g., financial fraud “affecting a federally insured financial institution”) Max. $1,100,000  Max. $1,893,610  72%
 FIRREA, 12 U.S.C. 1833a(b)(2)Continuing violations of FIRREA  Max. $1,100,000 (per day) or $5,500,000 Max. $1,893,610 (per day) or $9,468,050 72%
Anti-Kickback Act, 41 U.S.C. 8706(a)(1)(B)Violations involving kickbacks $11,000 $21,563 96%
 SEC8    Securities Act of 1933, 15 U.S.C. 77t(d) Corporate violations of SEC regulations, involving fraud, deceit, manipulation, or deliberate or reckless disregard and resulting in substantial losses or significant risk of such losses to others  Max. $775,000 Max. $890,780 15%
Securities Exchange Act of 1934, 15 U.S.C. 78ff(c)(1)(B) Foreign corrupt practices for issuer Max. $16,000 Max. $19,787 24%
Securities Exchange Act of 1934, 15 U.S.C. 78u-1(a)(3) Insider trading for controlling person Max. $1,525,000 Max. $1,978,690 30%
 OCC9                        Federal Deposit Insurance (FDI) Act, 12 U.S.C. § 1818(i)(2)      Violations of various statutes, including FIRREA, UDAP, unsafe or unsound practices, breach of fiduciary duty         Max Daily Max Daily  
 $7,500
(Tier One)
 $9,468
(Tier One)
26%
 $37,500
(Tier Two)
 $47,340
(Tier Two)
 $1,425,000
(Tier Three)
 $1,893,610
(Tier Three)
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), 15 U.S.C. 1639e(k)    Violations of the regulation implementing the appraisal independence requirements in Section 1472 of the Dodd-Frank Act     Max. Daily Max. Daily 
 $10,000
(for first violation)
 $10,875
(for first violation)
9%
 $20,000
(for subsequent violations)
 $21,749
(for subsequent violations) 
12 U.S.C. 481Refusals by any affiliate of a national bank to permit an examiner to make an examination of such affiliate or to provide any information required in the course of such an examination Max. $5,000
(per day)
 Max. $9,468
(per day)
 89%
12 U.S.C. 1832(c) Depository institutions' violations of the restrictions on withdrawals by negotiable or transferable instruments for transfers to third parties $1,100 $2,750 150%
12 U.S.C. 1972(2)(F)                Savings associations' violations of anti-tying restrictions regarding correspondent accounts, unsafe or unsound practices, or breach of fiduciary duty      

 Max. Daily 

 Max. Daily 

 

 
  $7,500
(Tier One)
  $9,468
(Tier One)
26%
 

$37,500
(Tier Two)

 $47,340
(Tier Two)
 26%
 $1,425,000
(Tier Three)
 $1,893,610
(Tier Three)
 33%
15 U.S.C. 78u–2(b)              Violations of various provisions of the Securities Act, the Securities Exchange Act, the Investment Company Act, and the Investment Advisers Act              

 For natural person:
Max. Daily

 For natural person:
Max. Daily

 

 $7,500
(Tier One)
 

$8,908
(Tier One)

19%
 $70,000
(Tier Two)
 $89,078
(Tier Two)
 27%
 $140,000
(Tier Three)
 

$178,156
(Tier Three)

 27%
 

For other person:
Max. Daily

 

For other person:
Max. Daily 

 

 $70,000
(Tier One)
 

$89,078
(Tier One)

 27%
 $350,000
(Tier Two)
 

445,390
(Tier Two)

 $700,000
(Tier Three)
 $890,780
(Tier Three)
CFPB10    Interstate Land Sales Full Disclosure Act, 15 U.S.C. 1717a(a)(2)    Knowing and material violations of the Interstate Land Sales Full Disclosure Act     Max. Max.  
 $1,000
(per violation)
 $1,894
(per violation) 
 89%
 $1,000,000
(per year)
 $1,893,610
(per year)
Consumer Financial Protection Act, 12 U.S.C. 5565(c)(2)      Violations of Federal consumer financial laws, including rules or orders prescribed thereunder        Max. Max. 
 $5,000
(Tier One)
 $5,437
(Tier One) 
9%
 $25,000
(Tier Two)
$27,186
(Tier Two)
 $1,000,000
(Tier Three)
 $1,087,450
(Tier Three)
Truth in Lending Act, 15 U.S.C. 1639e(k)Violations of the appraisal independence requirements under the Truth in Lending Act, or regulations prescribed thereunder, in extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the consumer Max. $10,000  (for first violation); $20,000  (for subsequent violations) Max. $10,875  (for first violation); $21,749  (for subsequent violations) 9%
 FDIC11        Home Owners' Loan Act, 12 U.S.C. 1464(v)Savings association's knowing or reckless submission to a federal banking agency of any false or misleading report or information in violation of Section 1464(v) (Tier Three penalty) Max. $1,425,000 Max. $1,893,610 33%
Federal Deposit Insurance (FDI) Act, 12 U.S.C. 1818(i)(2)      Violations of various statutes, including FIRREA, the International Banking Act of 1978, the Truth in Lending Act, the Fair Credit Reporting Act, and the Equal Credit Opportunity Act       Max. Daily Max. Daily 
$7,500
(Tier One)
$9,468
(Tier One)
 26% 
$37,500
(Tier Two)
 $47,340
(Tier Two)
 
$1,425,000
(Tier Three)

$1,893,610
(Tier Three)
Treasury (FinCEN)12     Bank Secrecy Act (BSA), 12 U.S.C. 1829b(j)Recordkeeping violations for funds transfers in violation of 12 U.S.C. 1829b Max. $10,000  Max. $19,787  98%
BSA, 31 U.S.C. 5330(e)Failure to register as money transmitting business in violation of 31 U.S.C. 5330 Max.  $5,000 Max.  $7,954 59%
BSA, 31 U.S.C. 5321(a)(1)Willful violations of BSA requirements  $25,000 –$100,000 $53,907 –$215,628 116%
 DOL13Occupational Safety and Health Act (OSHA), 29 CFR 1903.15(d)(3)Serious violations of OSHA Max.  $7,000 Max. $12,471 78%
 FAA14Federal Aviation Act of 1958, 49 U.S.C. 46318Violations of FAA regulations (e.g., air carrier's failure to obtain a certificate to operate under Section 41101) $25,000 $34,172 37%
 FCC15  Telecommunications Act of 1996, 47 U.S.C. 214(d)Failure to comply with any FCC order issued under Section 214 Max.  $1,320    (per day) Max.  $2,272    (per day) 72%
Telecommunications Act of 1996, 47 U.S.C. 223(b)  Making obscene or harassing interstate calls in violation of Section 223  Max. $80,000 Max. $117,742 47%
 FERC16  Federal Power Act (FPA), 16 U.S.C. 823b(c)Violations of Section 31(c) of the FPA (e.g., failure to comply with any FERC order with respect to license or permit issued) Max. $11,000  (per day) Max. $21,563  (per day) 96%
FPA, 16 U.S.C. 825n(a)Violations of Section 315(a) of the FPA (e.g., failure to comply with any FERC order, failure to file any report required by Part III of the FPA, or failure to comply with any rule or regulation issued thereunder) Max.  $1,100  Max.  $2,750 150%

 

The 2015 Act mandates that federal agencies publish interim final rules with the initial penalty adjustments by July 1, 2016, and there is no requirement that they provide notice and comment process before promulgation.17 Agencies have taken slightly varied approaches to determining their respective fine increases under the 2015 Act. For instance, the Federal Trade Commission, the Financial Crimes Enforcement Network of the Department of Treasury, and the Federal Aviation Administration, among others, published their finalized fine increases in late June and early July. Some agencies, such as the Department of Justice, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation, have invited public comment on their published increases with comment periods variously closing from mid-August to early September. Notably, these published fine increases will take effect on August 1, 2016 per the 2015 Act, notwithstanding the notice and comment period will not have expired.  


1 Congressional Budget Office, Estimate of the Budgetary Effects of H.R. 1314, the Bipartisan Budget Act of 2015, as reported by the House Committee on Rules on October 27, 2015, Oct. 28, 2015, at 4.

2 OMB Memorandum M-16-06, Implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, Feb. 24, 2016 (“OMB Memorandum M-16-06”), at 1.

Id. at 3-4.

Id. at 4.

Id. at 1. Penalties under OSHA and the Social Security Act (which were previously exempt) are now subject to the 2016 and subsequent inflation adjustments under the 2015 Act. Id.

Adjustment of Civil Monetary Penalty Amounts, 81 Fed. Reg. 42,476 (June 30, 2016).

Civil Monetary Penalties Inflation Adjustment, 81 Fed. Reg. 42,491 (June 30, 2016). The DOJ requested for public comments to be submitted by August 29, 2016.

Adjustments to Civil Monetary Penalty Amounts, SEC Release Nos. 33-10104; 34-78156; IA-4437; IC-32162; File No. S7-11-16 (June 27, 2016). The SEC requested for public comments to be submitted by August 15, 2016.

9Rules of Practice and Procedure; Rules of Practice and Procedure in Adjudicatory Proceedings; Civil Money Penalty Inflation Adjustments, 81 Fed. Reg. 43,021 (July 1, 2016). The Office of the Comptroller of the Currency (OCC) requested for public comments to be submitted by August 30, 2016.

10 Civil Penalty Inflation Adjustments, 81 Fed. Reg. 38,569 (June 14, 2016). The Consumer Financial Protection Bureau (CFPB) requested for public comments to be submitted by July 14, 2016, the effective date of this rule. 

11 Rules of Practice and Procedure, FDIC 3064-AE43 (June 21, 2016). The FDIC requested for public comments to be submitted by September 1, 2016.

12 Civil Monetary Penalty Adjustment and Table, 81 Fed. Reg. 42,503 (June 30, 2016).

13 Appendix 1: Inflation Adjustment Act – Penalty Adjustments, Dep't of Labor.

14 Revisions to the Civil Penalty Inflation Adjustment Tables, 81 Fed. Reg. 43,463 (July 5, 2015).

15 Order, In the Matter of Amendment of Section 1.80(b) of the Commission's Rules: Adjustment of Civil Monetary Penalties to Reflect Inflation, DA 16-644 (FCC June 9, 2016). This order took effect as of July 1, 2016.

16 Civil Monetary Penalty Inflation Adjustments, 155 FERC 61,320, Dkt. No. RM16-16-000, Order No. 826 (June 29, 2016).
OMB Memorandum M-16-06 at 3.

17 OMB Memorandum M-16-06 at 3.

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