82_FR_26499 82 FR 26391 - Supervisory Review Committee; Procedures for Appealing Material Supervisory Determinations

82 FR 26391 - Supervisory Review Committee; Procedures for Appealing Material Supervisory Determinations

NATIONAL CREDIT UNION ADMINISTRATION

Federal Register Volume 82, Issue 108 (June 7, 2017)

Page Range26391-26403
FR Document2017-11320

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

Federal Register, Volume 82 Issue 108 (Wednesday, June 7, 2017)
[Federal Register Volume 82, Number 108 (Wednesday, June 7, 2017)]
[Proposed Rules]
[Pages 26391-26403]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11320]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 746

RIN 3133-AE69


Supervisory Review Committee; Procedures for Appealing Material 
Supervisory Determinations

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice of proposed rulemaking.

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

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

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

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

SUPPLEMENTARY INFORMATION: 

I. Background

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

[[Page 26392]]

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

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

A. Expansion of Supervisory Review Committee Jurisdiction

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

B. Addition of Optional Intermediate Level of Review

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

C. Composition of the Supervisory Review Committee

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

D. Summary Chart of Proposed SRC Appeals Procedures

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

[[Page 26393]]

[GRAPHIC] [TIFF OMITTED] TP07JN17.001

III. Section by Section Analysis

Part 746--Appeals Procedures

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

[[Page 26394]]

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

[[Page 26395]]

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

[[Page 26396]]

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

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

[[Page 26397]]

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

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

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

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

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

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

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

[[Page 26398]]

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

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

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

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

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

IV. Regulatory Procedures

Regulatory Flexibility Act

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

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

Paperwork Reduction Act

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

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

Assessment of Federal Regulations and Policies on Families

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

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

Executive Order 13132

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

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

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[[Page 26399]]

List of Subjects

12 CFR Part 746

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

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

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

PART 746--APPEALS PROCEDURES

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

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

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

Subpart A--Procedures for Appealing Material Supervisory 
Determinations

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


Sec.  746.101   Authority, Purpose, and Scope.

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


Sec.  746.102   Definitions.

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


Sec.  746.103   Material Supervisory Determination.

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


Sec.  746.104   General Provisions.

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

[[Page 26400]]

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


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

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


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

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


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

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

[[Page 26401]]

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


Sec.  746.108   Composition of Supervisory Review Committee.

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

[[Page 26402]]

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


Sec.  746.109   Procedures for Appealing to the NCUA Board.

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


Sec.  746.110   Administration of the Appeal.

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


Sec.  746.111   Oral Hearing.

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

[[Page 26403]]

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


Sec.  746.112   Retaliation Prohibited.

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


Sec.  746.113   Coordination with State Supervisory Authority.

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

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



                                                                        Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                                     26391

                                                 NCUA’s Office of General Counsel. The                   Supervisory Review Committee (SRC) to                  I. Background
                                                 Board shall maintain the confidentiality                enhance due process and to be more
                                                                                                                                                                   Section 309(a) of the Riegle
                                                 of any information or materials                         consistent with the practices of the
                                                                                                                                                                Community Development and
                                                 submitted or otherwise obtained in the                  federal banking agencies. The proposed
                                                                                                                                                                Regulatory Improvement Act of 1994
                                                 course of the procedures outlined                       rule would expand the number of
                                                                                                                                                                (Riegle Act) 1 required the NCUA and
                                                 herein, subject to applicable law and                   supervisory determinations appealable
                                                                                                                                                                the federal banking agencies to establish
                                                 regulations.                                            to the SRC and provide credit unions
                                                                                                                                                                independent intra-agency appellate
                                                   (f) Conclusion of the oral hearing. The               with the opportunity for additional
                                                                                                                                                                processes to review material supervisory
                                                 Board shall take the oral presentations                 review by the Director of the Office of
                                                                                                                                                                determinations.2 The Riegle Act also
                                                 under advisement. The Board shall                       Examinations and Insurance (E&I). The
                                                                                                                                                                required the NCUA and the federal
                                                 render its decision on the appeal in                    Board proposes to codify these
                                                                                                                                                                banking agencies to ensure that appeals
                                                 accordance with § 746.206.                              procedures of our regulations.
                                                                                                                                                                of material supervisory determinations
                                                 PART 747—ADMINISTRATIVE                                 DATES: Comments must be received on                    are heard and decided expeditiously
                                                 ACTIONS, ADJUDICATIVE HEARINGS,                         or before August 7, 2017.                              and that appropriate safeguards exist for
                                                 RULES OF PRACTICE AND                                   ADDRESSES:   You may submit comments                   protecting appellants from retaliation by
                                                 PROCEDURE, AND INVESTIGATIONS                           by any of the following methods (Please                agency examiners.3
                                                                                                         send comments by one method only):                        On November 17, 1994, the Board
                                                 ■ 30. The authority citation for part 747                                                                      published proposed Interpretive Ruling
                                                 continues to read as follows:                              • Federal eRulemaking Portal: http://
                                                                                                                                                                and Policy Statement (IRPS) 94–2
                                                                                                         www.regulations.gov. Follow the
                                                   Authority: 12 U.S.C. 1766, 1782, 1784,                                                                       ‘‘Guidelines for the Supervisory Review
                                                                                                         instructions for submitting comments.
                                                 1785, 1786, 1787, 1790a, 1790d; 15 U.S.C.                                                                      Committee’’ in the Federal Register and
                                                 1639e; 42 U.S.C. 4012a; Pub. L. 101–410;                   • NCUA Web site: http://                            solicited public comment.4 The Board
                                                 Pub. L. 104–134; Pub. L. 109–351; Pub. L.               www.ncua.gov/Legal/Regs/Pages/                         proposed to establish a committee of
                                                 114–74.                                                 PropRegs.aspx. Follow the instructions                 five regular members consisting of
                                                                                                         for submitting comments.                               NCUA’s Executive Director, General
                                                 ■ 31. Remove and reserve subpart J of
                                                 part 747.                                                  • Email: Address to regcomments@                    Counsel, Director of E&I, a regional
                                                                                                         ncua.gov. Include ‘‘[Your name]—                       director, and one additional senior or
                                                 PART 750—GOLDEN PARACHUTE                               Comments on Supervisory Review                         Board staff member. The regional
                                                 AND INDEMNIFICATION PAYMENTS                            Committee; Proposed Procedures for                     director was to be selected on a rotating
                                                                                                         Appealing Material Supervisory                         basis every two years and an alternate
                                                 ■ 32. The authority citation for part 750               Determinations’’ in the email subject                  regional director was to be designated to
                                                 continues to read as follows:                           line.                                                  consider matters arising in the regular
                                                     Authority: 12 U.S.C. 1786(t).                          • Fax: (703) 518–6319. Use the                      regional director member’s region. The
                                                 ■ 33. Revise § 750.6(b) to read as                      subject line described above for email.                Executive Director was to serve as chair.
                                                 follows:                                                   • Mail: Address to Gerard Poliquin,                 The jurisdiction of the SRC was to be
                                                                                                         Secretary of the Board, National Credit                limited to matters specifically listed as
                                                 § 750.6    Filing instructions; appeal.                                                                        material supervisory determinations in
                                                                                                         Union Administration, 1775 Duke
                                                 *      *     *     *     *                              Street, Alexandria, Virginia 22314–                    the Riegle Act.5
                                                    (b) A FICU whose request for approval                3428.                                                     After receiving and considering
                                                 by NCUA, in accordance with paragraph                                                                          public comment, the Board adopted an
                                                                                                            • Hand Delivery/Courier: Same as
                                                 (a) of this section, has been denied may                                                                       IRPS and published it in the Federal
                                                                                                         mail address.
                                                 seek reconsideration of the request                                                                            Register on March 20, 1995 as IRPS 95–
                                                 and/or file an appeal with the NCUA                        Public Inspection: You can view all                 1.6 In the final IRPS, the Board reduced
                                                 Board in accordance with the                            public comments on NCUA’s Web site                     the size of the SRC from five members
                                                 procedures set forth in subpart B to part               at http://www.ncua.gov/Legal/Regs/                     to three, with each member appointed
                                                 746 of this chapter.                                    Pages/PropRegs.aspx as submitted,                      by the NCUA Chairman. The
                                                                                                         except for those we cannot post for                    jurisdiction of the SRC was limited to
                                                 [FR Doc. 2017–11319 Filed 6–6–17; 8:45 am]
                                                                                                         technical reasons. NCUA will not edit or               matters specifically listed as material
                                                 BILLING CODE 7535–01–P
                                                                                                         remove any identifying or contact                      supervisory determinations in the Riegle
                                                                                                         information from the public comments                   Act, although the Board reserved the
                                                                                                         submitted. You may inspect paper                       right to expand the number of
                                                 NATIONAL CREDIT UNION
                                                                                                         copies of comments in NCUA’s law                       supervisory determinations appealable
                                                 ADMINISTRATION
                                                                                                         library at 1775 Duke Street, Alexandria,               to the SRC after gaining some
                                                 12 CFR Part 746                                         Virginia 22314, by appointment                         experience with the process. The final
                                                                                                         weekdays between 9 a.m. and 3 p.m. To                  IRPS also clarified that material
                                                 RIN 3133–AE69                                           make an appointment, call (703) 518–                   ‘‘examination ratings’’ included
                                                                                                         6546 or send an email to OGCMail@                      composite CAMEL ratings of 3, 4, or 5,
                                                 Supervisory Review Committee;
                                                                                                         ncua.gov.
                                                 Procedures for Appealing Material
                                                 Supervisory Determinations                              FOR FURTHER INFORMATION CONTACT:                         1 Public  Law 103–325, 108 Stat. 2160 (1994).
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                                                                                                                                                                  2 12  U.S.C. 4806(a).
                                                                                                         Michael J. McKenna, General Counsel,
                                                 AGENCY: National Credit Union                                                                                    3 Id. at 4806(b)(1)–(2).
                                                                                                         Frank S. Kressman, Associate General
                                                 Administration (NCUA).                                                                                           4 59 FR 59437 (Nov. 17, 1994).
                                                                                                         Counsel, or Benjamin M. Litchfield,                      5 The Riegle Act defines ‘‘material supervisory
                                                 ACTION: Notice of proposed rulemaking.                  Staff Attorney, National Credit Union                  determination’’ to include determinations relating
                                                 SUMMARY:  The NCUA Board (Board)                        Administration, 1775 Duke Street,                      to: (1) Examination ratings; (2) the adequacy of loan
                                                 proposes to amend its procedures for                    Alexandria, Virginia 22314–3428 or                     loss reserve provisions; and (3) classifications on
                                                                                                         telephone: (703) 518–6540.                             loans that are significant to a federally insured
                                                 appealing material supervisory                                                                                 credit union. 12 U.S.C. 4806(f)(1)(A)(i)–(iii).
                                                 determinations to the NCUA                              SUPPLEMENTARY INFORMATION:                               6 60 FR 14795 (Mar. 20, 1995).




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                                                 26392                   Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules

                                                 as well as component ratings of those                   A. Expansion of Supervisory Review                     C. Composition of the Supervisory
                                                 composite ratings.                                      Committee Jurisdiction                                 Review Committee
                                                    The Board revised the IRPS in 2002 to                  Based on NCUA’s experience in                           The proposed rule would restructure
                                                 expand the jurisdiction of the SRC to                   administering the current appellate                    the SRC by creating a rotating SRC pool
                                                 include decisions by a regional director                process, the Board believes that it would              of not less than eight individuals
                                                 to revoke a credit union’s authority                                                                           appointed by the NCUA Chairman from
                                                                                                         be efficient and beneficial if the SRC
                                                 under NCUA’s then Regulatory                                                                                   among NCUA’s senior staff in the
                                                                                                         appeals process is more transparent and
                                                 Flexibility Program (RegFlex).7 In 2011,                                                                       regional and central offices. The
                                                                                                         objective and if more material
                                                 the Board revised the IRPS again to                                                                            Secretary of the Board would serve as
                                                                                                         supervisory determinations are                         the permanent SRC Chairman and
                                                 expand the jurisdiction of the SRC to                   appealable to the SRC. The proposed
                                                 include denials of Technical Assistance                                                                        would select three SRC members from
                                                                                                         rule would, therefore, redefine the term               this SRC pool to serve as the SRC for a
                                                 Grant (TAG) reimbursements by the                       ‘‘material supervisory determination’’ to
                                                 Director of the Office of Small Credit                                                                         particular appeal. As the permanent
                                                                                                         include supervisory determinations that                SRC Chairman, the Secretary of the
                                                 Union Initiatives (OSCUI).8 This                        may affect the capital, earnings,
                                                 revision was published in the Federal                                                                          Board would also be a member of the
                                                                                                         operating flexibility, or that may                     SRC pool and be eligible to serve as a
                                                 Register as IRPS 11–1, ‘‘Supervisory                    otherwise affect the nature and level of               member of the SRC for a particular
                                                 Review Committee’’ on April 29, 2011.                   supervisory oversight of a federally                   appeal.10 The Special Counsel to the
                                                 The Board has not made material                         insured credit union (FICU). Certain                   General Counsel (Special Counsel)
                                                 changes to IRPS 11–1 since 2012, when                   exceptions would be made for material                  would serve as a permanent non-voting
                                                 it removed all references to RegFlex to                 supervisory determinations that are                    member of each SRC to advise each
                                                 reflect the elimination of that program.9               specifically excluded by the Riegle Act                committee on procedural and legal
                                                 II. Summary of Proposed Rule                            or where other appeals procedures exist.               matters.
                                                                                                                                                                   The SRC Chairman would not be
                                                   The proposed rule would: (1) Expand                   B. Addition of Optional Intermediate                   permitted to select SRC members from
                                                 the number of material supervisory                      Level of Review                                        the program office that rendered the
                                                 determinations appealable to the SRC;                                                                          material supervisory determination that
                                                                                                            The Board is also proposing to add an
                                                 (2) create an optional intermediate level                                                                      is the subject of the appeal to hear that
                                                                                                         optional intermediate level of review by
                                                 of review before an appeal is brought to                                                                       appeal. Likewise, in cases where the
                                                                                                         the Director of E&I, or his or her                     FICU requested review by the Director
                                                 the SRC; and (3) change the nature and                  designee, before a FICU appeals to the
                                                 composition of the SRC. The proposed                                                                           of E&I, staff from E&I would be
                                                                                                         SRC. A decision by the Director of E&I                 ineligible to serve as SRC members for
                                                 rule would be codified as Subpart A to                  would be made in writing with no
                                                 part 746. The Board is requesting                                                                              that appeal. The presence of two SRC
                                                                                                         opportunity for oral presentations from                members (physically, telephonically, or
                                                 comment on all aspects of this proposed                 either the petitioner or the program
                                                 rule.                                                                                                          by video conference) would be required
                                                                                                         office. The Director of E&I, in addition               as a quorum, and a majority of votes
                                                                                                         to his or her supervisory expertise,                   present would be required for action on
                                                    7 67 FR 19778 (Apr. 23, 2002) (revocation of

                                                 RegFlex authority).
                                                                                                         would have the ability to consult with                 an appeal.
                                                    8 76 FR 3674 (Jan. 20, 2011) (interim final rule);   the parties either jointly or separately
                                                                                                                                                                D. Summary Chart of Proposed SRC
                                                 76 FR 23871 (Apr. 29, 2011) (final rule).               before rendering a decision. If the FICU
                                                                                                                                                                Appeals Procedures
                                                    9 77 FR 32004 (Aug. 29, 2012). RegFlex permitted
                                                                                                         or program office is unsatisfied with the
                                                 some federal credit unions with advanced levels of      decision rendered by the Director of                     Under the proposed rule, an appeal to
                                                 net worth and consistently strong supervisory                                                                  the SRC would resemble the following
                                                 examination ratings to request exemptions, in           E&I, or his or her designee, either may
                                                 whole or in part, from certain NCUA regulations.        appeal that decision to the SRC. This                  decision tree:
                                                 See 66 FR 58655 (Nov. 23, 2001). The Board              optional level of review provides
                                                 eliminated this program in 2011, but made certain                                                                10 With the inclusion of the SRC Chairman, the

                                                 regulatory relief provisions previously available
                                                                                                         enhanced due process to FICUs that                     total number of NCUA senior staff in the SRC pool
                                                 under the program widely available to all federal       wish to use it.                                        will be not less than nine; eight or more of which
                                                 credit unions. See 77 FR 31981 (May 31, 2012).                                                                 would be appointed by the NCUA Chairman.
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                                                                        Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                            26393




                                                 III. Section by Section Analysis                        Act.11 The Board is also issuing this                   Petitioner
                                                                                                         proposed rule under its plenary
                                                 Part 746—Appeals Procedures                                                                                        The term ‘‘petitioner’’ refers to an
                                                                                                         regulatory authority in the Federal
                                                 Subpart A—Procedures for Appealing                      Credit Union Act.12                                     entity, including a program office,
                                                 Material Supervisory Determinations                                                                             requesting reconsideration or review, or
                                                                                                            This section also states the purpose                 filing an appeal pursuant to the
                                                    The Board is proposing to create                     and scope of the rule. The scope of the
                                                                                                                                                                 procedures set forth in this subpart. As
                                                 Subpart A to part 746 which would                       proposed rule is limited to appeals of
                                                                                                                                                                 detailed more fully below, FICUs must
                                                 contain a comprehensive set of                          ‘‘material supervisory determinations,’’
                                                                                                                                                                 first request reconsideration from the
                                                 procedures to govern the appeal of                      a term defined by the regulation, and
                                                                                                                                                                 appropriate program office and then
                                                 material supervisory determinations. In                 does not apply to appeals where the
                                                                                                                                                                 may request review from the Director of
                                                 a separate rulemaking issued together                   petitioner has been granted a right to a
                                                                                                                                                                 E&I. Either a FICU or a program office
                                                 with this proposed rule, the Board is                   hearing on the record or appeals
                                                                                                         governed by Subpart B to part 746.                      may appeal a partial or complete
                                                 proposing significant changes to the
                                                                                                                                                                 adverse decision by the Director of E&I,
                                                 administrative appeals process for
                                                                                                         Section 746.102           Definitions                   or his or her designee, to the SRC.
                                                 matters that are outside of the
                                                 jurisdiction of the SRC, which would be                                                                         Similarly, either a FICU or program
                                                                                                           In § 746.102, the Board proposes to                   office may appeal a partial or complete
                                                 contained in Subpart B to part 746.                     define certain terms. Unless defined, the               adverse decision by the SRC to the
                                                                                                         Board expects FICUs and other affected
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                                                 Section 746.101        Authority, Purpose,                                                                      Board. Recognizing that, depending on
                                                 and Scope                                               parties to interpret terms or phrases
                                                                                                                                                                 the procedural posture of a particular
                                                                                                         consistently with the general definitions
                                                    Proposed § 746.101 states the legal                                                                          appeal, the entity requesting review may
                                                                                                         in § 700.2 of NCUA’s regulations or,
                                                 authority for the Board to issue this                                                                           be either a FICU or a program office, the
                                                                                                         where not defined, according to their
                                                 proposed rule. As noted in the                                                                                  Board is proposing to adopt a uniform
                                                                                                         plain meaning.
                                                 Background section above, the Board is                                                                          term to describe all entities requesting
                                                 issuing this proposed rule pursuant to                    11 12
                                                                                                                                                                 agency action on a particular matter.
                                                                                                                   U.S.C. 4806(a).
                                                 its authority under § 309(a) of the Riegle
                                                                                                                                                                                                             EP07JN17.001</GPH>




                                                                                                           12 12   U.S.C. 1766(a), 1789(a)(11).



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                                                 26394                  Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules

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




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                                                                        Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                            26395

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


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                                                 26396                  Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules

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



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                                                                            Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                                      26397

                                                    In addition, expanding the number of                    interest, these individuals should not                 appeal, the petitioner may amend or
                                                 individuals eligible to serve on the SRC                   serve as members of the SRC pool.                      supplement the appeal in writing. The
                                                 enhances due process by eliminating the                                                                           respondent would then be permitted 15
                                                                                                            Section 746.109 Procedures for
                                                 potential for conflicts of interest. Having                                                                       calendar days to respond to any
                                                                                                            Appealing to the NCUA Board
                                                 a wider pool from which to draw when                                                                              supplemental filings.
                                                 selecting SRC members allows the SRC                          This section of the proposed rule
                                                                                                            describes the filings that must be made                Certain Actions Not Reviewable
                                                 Chairman to avoid conflicts of interest
                                                 by selecting SRC members without any                       with the Secretary of the Board in order                  Under the proposed rule, petitioners
                                                 direct ties to the program office that                     to appeal a decision by the SRC to the                 are permitted to request an appeal to the
                                                 rendered the material supervisory                          Board. It also addresses timing                        Board in all circumstances except
                                                 determination. Moreover, having                            requirements. A request for appeal must                denials of TAG reimbursements. As the
                                                 additional members in the SRC pool                         include a statement of facts on which                  Board explained in its rulemaking
                                                 means that the Board can expand the                        the appeal is based, a statement of the                regarding the Community Development
                                                 jurisdiction of the SRC, while still                       petitioner’s principal objections to the               Revolving Loan Fund, TAG
                                                 providing an expeditious process for a                     SRC’s decision, and, for FICUs, a                      reimbursements are subject to the
                                                 FICU to appeal a material supervisory                      certification that the FICU’s board of                 discretion of the Director of OSCUI and
                                                 determination.                                             directors has authorized the appeal to be              availability of funds.23 Therefore, such
                                                    Nevertheless, the Board continues to                    filed. The proposed rule cross references              determinations are not subject to
                                                 believe that regional directors and                        procedures set out in § 746.111 that                   administrative appeal to the Board.
                                                 associate regional directors should not                    must be followed to request an oral                    However, whether a FICU meets the
                                                 serve in the pool of individuals eligible                  hearing.                                               qualifications set forth in a Notice of
                                                 to serve on the SRC. The Riegle Act                        Granting an Appeal                                     Funding Opportunity, which is different
                                                 mandated NCUA to establish an                                                                                     from whether the FICU should be
                                                 ‘‘independent appellate process,’’ which                      Consistent with IRPS 11–1, as                       granted a TAG reimbursement, is
                                                 it defines as ‘‘a review by an agency                      amended by IRPS 12–1, appeals to the                   subject to administrative appeal to the
                                                 official who does not directly or                          Board would not be granted as a matter                 Board under separate procedures and
                                                 indirectly report to the agency official                   of right. Rather, at least one Board                   not through the SRC appeals process.
                                                 who made the material supervisory                          Member would be required to agree to
                                                 determination under review.’’ 21 This                      hear an appeal from a decision by the                  Section 746.110 Administration of the
                                                 reflects a clear Congressional intent to                   SRC within 20 calendar days from the                   Appeal
                                                 afford a FICU a separate and meaningful                    date the petitioner first filed the appeal                Proposed § 746.110 sets out the
                                                 appeal of a material supervisory                           with the Secretary of the Board. The                   standard procedures followed by the
                                                 determination. As the Board explained                      purpose of this provision is to reserve                Board upon receipt of a timely appeal.
                                                 in IRPS 95–1, allowing regional                            Board review for only those cases                      These proposed procedures are, in some
                                                 directors and associate regional                           involving significant issues of                        respects, a codification of informal
                                                 directors to serve as members of the SRC                   supervisory policy that cannot be                      practices that the Board currently
                                                 pool would place these individuals in                      addressed at the several lower appellate               follows when reviewing other types of
                                                 the untenable position of potentially                      levels provided by this rule or through                appeals that were not heard by the SRC.
                                                 reviewing material supervisory                             a request for reconsideration from the                 To date, the Board has only received
                                                 determinations made by their                               appropriate program office. At this                    one appeal of a decision by the SRC.
                                                 colleagues. While the Board does not                       stage, petitioners would have had the                     Proposed paragraph (b) requires the
                                                 believe that these individuals would be                    opportunity to obtain potentially three                Board to render a written decision
                                                 predisposed to support other regional                      levels of review (i.e., reconsideration                stating the reasons for the decision
                                                 directors or associate regional directors,                 from the program office, review by the                 within 90 calendar days, unless
                                                 the Board wishes to eliminate any                          Director of E&I or his or her designee,                extended by the Board, from the date of
                                                 perception that the SRC appeals process                    and appeal to the SRC). Therefore, the                 receipt of an appeal by the Secretary of
                                                 may be biased against FICUs.                               Board believes that limiting Board                     the Board. Such a decision would
                                                    Likewise, the Board continues to                        review to only certain matters is not                  constitute a final agency action
                                                 believe that the executive director,                       unfairly prejudicial. Furthermore, if a                permitting the petitioner to seek judicial
                                                 deputy executive director, policy                          request for an appeal is denied, the                   review in federal court under the APA.
                                                 advisors and chiefs of staff to Board                      decision of the SRC would be treated as                If the Board does not reach a decision
                                                 Members should not serve as members                        a final agency action permitting the                   within 90 calendar days, unless
                                                 of the SRC pool.22 These individuals                       petitioner to seek judicial review in                  otherwise extended, from the date of
                                                 serve in positions that report to and                      federal court under the Administrative                 receipt, then it would be treated as a
                                                 represent the interests of Board                           Procedure Act (APA).                                   denial. Building this deadline into the
                                                 Members. In order to ensure a separate                        If a request for an appeal is granted,              rule ensures that the Board has adequate
                                                 and meaningful final appeal to the                         the Board generally will decide the                    time to decide a matter on appeal while
                                                 Board, these individuals should not                        matter based solely on written                         avoiding any undue prejudice to
                                                 serve as members of the SRC pool.                          submissions by the parties. However, if                petitioners from unnecessary delays.
                                                 Likewise, the Board believes that                          a request for an appeal is granted with
                                                                                                                                                                   Section 746.111 Oral Hearing
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                                                 attorneys from the Office of General                       an oral hearing, the Secretary of the
                                                 Counsel should not serve as members of                     Board would notify the parties of the                    This section of the proposed rule sets
                                                 the SRC pool. These individuals are                        date and time where the appeal shall be                out the process for requesting and
                                                 responsible for providing legal advice to                  heard. As discussed in more detail                     conducting an oral hearing. The Board
                                                 NCUA including the SRC and the Board.                      below, an oral hearing may be either in                recognizes that, in some unusual cases,
                                                 In order to prevent any conflicts of                       person (including through counsel) or                  the opportunity to make an oral
                                                                                                            through video or teleconference.                       presentation in person (or through video
                                                   21 12   U.S.C. 4806(f)(2).                                  Within 15 calendar days from the date
                                                   22 See   IRPS 95–1.                                      the Secretary of the Board receives an                   23 76   FR 67583, 67586 (Nov. 11, 2011).



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                                                 26398                    Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules

                                                 or teleconference) is necessary or useful                 documents. The submission of written                   procedures and provides voluntary
                                                 to ensure a thorough understanding of                     evidence or witness testimony at the                   options for credit unions. Accordingly,
                                                 the issues in a case. Therefore, the                      oral hearing would not be permitted.                   NCUA certifies the rule will not have a
                                                 Board proposes to allow a FICU to make                    The petitioner would be given the                      significant economic impact on a
                                                 an oral presentation to the Board where                   opportunity to argue first, followed by a              substantial number of small credit
                                                 at least one Board Member agrees with                     representative of the opposing party.                  unions.
                                                 the petitioner that good cause exists for
                                                                                                           Section 746.112 Retaliation Prohibited                 Paperwork Reduction Act
                                                 holding an oral hearing. Individual
                                                 Board Members must act on such a                            The Riegle Act required the Board to
                                                                                                           appoint an official to handle any                        The Paperwork Reduction Act of 1995
                                                 request within 20 days of receiving a                                                                            (PRA) applies to rulemakings in which
                                                 request for an oral hearing.                              problems FICUs may have as a result of
                                                                                                           appealing a material supervisory                       an agency by rule creates a new
                                                 Request for Oral Hearing; Action on                       determination.26 NCUA policy prohibits                 paperwork burden on regulated entities
                                                 Request; Effect of Denial                                 any retaliation, abuse, or retribution by              or increases an existing burden.28 For
                                                    Paragraph (a) describes the process for                NCUA personnel against a FICU in this                  purposes of the PRA, a paperwork
                                                 requesting an oral hearing. The request                   regard. FICUs that believe they are                    burden may take the form of a reporting
                                                 must accompany the notice of appeal                       victims of impermissible retaliation                   or recordkeeping requirement, both
                                                 itself, set out in a separate document                    would be able to file complaints with                  referred to as information collections.
                                                 titled ‘‘Request for Oral Hearing.’’ The                  the NCUA Office of Inspector General,                  Information collected as part of a civil
                                                 petitioner would be required to show                      who will investigate such claims and                   action or administrative action,
                                                 good cause for holding an oral hearing,                   recommend appropriate action.                          investigation, or audit, however, is not
                                                 stating reasons why the case cannot be                                                                           considered an information collection for
                                                                                                           Section 746.113 Coordination With                      purposes of the PRA.
                                                 presented adequately with just written
                                                                                                           State Supervisory Authority
                                                 statements. Proposed paragraph (b)                                                                                 Proposed Subpart A to part 746
                                                 specifies that an oral hearing would be                     In the event that a material                         establishes procedures for appealing
                                                 scheduled provided at least one Board                     supervisory determination becomes the                  material supervisory determinations to
                                                 Member agrees to the oral hearing. The                    subject of a request for review by the                 the NCUA Supervisory Review
                                                 Secretary of the Board would notify the                   Director of E&I and is the joint product               Committee. Because the only paperwork
                                                 parties of the Board’s determination                      of NCUA and a state supervisory
                                                                                                                                                                  burden in this proposed rule relates to
                                                 regarding the request for an oral hearing.                authority (SSA), proposed § 746.113
                                                                                                                                                                  activities that are not considered to be
                                                 Proposed paragraph (c) specifies that, in                 requires the Director of E&I, or his or her
                                                                                                                                                                  information collections, NCUA has
                                                 the event the request does not receive                    designee, to promptly notify the SSA of
                                                                                                                                                                  determined that this rule is exempt from
                                                 the support of at least one Board                         the request for review, provide the SSA
                                                                                                           with a copy of the request and any other               the requirements of the PRA.29
                                                 Member, the appeal will proceed on the
                                                 basis of written submissions.                             related materials, solicit the SSA’s                   Assessment of Federal Regulations and
                                                                                                           views regarding the merits of the request              Policies on Families
                                                 Procedures for Oral Hearing—                              before making a determination, and
                                                 Appearances; Representation                               notify the SSA of the Director’s                         NCUA has determined that this rule
                                                    At an oral hearing, the petitioner                     determination.                                         will not affect family well-being within
                                                 would be permitted to be represented by                     In the event that an appeal is                       the meaning of § 654 of the Treasury
                                                 one or more representatives of its choice                 subsequently filed with the SRC, the                   and General Government
                                                 (but not more than two without prior                      SRC is required to notify the SSA of the               Appropriations Act, 1999.30
                                                 approval by the NCUA Chairman). This                      appeal, provide the SSA with a copy of
                                                                                                           the appeal and any other related                       Executive Order 13132
                                                 proposed paragraph recognizes the
                                                 general right granted in the APA for                      materials, solicit the SSA’s views                       Executive Order 13132 encourages
                                                 individuals appearing in person before                    regarding the merits of the appeal before              independent regulatory agencies to
                                                 an agency to be ‘‘accompanied,                            making a determination, and notify the                 consider the impact of their actions on
                                                 represented, and advised by counsel or,                   SSA of the SRC’s determination. Once                   state and local interests.31 NCUA, an
                                                 if permitted by the agency, by other                      the SRC issues a determination, any
                                                                                                                                                                  independent regulatory agency as
                                                 qualified representative[s].’’ 24 In                      other issues not addressed by the SRC
                                                                                                                                                                  defined in 44 U.S.C. 3502(5), voluntarily
                                                 general, courts have found the right to                   that may remain between the FICU and
                                                                                                                                                                  complies with the executive order to
                                                 counsel to be a fundamental aspect of                     the SSA would be left to those parties
                                                                                                                                                                  adhere to fundamental federalism
                                                 procedural due process in both informal                   to resolve. Similar procedures would be
                                                                                                                                                                  principles. The rule will not have
                                                 and formal agency adjudications.25                        followed for appeals to the Board.
                                                                                                                                                                  substantial direct effects on the states,
                                                 Conduct of Oral Hearing                                   IV. Regulatory Procedures                              on the relationship between the national
                                                                                                           Regulatory Flexibility Act                             government and the states, or on the
                                                   Proposed paragraph (d)(3) permits the                                                                          distribution of power and
                                                 use of presentations based on written                        The Regulatory Flexibility Act                      responsibilities among the various
                                                 evidence submitted as part of the appeal                  requires NCUA to prepare an analysis to                levels of government. NCUA has
                                                                                                           describe any significant economic                      therefore determined that this rule does
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                                                   24 5  U.S.C. 555(b).                                    impact a regulation may have on a                      not constitute a policy that has
                                                   25 See   Goldberg v. Kelly, 397 U.S. 254, 270 (1970)
                                                 (‘‘The right to be heard would be, in many cases,
                                                                                                           substantial number of small entities                   federalism implications for purposes of
                                                 of little avail if it did not comprehend the right to     (primarily those under $100 million in                 the executive order.
                                                 be heard by counsel. We do not say that counsel           assets).27 This rule has no economic
                                                 must be provided at the pre-termination hearing,          impact on small credit unions because                    28 44
                                                 but only that the recipient must be allowed to retain                                                                    U.S.C. 3507(d); 5 CFR 1320.
                                                 an attorney if he so desires. Counsel can help
                                                                                                           it only impacts internal NCUA                            29 44 U.S.C. 3518(c)(1)(B)(ii).
                                                                                                                                                                    30 Public Law 105–277, 654, 112 Stat. 2681, 2681–
                                                 delineate the issues, present factual contentions in
                                                                                                            26 12   U.S.C. 4806(d).                               581 (1998).
                                                 an orderly manner, conduct cross-examination, and
                                                 generally safeguard the interests of the recipient.’’).    27 5   U.S.C. 603(a).                                   31 64 FR 43255 (Aug. 4, 1999).




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                                                                        Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                            26399

                                                 List of Subjects                                          (c) Scope. This subpart applies to the                  (2) Determinations relating to the
                                                                                                         appeal of material supervisory                         adequacy of loan loss reserve
                                                 12 CFR Part 746
                                                                                                         determinations made by agency                          provisions;
                                                   Administrative practice and                           officials. This subpart does not apply to                 (3) Classifications of loans and other
                                                 procedure, Claims, Credit Unions,                       the appeal of determinations for which                 assets that are significant to a federally
                                                 Investigations.                                         an independent right to appeal exists                  insured credit union;
                                                   By the National Credit Union                          such as a decision to appoint a                           (4) Restitution orders pursuant to the
                                                 Administration Board on May 25, 2017.                   conservator or liquidating agent for a                 Truth in Lending Act (15 U.S.C. 1601 et
                                                 Gerard Poliquin,                                        federally insured credit union or to take              seq.) and its implementing regulation,
                                                 Secretary of the Board.                                 prompt corrective action pursuant to                   Regulation Z (12 CFR part 1026); and
                                                                                                         section 216 of the Federal Credit Union                   (5) Determinations on a waivers
                                                   For the reasons discussed above, the                  Act (12 U.S.C. 1790d) and part 702 of                  request or an application for additional
                                                 NCUA Board proposes to add Subpart A                    this chapter. This subpart also does not               authority where independent appeal
                                                 to 12 CFR part 746 as follows:                          apply to enforcement-related actions                   procedures have not been specified in
                                                 PART 746—APPEALS PROCEDURES                             and decisions, including determinations                other NCUA regulations.
                                                                                                         and the underlying facts and                              (b) Exclusions from Coverage. The
                                                 ■ 1. The authority citation for part 746                circumstances that form the basis of a                 term ‘‘material supervisory
                                                 reads as follows:                                       pending enforcement action.                            determination’’ does not include:
                                                     Authority: 12 U.S.C. 1766, 1787, and 1789.
                                                                                                                                                                   (1) Composite examination ratings of
                                                                                                         § 746.102    Definitions.                              1 or 2;
                                                 ■ 2. Add a new subpart A to read as                       For purposes of this subpart:                           (2) Component examination ratings
                                                 follows:                                                  Board means the NCUA Board.                          unless such ratings have a significant
                                                                                                           Committee means the Supervisory                      adverse effect on the nature and level of
                                                 Subpart A—Procedures for Appealing                      Review Committee.                                      supervisory oversight of a federally
                                                 Material Supervisory Determinations                       Director of the Office of Examination
                                                                                                                                                                insured credit union;
                                                                                                         and Insurance has the same meaning as                     (3) The scope and timing of
                                                 Sec.                                                    used in § 790.2 of this chapter but also
                                                 746.101 Authority, Purpose, and Scope.                                                                         supervisory contacts;
                                                 746.102 Definitions.
                                                                                                         includes individuals designated by the                    (4) Decisions to appoint a conservator
                                                 746.103 Material Supervisory                            Director of the Office of Examination                  or liquidating agent for a federally
                                                      Determinations.                                    and Insurance from among senior Office                 insured credit union;
                                                 746.104 General Provisions.                             of Examination and Insurance staff to                     (5) Decisions to take prompt
                                                 746.105 Procedures for Reconsideration                  handle requests for review by the                      corrective action pursuant to section
                                                      from the Appropriate Program Office.               Director of the Office of Examination
                                                 746.106 Procedures for Requesting Review                                                                       216 of the Federal Credit Union Act (12
                                                                                                         and Insurance pursuant to § 746.106 of                 U.S.C. 1790d) and part 702 of this
                                                      by the Director of the Office of                   this subpart.
                                                      Examination and Insurance.                                                                                chapter;
                                                                                                           Material Supervisory Determination is
                                                 746.107 Procedures for Appealing to the                                                                           (6) Enforcement-related actions and
                                                                                                         defined in § 746.103 of this subpart.
                                                      Supervisory Review Committee.
                                                                                                           Petitioner means an entity, including                decisions, including determinations and
                                                 746.108 Composition of Supervisory                                                                             the underlying facts and circumstances
                                                      Review Committee.                                  a program office, requesting
                                                                                                         reconsideration, review, or filing an                  that form the basis of a pending
                                                 746.109 Procedures for Appealing to the                                                                        enforcement action;
                                                      NCUA Board.                                        appeal pursuant to the procedures set
                                                 746.110 Administration of the Appeal.                   forth in this subpart.                                    (7) Preliminary examination
                                                 746.111 Oral Hearing.                                     Program Office means the office                      conclusions communicated to a
                                                 746.112 Retaliation Prohibited.                         within NCUA responsible for making a                   federally insured credit union before a
                                                 746.113 Coordination with State                         material supervisory determination.                    final exam report or other written
                                                      Supervisory Authority.                               Respondent means an entity,                          communication is issued;
                                                                                                         including a program office, defending                     (8) Formal and informal rulemakings
                                                 § 746.101    Authority, Purpose, and Scope.                                                                    pursuant to the Administrative
                                                                                                         against an action by a petitioner.
                                                   (a) Authority. This subpart is issued                   Special Counsel to the General                       Procedure Act (5 U.S.C. 500 et seq.);
                                                 pursuant to section 309 of the Riegle                   Counsel or Special Counsel means an                       (9) Requests for NCUA records or
                                                 Community Development and                               individual within the Office of General                information under the Freedom of
                                                 Regulatory Improvement Act of 1994 (12                  Counsel providing legal or procedural                  Information Act (5 U.S.C. 552) and part
                                                 U.S.C. 4806), which requires the NCUA                   advice to the Committee in accordance                  792 of this chapter and the submission
                                                 Board to establish an independent intra-                with the procedures set forth in this                  of information to NCUA that is governed
                                                 agency process to review appeals of                     subpart.                                               by this statute and this regulation; and
                                                 material supervisory determinations                                                                               (10) Determinations for which other
                                                 made by agency officials, and sections                  § 746.103 Material Supervisory                         appeals procedures exist.
                                                 120 and 209 of the Federal Credit Union                 Determination.
                                                 Act (12 U.S.C. 1766, 1789).                                (a) Material Supervisory                            § 746.104   General Provisions.
                                                   (b) Purpose. The purpose of this                      Determination. The term ‘‘material                        (a) Standard of Review. The burden of
                                                 subpart is to establish an expeditious                  supervisory determination’’ means a                    showing an error in an appealed
                                                 review process for federally insured
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                                                                                                         written decision by a program office that              determination shall rest solely with the
                                                 credit unions to appeal material                        may significantly affect the capital,                  petitioner. Review shall be de novo.
                                                 supervisory determinations to an                        earnings, operating flexibility, or that                  (b) Dismissal and Withdrawal. Any
                                                 independent supervisory panel and, if                   may otherwise affect the nature and                    appeal under this subpart may be
                                                 applicable, to the NCUA Board. This                     level of supervisory oversight of a                    dismissed by written notice if it is not
                                                 subpart is also intended to establish                   federally insured credit union. The term               timely filed; if the basis for the appeal
                                                 appropriate safeguards for protecting                   includes, but is not limited to:                       is not discernable; if the petitioner asks
                                                 appellants from retaliation by agency                      (1) Composite examination ratings of                to withdraw the request in writing; if
                                                 officials.                                              3, 4, or 5;                                            any party fails to provide additional


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                                                 26400                  Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules

                                                 information requested pursuant to any                   provided to the appropriate program                       (4) Any other evidence relied upon by
                                                 authority granted in this subpart; if any               office making the material supervisory                 the federally insured credit union that
                                                 party engages in bad faith; or for reasons              determination.                                         was not previously provided to the
                                                 deemed appropriate by the reviewing                        (c) Decision. Within 30 calendar days               appropriate program office making the
                                                 authority.                                              after receiving a request for                          material supervisory determination; and
                                                   (c) Discovery. No provision of this                   reconsideration, the appropriate                          (5) A certification that the board of
                                                 subpart is intended to create any right                 program office shall issue a written                   directors of the federally insured credit
                                                 to discovery or similar process.                        decision, stating the reasons for the                  union has authorized the request for
                                                   (d) Supervisory or Enforcement                        decision, and provide written notice of                review to be filed.
                                                 Actions Not Affected. No provision of                   the right to file a request for review by                 (c) Conduct of Review. Review of a
                                                 this subpart is intended to affect, delay,              the Director of the Office of Examination              material supervisory determination
                                                 or impede any formal or informal                        and Insurance pursuant to § 746.106 or                 shall be based on the written
                                                 supervisory or enforcement action in                    file an appeal with the Committee                      submissions provided under paragraph
                                                 progress or affect NCUA’s authority to                  pursuant to § 746.107. If a written                    (b) of this section. The Director of the
                                                 take any supervisory or enforcement                     decision is not issued within 30                       Office of Examination and Insurance
                                                 action against a federally insured credit               calendar days, the request for                         may request additional information
                                                 union.                                                  reconsideration will be deemed to have                 from the appropriate program office or
                                                   (e) Additional Authority and Waiver                   been denied.                                           the federally insured credit union
                                                 Requests During the Pendency of an                         (d) Subsequent Requests for                         within 15 calendar days after the
                                                 Appeal. A program office will not                       Reconsideration. Any subsequent                        Secretary of the Board receives a request
                                                 consider a waiver request or an                         request for reconsideration following an               for review by the Director of the Office
                                                 application for additional authority that               initial request made pursuant to this                  of Examination and Insurance. The
                                                 could be affected by the outcome of an                  section will be treated as a request for               relevant party must submit the
                                                 appeal of a material supervisory                        review by the Director of the Office of                requested information to the Director of
                                                 determination unless specifically                       Examination and Insurance pursuant to                  the Office of Examination and Insurance
                                                 requested by the federally insured credit               § 746.106 or an appeal to the Committee                within 15 calendar days after receiving
                                                 union appealing the material                            pursuant to § 746.107 as determined by                 such request for additional information.
                                                 supervisory determination. Any                          the Secretary of the Board after                       The Director of the Office of
                                                 deadline for a program office to decide                 consultation with the federally insured                Examination and Insurance may consult
                                                 a waiver request or an application for                  credit union.                                          with the parties jointly or separately
                                                 additional authority set forth in any part                                                                     before rendering a decision and may
                                                 of this chapter shall be suspended until                § 746.106 Procedures for Requesting                    solicit input from any other pertinent
                                                 the federally insured credit union                      Review by the Director of Office of                    program office as necessary.
                                                 appealing a material supervisory                        Examination and Insurance.                                (d) Decision. Within 30 calendar days
                                                 determination has exhausted its                            (a) Request for Review. Prior to filing             after the Secretary of the Board receives
                                                 administrative remedies under this                      an appeal with the Committee pursuant                  a request for review, the Director of the
                                                 subpart or may no longer appeal the                     to § 746.107, but after receiving a                    Office of Examination and Insurance
                                                 material supervisory determination,                     written decision by the appropriate                    shall issue a written decision, stating
                                                 whichever is later.                                     program office in response to a request                the reasons for the decision, and
                                                                                                         for reconsideration pursuant to                        provide written notice of the right to file
                                                 § 746.105 Procedures for Reconsideration                                                                       an appeal with the Committee pursuant
                                                 From the Appropriate Program Office.
                                                                                                         § 746.105, a federally insured credit
                                                                                                         union may make a written request for                   to § 746.107. The 30 calendar day
                                                   (a) Reconsideration. A federally                      review by the Director of the Office of                deadline is extended by the time period
                                                 insured credit union must make a                        Examination and Insurance of the                       during which the Director of the Office
                                                 written request for reconsideration from                program office’s material supervisory                  of Examination and Insurance is
                                                 the appropriate program office prior to                 determination. Such a request must be                  gathering additional information. If a
                                                 requesting review by the Director of the                made within 30 calendar days after a                   written decision is not issued within 30
                                                 Office of Examination and Insurance                     final decision on reconsideration is                   calendar days, as extended by
                                                 pursuant to § 746.106 or filing an appeal               made by the appropriate program office.                additional time during which the
                                                 with the Committee pursuant to                          A request for review must be in writing                information is being gathered, the
                                                 § 746.107. Such a request must be made                  and filed with the Secretary of the                    request for review will be deemed to
                                                 within 30 calendar days after receiving                 Board, National Credit Union                           have been denied.
                                                 an examination report containing a                      Administration, 1775 Duke Street,                         (e) Subsequent Requests for Review.
                                                 material supervisory determination or                   Alexandria, VA 22314–3428.                             No party may request reconsideration of
                                                 other official written communication of                                                                        the decision rendered by the Director of
                                                                                                            (b) Content of Request. Any request
                                                 a material supervisory determination. A                                                                        the Office of Examination and
                                                                                                         for review by a federally insured credit
                                                 request for reconsideration must be in                                                                         Insurance. Any subsequent request for
                                                                                                         union must include:
                                                 writing and filed with the appropriate                                                                         review following the rendering of a
                                                 program office.                                            (1) A statement that the federally
                                                                                                         insured credit union is requesting                     decision by the Director of the Office of
                                                   (b) Content of Request. Any request                                                                          Examination and Insurance will be
                                                                                                         review by the Director of the Office of
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                                                 for reconsideration must include:                                                                              treated as an appeal to the Committee.
                                                    (1) A statement of the facts on which                Examination and Insurance;
                                                 the request for reconsideration is based;                  (2) A statement of the facts on which               § 746.107 Procedures for Appealing to the
                                                    (2) A statement of the basis for the                 the request for review is based;                       Supervisory Review Committee.
                                                 material supervisory determination to                      (3) A statement of the basis for the                  (a) Request for Appeal. After receiving
                                                 which the petitioner objects and the                    material supervisory determination to                  a written decision by the appropriate
                                                 alleged error in such determination; and                which the federally insured credit union               program office in response to a request
                                                    (3) Any other evidence relied upon by                objects and the alleged error in such                  for reconsideration pursuant to
                                                 the petitioner that was not previously                  determination;                                         § 746.105, a petitioner may file an


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                                                                        Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                             26401

                                                 appeal with the Committee. Such an                      appearance identifying the individual(s)               § 746.108 Composition of Supervisory
                                                 appeal must be filed within 30 calendar                 who will be representing them in the                   Review Committee.
                                                 days after receiving a written decision                 oral presentation. The federally insured                  (a) Formation and Composition of
                                                 by the appropriate program office on                    credit union shall designate not more                  Committee Pool. The NCUA Chairman
                                                 reconsideration or, if the petitioner                   than two officers, employees, or other                 shall select not less than eight members
                                                 requests review by the Director of the                  representatives including counsel,                     from among senior staff in the regional
                                                 Office of Examination and Insurance                     unless authorized by the Committee.                    offices, the Office of the Executive
                                                 pursuant to § 746.106, within 30                        The program office shall designate not                 Director, the Office of Examination and
                                                 calendar days after a final decision is                 more than two individuals, one of                      Insurance, the Office of National
                                                 made by the Director of the Office of                   whom may be an enforcement attorney                    Examination and Supervision, the
                                                 Examination and Insurance. An appeal                    from NCUA’s Office of General Counsel,                 Office of Small Credit Union Initiatives,
                                                 must be in writing and filed with the                   unless authorized by the Committee.                    and the Office of Consumer Financial
                                                 Secretary of the Board, National Credit                    (d) Decision. Within 30 calendar days               Protection and Access to serve along
                                                 Union Administration, 1775 Duke                         after the oral presentation of the appeal              with the Committee Chairman as a
                                                 Street, Alexandria, VA 22314–3428.                      to the Committee, the Committee shall                  Committee pool from which the
                                                    (b) Content of Appeal. Any appeal                    issue a decision in writing, stating the               Committee Chairman may select
                                                 must include:                                           reasons for the decision, and provide                  Committee members. None of the
                                                    (1) A statement that the petitioner is               the petitioner with written notice of the              members appointed by the NCUA
                                                 filing an appeal with the Committee;                    right to file an appeal with the NCUA                  Chairman shall also serve as a regional
                                                    (2) A statement of the facts on which                Board (if applicable). If a federally                  director, associate regional director,
                                                 the appeal is based;                                    insured credit union has requested that                executive director, deputy executive
                                                    (3) A statement of the basis for the                 an appeal be entirely based on the                     director, general counsel, or a senior
                                                 determination to which the petitioner                   written record, the Committee shall                    policy advisor or chief of staff to a Board
                                                 objects and the alleged error in such                   issue a decision within 30 calendar days               Member.
                                                 determination;                                          from the date of receipt of an appeal by                  (b) Term of Office for Members of
                                                    (4) Any other evidence relied upon by                the Secretary of the Board. The 30                     Committee Pool. Each member of the
                                                 the petitioner that was not previously                  calendar day deadline to decide an                     Committee pool shall serve for a one
                                                 provided to the appropriate program                     appeal based entirely on the written                   year term and may be reappointed by
                                                 office or, if applicable, the Director of               record is extended by any time period                  the NCUA Chairman for additional
                                                 the Office of Examination and                           during which the Committee is                          terms.
                                                 Insurance; and                                                                                                    (c) Designation and Role of
                                                                                                         gathering additional information
                                                    (5) For federally insured credit                                                                            Committee Chairman. The Secretary of
                                                                                                         pursuant to paragraph (c)(1) of this
                                                 unions, a certification that its board of                                                                      the Board shall serve as permanent
                                                                                                         section.
                                                 directors has authorized the appeal to be                                                                      Committee Chairman. The Committee
                                                 filed.                                                     (e) Publication. The Committee shall                Chairman shall be responsible for
                                                    (c) Conduct of Appeal. The following                 publish its decisions on NCUA’s Web                    designating three Committee members
                                                 procedures shall govern the conduct of                  site with appropriate redactions to                    (one of whom may be the Committee
                                                 an appeal to the Committee:                             protect confidential or exempt                         Chairman) from among the Committee
                                                    (1) Submission of Written Materials.                 information. In cases where redaction is               pool to hear a particular appeal.
                                                 The Committee may request additional                    insufficient to prevent improper                          (d) Selection Criteria. When selecting
                                                 information from either of the parties                  disclosure, published decisions may be                 Committee members to hear an appeal
                                                 within 15 calendar days after the filing                presented in summary form. Published                   pursuant to paragraph (c), the
                                                 of an appeal. The parties must submit                   decisions may be cited as precedent in                 Committee Chairman shall consider any
                                                 the requested information to the                        appeals to the Committee.                              real or apparent conflicts of interest that
                                                 Committee within 15 calendar days after                    (f) Consultation With Office of                     may impact the objectivity of the
                                                 receiving a request for additional                      Examination and Insurance or Office of                 Committee member as well as that
                                                 information.                                            General Counsel Required. If an appeal                 individual’s experience with the subject
                                                    (2) Oral Hearing; Duration; Location.                involves the interpretation of material                matter of the appeal.
                                                 Except where a federally insured credit                 supervisory policy or generally accepted                  (e) Interested Staff Ineligible.
                                                 union, as either petitioner or                          accounting principles, the Committee                   Members of the Committee pool from
                                                 respondent, has requested that an                       shall notify the Director of the Office of             the program office that made the
                                                 appeal be based entirely on the written                 Examination and Insurance of the                       material supervisory determination that
                                                 record, an appeal shall also consist of                 appeal and solicit input from the Office               is the subject of the appeal are ineligible
                                                 oral presentations to the Committee at                  of Examination and Insurance. If an                    to serve on the Committee for that
                                                 NCUA headquarters. The introduction                     appeal involves the interpretation of                  appeal. Members of the Committee pool
                                                 of written evidence or witness                          legal requirements, including NCUA’s                   from the Office of Examination and
                                                 testimony may also be permitted at the                  regulations, the Committee shall notify                Insurance are ineligible to serve on the
                                                 oral hearing. The petitioner shall argue                the General Counsel of the appeal and                  Committee for appeals where the
                                                 first. Each side shall be allotted a                    solicit input from the Office of General               petitioner previously requested review
                                                 specified and equal amount of time for                  Counsel.                                               by the Director of the Office of
                                                                                                            (g) Supplemental Procedures
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                                                 its presentation, of which a portion may                                                                       Examination and Insurance pursuant to
                                                 be reserved for purposes of rebuttal.                   Authorized. In addition to the                         § 746.106.
                                                 This time limit shall be set by the                     procedures contained in this subpart,                     (f) Role of the Special Counsel. The
                                                 Committee and will be based on the                      the Committee Chairman may adopt                       Special Counsel to the General Counsel
                                                 complexity of the appeal. Committee                     supplemental procedures governing the                  shall serve as a permanent nonvoting
                                                 members may ask questions of any                        operations of the Committee, order that                member of the Committee to advise on
                                                 individual appearing before it.                         material be kept confidential, or                      procedural and legal matters.
                                                    (3) Appearances; Representation. The                 consolidate appeals that present similar                  (g) Quorum; Meetings. A quorum of
                                                 parties shall submit a notice of                        issues of law or fact.                                 two Committee members (excluding the


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                                                 26402                  Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules

                                                 Special Counsel) shall be present at                    petitioner may request an opportunity to               the Secretary of the Board to serve
                                                 each Committee meeting and a majority                   appear before the Board to make an oral                notice of the Board’s determination in
                                                 vote of a quorum is required for an                     presentation in support of the appeal.                 writing to the parties. A request for oral
                                                 action on an appeal. Meetings of the                                                                           hearing shall be granted with the
                                                 Committee will not be open to the                       § 746.110    Administration of the Appeal.             approval of any Board Member within
                                                 public.                                                    (a) Conduct of Appeal. Except as                    20 days of receiving a request for an oral
                                                                                                         otherwise provided in § 746.111, the                   hearing.
                                                 § 746.109 Procedures for Appealing to the               following procedures shall govern the                     (c) Effect of Denial. In the event a
                                                 NCUA Board.                                             conduct of an appeal to the Board:                     request for an oral hearing is denied, the
                                                    (a) Request for Appeal. A petitioner                    (1) Review Based on Written Record.                 appeal shall be reviewed by the Board
                                                 may file an appeal with the Board                       The appeal of a material supervisory                   on the basis of the written record.
                                                 challenging a decision by the Committee                 determination shall be entirely based on                  (d) Procedures for Oral Hearing. The
                                                 within 30 calendar days after receiving                 the written record.                                    following procedures shall govern the
                                                 that decision. An appeal must be in                        (2) Submission of Written Materials.                conduct of any oral hearing:
                                                 writing and filed with the Secretary of                 The Board or the Special Counsel to the                   (1) Scheduling of Oral Hearing;
                                                 the Board, National Credit Union                        General Counsel may request additional                 Location. The Secretary of the Board
                                                 Administration, 1775 Duke Street,                       information to be provided in writing                  shall notify the parties of the date and
                                                 Alexandria, VA 22314–3428.                              from either of the parties within 15                   time for the oral hearing, making sure to
                                                    (b) Granting an Appeal. At least one                 calendar days after the filing of an                   provide reasonable lead time and
                                                 Board Member must agree to consider                     appeal, any amendments or                              schedule accommodations. The oral
                                                 an appeal from a decision by the                        supplementary information to the                       hearing will be held at NCUA
                                                 Committee. If a request for an oral                     appeal documents by the petitioner, or                 headquarters; provided, however, that
                                                 hearing pursuant to § 746.111 is granted,               any responsive materials by the                        on its own initiative or at the request of
                                                 the Secretary of the Board will notify                  respondent, whichever is later. The                    the petitioner, the NCUA Chairman may
                                                 the parties of the time and location                    parties must submit the requested                      in his or her sole discretion allow for an
                                                 where the oral hearing shall be heard.                  information to the Board or the Special                oral hearing to be conducted via
                                                 Except in unusual circumstances, any                    Counsel within 15 calendar days of                     teleconference or video conference
                                                 appeal shall be held at NCUA                            receiving a request for additional                     facilities.
                                                 headquarters. If at least one Board                     information.                                              (2) Appearances; Representation. The
                                                 Member does not agree to consider an                       (b) Decision. The Board shall issue a               parties shall submit a notice of
                                                 appeal from a decision by the                           decision within 90 calendar days,                      appearance identifying the individual(s)
                                                 Committee within 20 days of receiving                   unless there is an oral hearing, from the              who will be representing them in the
                                                 a request, the request will be deemed to                date of receipt of an appeal by the                    oral presentation. The federally insured
                                                 have been denied.                                       Secretary of the Board. The decision by                credit union shall designate not more
                                                    (c) Failure to File a Timely Appeal. A               the Board shall be in writing, stating the             than two officers, employees, or other
                                                 petitioner that fails to file an appeal                 reasons for the decision, and shall                    representatives including counsel,
                                                 within the specified 30-day period shall                constitute a final agency action for                   unless authorized by the NCUA
                                                 be deemed to have waived all claims                     purposes of chapter 7 of title 5 of the                Chairman. The program office shall
                                                 pertaining to the matters in issue.                     United States Code. Failure by the                     designate not more than two individuals
                                                    (d) Certain Actions Not Reviewable.                  Board to issue a decision on an appeal                 one of whom may be an enforcement
                                                 Notwithstanding any other provision of                  within the 90-day period, unless there is              attorney from NCUA’s Office of General
                                                 this subpart, Committee decisions on                    an oral hearing, shall be deemed to be                 Counsel, unless authorized by the
                                                 the denial of a technical assistance grant              a denial of the appeal.                                NCUA Chairman.
                                                 reimbursement are final decisions of                       (c) Publication. The Board shall                       (3) Conduct of Oral Hearing. The oral
                                                 NCUA and may not be appealed to the                     publish its decisions on NCUA’s Web                    hearing shall consist entirely of oral
                                                 Board.                                                  site with appropriate redactions to                    presentations. The introduction of
                                                    (e) Content of Appeal. Any request for               protect confidential or exempt                         written evidence or witness testimony
                                                 appeal must include:                                    information. In cases where redaction is               shall not be permitted at the oral
                                                    (1) A statement of the facts on which                insufficient to prevent improper                       hearing. The petitioner shall argue first.
                                                 the appeal is based;                                    disclosure, published decisions may be                 Each side shall be allotted a specified
                                                    (2) A statement of the basis for the                 presented in summary form. Published                   and equal amount of time for its
                                                 determination to which the petitioner                   decisions may be cited as precedent.                   presentation, of which a portion may be
                                                 objects and the alleged error in such                                                                          reserved for purposes of rebuttal. This
                                                 determination; and                                      § 746.111    Oral Hearing.                             time limit shall be set by the Board and
                                                    (3) For federally insured credit                        (a) Request for Oral Hearing. The                   will be based on the complexity of the
                                                 unions, a certification that its board of               petitioner may request to appear before                appeal. Members of the Board may ask
                                                 directors has authorized the appeal to be               the Board to make an oral presentation                 questions of any individual appearing
                                                 filed.                                                  in support of the appeal. The request                  before the Board.
                                                    (f) Amending or Supplementing the                    must be submitted with the initial                        (4) Transcript. The oral hearing shall
                                                 Appeal. The petitioner may amend or                     appeal documents and should be in the                  be on the record and transcribed by a
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                                                 supplement the appeal in writing within                 form of a separate written document                    stenographer, who will prepare a
                                                 15 calendar days from the date the                      titled ‘‘Request for Oral Hearing.’’ The               transcript of the proceedings. The
                                                 Secretary of the Board receives an                      request must show good cause for an                    stenographer will make the transcript
                                                 appeal. If the petitioner amends or                     oral presentation and state reasons why                available to the federally insured credit
                                                 supplements the appeal, the respondent                  the appeal cannot be presented                         union upon payment of the cost thereof.
                                                 will be permitted to file responsive                    adequately in writing.                                    (e) Confidentiality. An oral hearing as
                                                 materials within 15 calendar days.                         (b) Action on the Request. The Board                provided for herein constitutes a
                                                    (g) Request for Oral Hearing. In                     shall determine whether to grant the                   meeting of the Board within the
                                                 accordance with § 746.111, the                          request for oral hearing and shall direct              meaning of the Government in the


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                                                                        Federal Register / Vol. 82, No. 108 / Wednesday, June 7, 2017 / Proposed Rules                                            26403

                                                 Sunshine Act (5 U.S.C. 552b). The                       the Office of Examination and Insurance                DEPARTMENT OF TRANSPORTATION
                                                 Chairman shall preside over the conduct                 will promptly notify the appropriate
                                                 of the oral hearing. The meeting will be                state supervisory authority of the                     Federal Aviation Administration
                                                 closed to the public to the extent that                 request for review, provide the state
                                                 one or more of the exemptions from                      supervisory authority with a copy of the               14 CFR Part 39
                                                 public meetings apply as certified by                   request for review and any other related               [Docket No. FAA–2017–0511; Directorate
                                                 NCUA’s Office of General Counsel. The                   materials, solicit the state supervisory               Identifier 2016–NM–176–AD]
                                                 Board shall maintain the confidentiality                authority’s views regarding the merits of
                                                 of any information or materials                                                                                RIN 2120–AA64
                                                                                                         the request for review before making a
                                                 submitted or otherwise obtained in the                  determination, and notify the state                    Airworthiness Directives; Bombardier,
                                                 course of the procedures outlined                       supervisory authority of the Director’s                Inc. Airplanes
                                                 herein, subject to applicable law and                   determination.
                                                 regulations.                                                                                                   AGENCY: Federal Aviation
                                                   (f) Conclusion of the Oral Hearing.                      (b) Coordination when Appeal to                     Administration (FAA), DOT.
                                                 The Board shall take the oral                           Supervisory Review Committee Filed. In                 ACTION: Notice of proposed rulemaking
                                                 presentations under advisement. The                     the event that a material supervisory                  (NPRM).
                                                 Board shall render its decision on the                  determination appealed to the
                                                 appeal in accordance with § 746.110.                    Committee is the joint product of NCUA                 SUMMARY:   We propose to adopt a new
                                                                                                         and a state supervisory authority, the                 airworthiness directive (AD) for certain
                                                 § 746.112   Retaliation Prohibited.                                                                            Bombardier, Inc. Model CL–600–1A11
                                                                                                         Committee will promptly notify the
                                                    (a) Retaliation Prohibited. NCUA staff               state supervisory authority of the                     (CL–600), CL–600–2A12 (CL–601
                                                 may not retaliate against a federally                   appeal, provide the state supervisory                  Variant), and CL–600–2B16 (CL–601–
                                                 insured credit union making any type of                 authority with a copy of the appeal and                3A, CL–601–3R, and CL–604 Variants)
                                                 appeal. Alleged acts of retaliation                                                                            airplanes. This proposed AD was
                                                                                                         any other related materials, solicit the
                                                 should be reported to the NCUA Office                                                                          prompted by a new life limitation that
                                                                                                         state supervisory authority’s views
                                                 of Inspector General, which is                                                                                 has been introduced for the side brace
                                                 authorized to receive and investigate                   regarding the merits of the appeal before
                                                                                                         making a determination, and notify the                 fitting shaft and side brace-to-airplane
                                                 complaints and other information                                                                               fitting pin of the main landing gear
                                                 regarding abuse in agency programs and                  state supervisory authority of the
                                                                                                         Committee’s determination. Once the                    (MLG). This proposed AD would require
                                                 operations.                                                                                                    revising the maintenance or inspection
                                                    (b) Submission of Complaints.                        Committee has issued its determination,
                                                                                                                                                                program. This proposed AD would also
                                                 Federally insured credit unions may                     any other issues that may remain
                                                                                                                                                                require an inspection to identify the
                                                 submit complaints of suspected                          between the federally insured credit                   serial number, to serialize, and to record
                                                 retaliation to the NCUA Office of                       union and the state supervisory                        the accumulated life of the side brace
                                                 Inspector General, 1775 Duke Street,                    authority will be left to those parties to             fitting shaft of the MLG. We are
                                                 Alexandria, VA 22314–3428.                              resolve.                                               proposing this AD to address the unsafe
                                                 Complaints should include an                               (c) Coordination when Appeal to                     condition on these products.
                                                 explanation of the circumstances                        Board Filed. In the event that a material              DATES: We must receive comments on
                                                 surrounding the complaint and                           supervisory determination appealed to                  this proposed AD by July 24, 2017.
                                                 evidence of any retaliation. Information                the Board is the joint product of NCUA
                                                 submitted as part of a complaint shall be                                                                      ADDRESSES: You may send comments,
                                                                                                         and a state supervisory authority, the                 using the procedures found in 14 CFR
                                                 kept confidential.
                                                    (c) Disciplinary Action. Any                         Board will promptly notify the state                   11.43 and 11.45, by any of the following
                                                 retaliation by NCUA staff will subject                  supervisory authority of the appeal,                   methods:
                                                 the employee to appropriate                             provide the state supervisory authority                   • Federal eRulemaking Portal: Go to
                                                 disciplinary or remedial action by the                  with a copy of the appeal and any other                http://www.regulations.gov. Follow the
                                                 appropriate supervisor. Such                            related materials, solicit the state                   instructions for submitting comments.
                                                 disciplinary or remedial action may                     supervisory authority’s views regarding                   • Fax: 202–493–2251.
                                                 include oral or written warning or                      the merits of the appeal before making                    • Mail: U.S. Department of
                                                 admonishment, reprimand, suspension                     a determination, and notify the state                  Transportation, Docket Operations, M–
                                                 or separation from employment, change                   supervisory authority of the Board’s                   30, West Building Ground Floor, Room
                                                 in assigned duties, or disqualification                 determination. Once the Board has                      W12–140, 1200 New Jersey Avenue SE.,
                                                 from a particular assignment, including                 issued its determination, any other                    Washington, DC 20590.
                                                 prohibition from participating in any                   issues that may remain between the                        • Hand Delivery: Deliver to Mail
                                                 examination of the federally insured                    federally insured credit union and the                 address above between 9 a.m. and 5
                                                 credit union that was the subject of the                state supervisory authority will be left to            p.m., Monday through Friday, except
                                                 retaliation.                                                                                                   Federal holidays.
                                                                                                         those parties to resolve.
                                                                                                                                                                   For service information identified in
                                                 § 746.113 Coordination with State                       [FR Doc. 2017–11320 Filed 6–6–17; 8:45 am]             this NPRM, contact Bombardier, Inc.,
                                                 Supervisory Authority.                                  BILLING CODE 7535–01–P                                 400 Côte-Vertu Road West, Dorval,
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                                                   (a) Coordination when Request for                                                                            Québec H4S 1Y9, Canada; Widebody
                                                 Review by the Director of the Office of                                                                        Customer Response Center North
                                                 Examination and Insurance Filed. In the                                                                        America toll-free telephone 1–866–538–
                                                 event that a material supervisory                                                                              1247 or direct-dial telephone 1–514–
                                                 determination subject to a request for                                                                         855–2999; fax 514–855–7401; email
                                                 review by the Director of the Office of                                                                        ac.yul@aero.bombardier.com; Internet
                                                 Examination and Insurance is the joint                                                                         http://www.bombardier.com. You may
                                                 product of NCUA and a state                                                                                    view this referenced service information
                                                 supervisory authority, the Director of                                                                         at the FAA, Transport Airplane


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Document Created: 2017-06-07 02:01:03
Document Modified: 2017-06-07 02:01:03
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionNotice of proposed rulemaking.
DatesComments must be received on or before August 7, 2017.
ContactMichael J. McKenna, General Counsel, Frank S. Kressman, Associate General Counsel, or Benjamin M. Litchfield, Staff Attorney, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518- 6540.
FR Citation82 FR 26391 
RIN Number3133-AE69
CFR AssociatedAdministrative Practice and Procedure; Claims; Credit Unions and Investigations

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