FDIC: Fair Hiring in Banking Act
The proposed rule was issued by
COMMENT DEADLINE:
* * *
SUMMARY:
The
DATES:
Comments must be received on or before
ADDRESSES:
You may submit comments, identified by RIN 3064-AF92, by any of the following methods:
* FDIC Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow instructions for submitting comments on the agency website.
* Email: [email protected]. Include RIN 3064-AF92 on the subject line of the message.
* Mail:
* Hand Delivery to
Please include your name, affiliation, address, email address, and telephone number(s) in your comment. All statements received, including attachments and other supporting materials, are part of the public record and are subject to public disclosure.
* Public Inspection: Comments received, including any personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. Commenters should submit only information that the commenter wishes to make available publicly. The
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Background
Section 19 of the Federal Deposit Insurance Act (section 19)[1] prohibits, without the prior written consent of the
From 1998 until 2020, the
On
* Certain older offenses: (1) if it has been 7 years or more since the offense occurred; (2) if the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration; or (3) for individuals who committed an offense when they were 21 years of age or younger, if it has been more than 30 months since the sentencing occurred.[6]
* Offenses for which an order of expungement, sealing, or dismissal has been issued in regard to the conviction in connection with such offense and it is intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record even if exceptions allow the record to be considered for certain character and fitness evaluation purposes.
* " Designated lesser offenses," including the use of fake identification, shoplifting, trespass, fare evasion, driving with an expired license or tag (and such other low-risk offenses as the
* Misdemeanor criminal offenses involving dishonesty, if the offense was committed more than one year before the date on which an individual files a consent application,[7] excluding any period of incarceration.
* A criminal offense involving dishonesty that also "involv[es] the possession of controlled substances. "
The FHBA clarifies several terms in section 19, including "criminal offense involving dishonesty" and "pretrial diversion or similar program." It also provides conditions regarding de minimis offenses, to the extent the
The FHBA codifies procedures for consent applications filed with the
II. Discussion of Proposed Amendments
The proposed amendments to the
Significant proposed revisions[9] include the following:
A. Revised Provisions of 12 CFR Part 303, Subpart L
1. Section 303.220What is section 19 of the Federal Deposit Insurance Act?
The
2. Section 303.221Who is covered by section 19?
The
3. Section 303.222Which offenses qualify as "Covered Offenses" under section 19?
The proposed revisions to paragraph (a) of this section would reflect the new statutory definition of "criminal offense involving dishonesty."[11] The FHBA excludes from the scope of such offenses "an offense involving the possession of controlled substances."[12] The
This revised regulatory language would mark a shift from the
The FHBA also states that the term "criminal offense involving dishonesty" does not include "a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration."[13] The
Revised paragraph (c) would include new language reflecting the statute's exception of certain older offenses from the scope of section 19.[14] Among other exceptions, the FHBA states that section 19's restrictions will not apply to an offense if "it has been 7 years or more since the offense occurred."[15] The
Revised paragraph (d) excludes "designated lesser offenses" (for example, using fake identification), as specified in 12 U.S.C. 1829(c)(3)(D), if one year or more has passed since the applicable conviction or program entry.
Revised paragraph (e) adds language to codify the
4. Section 303.223What constitutes a conviction under section 19?
Paragraph (c) of this section has been revised to reflect statutory language related to the treatment of orders of expungement, sealing, or dismissal of criminal records.[19] The FHBA provides a two-pronged test to determine whether a covered offense should be considered expunged, dismissed, or sealed and therefore excluded from the scope of section 19. First, there must be an "order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense"; second, it must be "intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record, even if exceptions allow the record to be considered for certain character and fitness evaluation purposes."[20] The statute does not address expungements, sealings, or dismissals by operation of law, and the
Revised paragraph (d) clarifies that it encompasses the terms "youthful offender" and "juvenile delinquent" and similar terms, since a court does not have to specifically use these terms in an adjudication in order for paragraph (d)'s provisions to apply.
5. Section 303.224What constitutes a pretrial diversion or similar program (program entry) under section 19?
This section has been revised to reflect the statutory definition of "pretrial diversion or similar program."[21]
6. Section 303.225What are the types of applications that can be filed?
This section has been revised to reflect the updated statutory filing procedures. The statute removes the
Revised paragraph (b), consistent with the FHBA, states that an individual or an institution may file applications at separate times. Under either approach, the application(s) must be filed with the appropriate FDIC Regional Office.[23]
7. Section 303.226When may an application be filed?
This revised section notes that, before an application may be filed, "all of the sentencing requirements associated with a conviction, or conditions imposed by the program entry, including but not limited to, imprisonment, fines, condition of rehabilitation, and probation requirements, must be completed, and the case must be considered final by the procedures of the applicable jurisdiction." The
Furthermore, the FHBA requires the
8. Section 303.227De minimis Offenses
The
The FHBA removed the use of fake identification from the scope of section 19, and revised paragraphs (a)(1) and (b)(4) reflect this exclusion.[26] Revised paragraph (a)(2) would reflect the FHBA's confinement criteria as to the
The
9. Section 303.228How To File an Application
This revised section would eliminate the institution filing requirement and waiver process and indicate that an "institution"--an IDI or a depository institution holding company--could file an application on behalf of an individual, rather than just an IDI. Both of these proposed revisions are due to the updated statutory language.[29] This revised section would also clarify that the appropriate
10. Section 303.229How an Application Is Evaluated
Revised paragraph (a) would reflect new statutory requirements related to the
Revised paragraph (b) would state that the
Revised paragraph (d) would clarify how the
Revised paragraph (g) would eliminate references to the former application-waiver requirement.
Finally, revised paragraph (h) would incorporate statutory language explaining when a new institution-sponsored application would be necessary due to changes in the scope of an applicant's employment.[34]
11. Section 303.231Waiting Time for a Subsequent Application if An Application Is Denied
This section, as currently written and among other provisions, requires a one-year waiting period to file a consent application, following the issuance of a decision denying such an application. The proposed rule would retain the existing regulatory text as paragraph (a) and create a new paragraph (b)--which would note that an institution-sponsored application is not subject to the one-year waiting period if the application (1) follows the denial of an individual application, or (2) follows the denial of an institution-sponsored application and the subsequent application is sponsored by a different institution or is for a different position.
B. Revised Provisions of 12 CFR Part 308, Subpart M
The proposed rule would make several technical amendments to Sec.Sec.308.156 and 308.158 to encompass applications that are sponsored by depository institution holding companies, clarify two sentences concerning hearing procedures, and use more consistent terminology.
III. Expected Effects
As previously discussed, the proposed rule would align the
To estimate the number of institutions and individuals affected by the rule, the
As previously described, the proposed rule would align the
The proposed rule would amend the
Finally, in seeking to align its section 19 regulations with the provisions of the FHBA, the
The
IV. Alternatives
As discussed above, almost all of the proposed substantive changes stem from the FHBA's revisions to section 19. The
V. Request for Comments
1. The
2. Offense date. As revised, section 19 provides for an exception for an offense if "it has been 7 years or more since the offense occurred."[38] There is a similar provision that removes from the definition of "criminal offense involving dishonesty" "a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration[.]"[39] Historically, the
3. " Sentencing occurred. " The FHBA exempts offenses committed by individuals 21 years of age or younger if it has been more than 30 months since the sentencing occurred.[41] However, the statute does not define the phrase "sentencing occurred." The
4. Foreign convictions and pretrial diversions. Section 19 applies to "any person who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense."[42] The phrase "criminal offense involving dishonesty" is defined in the statute but is silent as to whether it includes convictions and pretrial diversions for criminal offenses prosecuted by foreign authorities (foreign convictions).[43] The statute does not define "offense involving . . . breach of trust or money laundering." The
5. Expungements, sealings, and dismissals. The FHBA established a new statutory exemption for expunged, sealed, and dismissed convictions (collectively, "expungements").[44] The
6. Offenses involving controlled substances. The FHBA states that "offenses involving the possession of controlled substances" are not included within the definition of "criminal offense involving dishonesty" and, therefore, are not subject to section 19's prohibition.[45] The proposed rule includes this definitional exclusion and notes that the
7. De minimis offenses. The FHBA states that the
8. Written comments must be received by the
VI. Regulatory Analysis and Procedure
A. The Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act (PRA),[47] the
The
(a) Whether the collection of information is necessary for the proper performance of the
(b) The accuracy of the estimate of the burden of the information collection, including the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on the collection of information should be sent to the address listed in the ADDRESSES section of this document. A copy of the comments may also be submitted to the OMB desk officer: By mail to
Information Collection
Title: "Application Pursuant to Section 19 of the Federal Deposit Insurance Act".
OMB Number: 3064-0018.
Affected Public: Insured depository institutions and individuals.
Summary of Estimated Annual Burdens
[OMB No. 3064-0018]
IC Description ... Type of burden (obligation to respond) ... Frequency of response ... Number of respondents ... Number of responses/ respondent ... Hours per response ... Annual burden (hours)
Application Pursuant to Section 19 of the Federal Deposit Insurance Act ... Reporting (Required to obtain or retain benefits) ... On occasion ... 76 ... 1 ... 16 ... 1,216
Total Annual
Source:
B. The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities.[48] However, an initial regulatory flexibility analysis is not required if the agency certifies that the proposed rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.
As discussed further below, the
As of the quarter ending
As discussed in the SUPPLEMENTARY INFORMATION section, the proposed rule would align the
In light of the foregoing, the
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act[53] requires each Federal banking agency (FBA) to use plain language in its proposed and final rules published after
- Has the
- Have we clearly stated the requirements of the rule? If not, how could the rule be more clearly stated?
- Does the rule contain technical jargon that is not clear? If so, which language requires clarification?
- Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would make the regulation easier to understand?
- What else could we do to make the regulation easier to understand?
D.
Under section 302(a) of the
List of Subjects
12 CFR Part 303
- Administrative practice and procedure
- Bank deposit insurance
- Banks, banking
- Reporting and recordkeeping requirements
- Savings associations
12 CFR Part 308
- Administrative practice and procedure
- Bank deposit insurance
- Banks, banking
- Claims
- Crime
- Equal access to justice
- Fraud
- Investigations
- Lawyers
- Penalties
- Savings associations
By order of the Board of Directors.
Dated at
Assistant Executive Secretary.
Footnotes
1. 12 U.S.C. 1829.
2. See63 FR 66177 (
3. See84 FR 68353.
4. See85 FR 51312 (
5. The FHBA appears at section 5705 of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law 117-263, 136 Stat. 2395, 3411.
6. These exceptions do not apply to the offenses described under 12 U.S.C. 1829(a)(2).
7. Under the FHBA, a "consent application" "means an application filed with [the
8. See12 U.S.C. 1829(f)(9) ("In carrying out this section, the [
9. The proposed rule would also make a number of non-substantive, technical edits to the section 19 regulations that are not discussed in this section.
10. 15 U.S.C. 78l.
11. See12 U.S.C. 1829(g)(2).
12. 12 U.S.C. 1829(g)(2)(C)(ii).
13. 12 U.S.C. 1829(g)(2)(C)(i).
14. See12 U.S.C. 1829(c)(1).
15. See12 U.S.C. 1829(c)(1)(A)(i).
16. See12 U.S.C. 1829(c)(1)(A)(ii).
17. 12 U.S.C. 1829(c)(1)(B).
18. See12 U.S.C. 1829(c)(1)(C).
19. See12 U.S.C. 1829(c)(2).
20. 12 U.S.C. 1829(c)(2).
21. See12 U.S.C. 1829(g)(3).
22. See12 U.S.C. 1829(f)(1).
23. See12 U.S.C. 1829(f)(1).
24. 12 U.S.C. 1829(f)(5)(A).
25. 12 U.S.C. 1829(f)(5)(B).
26. See 12 U.S.C. 1829(c)(3)(D).
27. See12 U.S.C. 1829(c)(3)(B).
28. See12 U.S.C. 1829(c)(3)(C).
29. See12 U.S.C. 1829(f)(1).
30. See12 U.S.C. 1829(f)(6)(A)(i).
31. See12 U.S.C. 1829(f)(6)(A)(ii).
32. 12 U.S.C. 1829(f)(6)(B).
33. 12 U.S.C. 1829(f)(7). While the statute uses the terms "rehabilitation" and "mitigating" as separate categories of evidence, the terms appear to be substantially similar, in the context of section 19 applications, and the use of both terms in these regulations may create confusion. Therefore, the proposed rule uses the term rehabilitation not mitigating.
34. See12 U.S.C. 1829(f)(8).
35. FDIC Call Report data,
36. FDIC Application Tracking System.
37. (76/4,654) * 100 = 1.6 percent.
38. 12 U.S.C. 1829(c)(1).
39. 12 U.S.C. 1829(g)(2)(C)(i).
40. See12 CFR 303.223(a) (2020). ("There must be a conviction of record. Section 19 does not cover arrests or pending cases not brought to trial, unless the person has a program entry as set out in Sec.303.224."). The
41. 12 U.S.C. 1829(c)(1)(B).
42. 12 U.S.C. 1829(a)(1).
43. See12 U.S.C. 1829(g)(2).
44. See12 U.S.C. 1829(c)(2).
45. 12 U.S.C. 1829(g)(2)(C)(ii).
46. See12 CFR 303.227.
47. 44 U.S.C. 3501 et seq.
48. 5 U.S.C.
49. The SBA defines a small banking organization as having
50. FDIC Call Report,
51. FDIC Application Tracking System.
52. (70/3,433) * 100 = 2.04 percent.
53. Public Law 106-102, sec. 722, 113 Stat. 1338, 1471 (1999), 12 U.S.C. 4809.
54. 12 U.S.C. 4802(a).
55. 12 U.S.C. 4802.
[FR Doc. 2023-23853 Filed 11-13-23;
BILLING CODE 6714-01-P
* * *
The document was published in the
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