issue-1996-06-07•Federal Register final rules — 1996-06-07
Federal Register final rules — 1996-06-07
issue-1996-06-07Federal Register final rules — 1996-06-07Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 96-14445 Standard Instrument Approach Procedures; Miscellaneous Amendments
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29015-29016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14445]
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DEPARTMENT OF TRANSPORTATION
14 CFR Part 97
[Docket No. 28594; Amdt. No. 1732]
Standard Instrument Approach Procedures; Miscellaneous Amendments
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment establishes, amends, suspends, or revokes
Standard Instrument Approach Procedures (SIAPs) for operations at
certain airports. These regulatory actions are needed because of the
adoption of new or revised criteria, or because of changes occurring in
the National Airspace System, such as the commissioning of new
navigational facilities, addition of new obstacles, or changes in air
traffic requirements. These changes are designed to provide safe and
efficient use of the navigable airspace and to promote safe flight
operations under instrument flight rules at the affected airports.
DATES: An effective date for each SIAP is specified in the amendatory
provisions.
Incorporation by reference--approved by the Director of the Federal
Register on December 31, 1980, and reapproved as of January 1, 1982.
ADDRESSES: Availability of matters incorporated by reference in the
amendment is as follows:
For Examination--
1. FAA Rules Docket, FAA Headquarters Building, 800 Independence
Avenue, SW., Washington, DC 20591;
2. The FAA Regional Office of the region in which the affected
airport is located; or
3. The Flight Inspection Area Office which originated the SIAP.
For Purchase--Individual SIAP copies may be obtained from:
1. FAA Public Inquiry Center (APA-200), FAA Headquarters Building,
800 Independence Avenue, SW., Washington, DC 20591; or
2. The FAA Regional Office of the region in which the affected
airport is located.
By Subscription--Copies of all SIAPs, mailed once every 2 weeks,
are for sale by the Superintendent of Documents, U.S. Government
Printing Office, Washington, DC 20402.
FOR FURTHER INFORMATION CONTACT:
Paul J. Best, Flight Procedures Standards Branch (AFS-420), Technical
Programs Division, Flight Standards Service, Federal Aviation
Administration, 800 Independence Avenue, SW., Washington, DC 20591;
telephone (202) 267-8277.
SUPPLEMENTARY INFORMATION: This amendment to part 97 of the Federal
Aviation Regulation (14 CFR part 97) establishes, amends, suspends, or
revokes Standard Instrument Approach Procedures (SIAPs). The complete
regulatory description of each SIAP is contained in official FAA from
documents which are incorporated by reference in this amendment under 5
U.S.C. 552(a), 1 CFR part 51, and Sec. 97.20 of the Federal Aviation
Regulations (FAR). The applicable FAA Forms are identified as FAA Forms
8260-3, 8260-4, and 8260-5. Materials incorporated by reference are
available for examination or purchase as stated above.
The large number of SIAPs, their complex nature, and the need for a
special format make their verbatim publication in the Federal Register
expensive and impractical. Further, airmen do not use the regulatory
text of the SIAPs, but refer to their graphic depiction on charts
printed by publishers of aeronautical materials. Thus, the advantages
of incorporation by reference are realized and publication of the
complete description of each SIAP contained in FAA form documents is
unnecessary. The provisions of this amendment state the affected CFR
(and FAR) sections, with the types and effective dates of the SIAPs.
This amendment also identifies the airport, its location, the procedure
identification and the amendment number.
The Rule
This amendment to part 97 is effective upon publication of each
separate SIAP as contained in the transmittal. Some SIAP amendments may
have been previously issued by the FAA in a National Flight Data Center
(FDC) Notice to Airmen (NOTAM) as an emergency action of immediate
flight safety relating directly to published aeronautical charts. The
circumstances which created the need for some SIAP amendments may
require making them effective in less than 30 days. For the remaining
SIAPs, an effective date at least 30 days after publication is
provided.
Further, the SIAPs contained in this amendment are based on the
criteria contained in the U.S. Standard for Terminal Instrument
Approach Procedures (TERPS). In developing these SIAPs, the TERPS
criteria were applied to the conditions existing or anticipated at the
affected airports. Because of the close and immediate relationship
between these SIAPs and safety in air commerce, I find that notice and
public procedure before adopting these SIAPs are impracticable and
contrary to the public interest and, where applicable, that good cause
exists for making some SIAPs effective in less than 30 days.
The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore--(1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation as the
anticipated impact is so minimal. For the same reason, the FAA
certifies that this amendment will not have a significant economic
impact on a substantial number of small entities under the criteria of
the Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 97
Air Traffic Control, Airports, Navigation (Air).
[[Page 29016]]
Issued in Washington, DC on May 31, 1996.
Thomas C. Accardi,
Director, Flight Standards Service.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me, part 97 of
the Federal Aviation Regulations (14 CFR part 97) is amended by
establishing, amending, suspending, or revoking Standard Instrument
Approach Procedures, effective at 0901 UTC on the dates specified, as
follows:
PART 97--STANDARD INSTRUMENT APPROACH PROCEDURES
1. The authority citation for part 97 is revised to read as
follows:
Authority: 49 U.S.C. 106(g), 40103, 40113, 40120, 44701; and 14
CFR 11.49(b)(2).
2. Part 97 is amended to read as follows:
Secs. 97.23, 97.25, 97.27, 97.29, 97.31, 97.33, 97.35 [Amended]
Be amending: Sec. 97.23 VOR, VOR/DME, VOR or TACAN, and VOR/DME or
TACAN; Sec. 97.25 LOC, LOC/DME, LDA, LDA/DME, SDF, SDF/DME; Sec. 97.27
NDB, NDB/DME; Sec. 97.29 ILS, ILS/DME, ISMLS, MLS, MLS/DME, MLS/RNAV;
Sec. 97.31 RADAR SIAPs; Sec. 97.33 RNAV SIAPs; and Sec. 97.35 COPTER
SIAPs, identified as follows:
. . . Effective June 20, 1996
Bessemer, AL, Bessemer, LOC/DME RWY 5, Orig
Sacramento, CA, Mather Field, ILS RWY 22L, Orig
Miami, FL, Opa Locka, ILS RWY 12, Orig
Miami, FL, Opa Locka, ILS/DME RWY 27R, Orig
Marietta, GA, Cobb County-McCollum Field, LOC RWY 27, Amdt 3, CANCELLED
Marietta, GA, Cobb County-McCollum Field, ILS RWY 27, Orig
Pipestone, MN Pipestone Muni, NDB or GPS RWY 36, Amdt 6
Statesville, NC, Statesville Muni, VOR/DME RWY 10, Amdt 7
Statesville, NC, Statesville Muni, LOC RWY 10, Orig
Statesville, NC, Statesville Muni, NDB RWY 20, Amdt 8, CANCELLED
Statesville, NC, Statesville Muni, NDB RWY 10, Orig
Statesville, NC, Statesville Muni, GPS RWY 10, Orig
Norfolk, VA, Norfolk Intl, GPS RWY 14, Orig
Norfolk, VA, Norfolk Intl, GPS RWY 32, Orig
. . . Effective August 15, 1996
Andalusia/Opp, AL, Andalusia-Opp, GPS RWY 29, Orig
Lompoc, CA, Lompoc, GPS RWY 25, Orig
Placerville, CA, Placerville, GPS RWY 5, Amdt 1
Ramona, CA, Ramona, GPS RWY 9, Orig
Goshen, IN, Goshen Muni, GPS RWY 9, Orig
Red Wing, MN, Red Wing Muni, GPS RWY 9, Orig
Trenton, NJ, Mercer County, GPS RWY 16, Orig
Trenton, NJ, Mercer County, GPS RWY 34, Orig
Tonopah, NV, Tonopah, GPS RWY 15, Orig
Rutland, VT, Rutland State, GPS RWY 19, Amdt 1
Rutland, VT, Rutland State, LDA 1 RWY 19, Amdt 7
Note: The FAA published an amendment in Docket No. 28564, Amdt
1726 to part 97 of the Federal Aviation Regulations, Vol 61, No 98,
Page 25139, dated Monday, May 20, 1996, Section 97.23 effective June
20, 1996, which is amended as follows:
Wentzville, MO, Wentzville, VOR/DME OR GPS-A, Amdt 2, CANCELLED is
amended to read:
Wentzville, MO, Wentzville, VOR/DME OR GPS-A, Amdt 1, CANCELLED
[FR Doc. 96-14445 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-14444 Standard Instrument Approach Procedures; Miscellaneous Amendments
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29016-29018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14444]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 97
[Docket No. 28595; Amdt. No. 1733]
Standard Instrument Approach Procedures; Miscellaneous Amendments
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment establishes, amends, suspends, or revokes
Standard Instrument Approach Procedures (SIAPs) for operations at
certain airports. These regulatory actions are needed because of
changes occurring in the National Airspace System, such as the
commissioning of new navigational facilities, addition of new
obstacles, or changes in air traffic requirements. These changes are
designed to provide safe and efficient use of the navigable airspace
and to promote safe flight operations under instrument flight rules at
the affected airports.
DATES: An effective date for each SIAP is specified in the amendatory
provisions.
Incorporation by reference--approved by the Director of the Federal
Register on December 31, 1980, and reapproved as of January 1, 1982.
ADDRESSES: Availability of matter incorporated by reference in the
amendment is as follows:
For Examination--
1. FAA Rules Docket, FAA Headquarters Building, 800 Independence
Avenue, SW., Washington, DC 20591;
2. The FAA Regional Office of the region in which affected airport
is located; or
3. The Flight Inspection Area Office which originated the SIAP.
For Purchase--Individual SIAP copies may be obtained from:
1. FAA Public Inquiry Center (APA-200), FAA Headquarters Building,
800 Independence Avenue, SW., Washington, DC 20591; or
2. The FAA Regional Office of the region in which the affected
airport is located.
By Subscription--Copies of all SIAPs, mailed once every 2 weeks,
are for sale by the Superintendent of Documents, US Government Printing
Office, Washington, DC 20402.
FOR FURTHER INFORMATION CONTACT:
Paul J. Best, Flight Procedures Standards Branch (AFS-420), Technical
Programs Division, Flight Standards Service, Federal Aviation
Administration, 800 Independence Avenue, SW., Washington, DC 20591;
telephone (202) 267-8277.
SUPPLEMENTARY INFORMATION: This amendment to part 97 of the Federal
Aviation Regulations (14 CFR part 97) establishes, amends, suspends, or
revokes Standard Instrument Approach Procedures (SIAPs). The complete
regulatory description on each SIAP is contained in the appropriate FAA
Form 8260 and the National Flight Data Center (FDC)/Permanent (P)
Notices to Airmen (NOTAM) which are incorporated by reference in the
amendment under 5 U.S.C. 552(a), 1 CFR part 51, and Sec. 97.20 of the
Federal Aviations Regulations (FAR). Materials incorporated by
reference are available for examination or purchase as stated above.
The large number of SIAPs, their complex nature, and the need for a
special format make their verbatim publication in the Federal Register
expensive and impractical. Further, airmen do not use the regulatory
text of the SIAPs, but refer to their graphic depiction of charts
printed by publishers of aeronautical materials. Thus, the advantages
of incorporation by reference are realized and publication of the
complete description of each SIAP contained in FAA form
[[Page 29017]]
documents is unnecessary. The provisions of this amendment state the
affected CFR (and FAR) sections, with the types and effective dates of
the SIAPs. This amendment also identifies the airport, its location,
the procedure identification and the amendment number.
The Rule
This amendment to part 97 of the Federal Aviation Regulations (14
CFR part 97) establishes, amends, suspends, or revokes SIAPs. For
safety and timeliness of change considerations, this amendment
incorporates only specific changes contained in the content of the
following FDC/P NOTAM for each SIAP. The SIAP information in some
previously designated FDC/Temporary (FDC/T) NOTAMs is of such duration
as to be permanent. With conversion to FDC/P NOTAMs, the respective
FDC/T NOTAMs have been cancelled.
The FDC/P NOTAMs for the SIAPs contained in this amendment are
based on the criteria contained in the U.S. Standard for Terminal
Instrument Approach Procedures (TERPS). In developing these chart
changes to SIAPs by FDC/P NOTAMs, the TERPS criteria were applied to
only these specific conditions existing at the affected airports. All
SIAP amendments in this rule have been previously issued by the FAA in
a National Flight Data Center (FDC) Notice to Airmen (NOTAM) as an
emergency action of immediate flight safety relating directly to
published aeronautical charts. The circumstances which created the need
for all these SIAP amendments requires making them effective in less
than 30 days.
Further, the SIAPs contained in this amendment are based on the
criteria contained in the TERPS. Because of the close and immediate
relationship between these SIAPs and safety in air commerce, I find
that notice and public procedure before adopting these SIAPs are
impracticable and contrary to the public interest and, where
applicable, that good cause exists for making these SIAPs effective in
less than 30 days.
Conclusion
The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore--(1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evolution as the
anticipated impact is so minimal. For the same reason, the FAA
certifies that this amendment will not have a significant economic
impact on a substantial number of small entities under the criteria of
the Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 97
Air Traffic Control, Airports, Navigation (Air).
Issued in Washington, DC on May 31, 1996.
Thomas C. Accardi,
Director, Flight Standards Service.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me, part 97 of
the Federal Aviation Regulations (14 CFR part 97) is amended by
establishing, amending, suspending, or revoking Standard Instrument
Approach Procedures, effective at 0901 UTC on the dates specified, as
follows:
PART 97--STANDARD iNSTRUMENT APPROACH PROCEDURES
1. The authority citation for part 97 is revised to read as
follows:
Authority: 49 U.S.C. 40103, 40113, 40120, 44701; 49 U.S.C.
106(g); and 14 CFR 11.49(b)(2).
2. Part 97 is amended to read as follows:
Secs. 97.23, 97.25, 97.27, 97.29, 97.31, 97.33, 97.35 [Amended]
By amending: Sec. 97.23 VOR, VOR/DME, VOR or TACAN, and VOR/DME or
TACAN; Sec. 97.25 LOC, LOC/DME, LDA, LDA/DME, SDF, SDF/DME; Sec. 97.27
NDB/ DME; Sec. 97.29 ILS, ILS/DME, ISMLS, MLS, MLS/DME, MLS/RNAV;
Sec. 97.31 RADAR SIAPs; Sec. 97.33 RNAV SIAPs; and Sec. 97.35 COPTER
SIAPs, identified as follows:
. . . effective upon publication
----------------------------------------------------------------------------------------------------------------
FDC Date State City Airport FDC Number SIAP
----------------------------------------------------------------------------------------------------------------
04/05/96....... IA Iowa City........ Iowa City Muni.. FDC 6/2087 VOR OR GPS RWY 35 AMDT
10A...
05/17/96....... NE Fremont.......... Fremont Muni.... FDC 6/3054 VOR RWY 13, ORIG...
05/17/96....... OH Dayton........... Dayton-Wright FDC 6/3053 LOC RWY 20 AMDT 4...
Brothers.
05/20/96....... OH Wilmington....... Airborne Airpark FDC 6/3121 VOR/DME OR GPS RWY 22R AMDT
4A...
05/20/96....... OH Wilmington....... Airborne Airpark FDC 6/3123 VOR RWY 22R AMDT 4A...
05/20/96....... OH Wilmington....... Airborne Airpark FDC 6/3135 NDB RWY 22R AMDT 7A...
05/20/96....... OH Wilmington....... Airborne Airpark FDC 6/3136 ILS RWY 22R AMDT 4...
05/20/96....... OH Wilmington....... Airborne Airpark FDC 6/3137 ILS RWY 4L AMDT 3...
05/20/96....... OH Wilmington....... Airborne Airpark FDC 6/3138 NDB RWY 4L AMDT 2B...
05/21/96....... CA Arcata-Eureka.... Arcata.......... FDC 6/3166 ILS RWY 32 AMDT 29A...
05/21/96....... MS Jackson.......... Jackson Intl.... FDC 6/3164 ILS RWY 15L AMDT 7, ILS RWY
15L (CAT II) AMDT 7, ILS
RWY 15L (CAT III) AMDT
7...
[[Page 29018]]
05/21/96....... OH Wilmington....... Airborne Airpark FDC 6/3147 VOR/ OR GPS RWY 4L AMDT
5B...
05/24/96....... NY Olean............ Cattaraugus FDC 6/3245 LOC RWY 22 AMDT 4...
County-Olean.
05/24/96....... NY Olean............ Cattaraugus FDC 6/3247 RNAV OR GPS RWY 22 AMDT
County-Olean. 4...
05/24/96....... NY Olean............ Cattaraugus FDC 6/3248 NDB RWY 22 AMDT 11...
County-Olean.
05/24/96....... NY Wellsville....... Wellsville Muni- FDC 6/3239 LOC RWY 28 AMDT 3...
Tarantine Field.
05/24/96....... NY Wellsville....... Wellsville Muni- FDC 6/3243 VOR-A AMDT 5...
Tarantine Field.
05/24/96....... NY Wellsville....... Wellsville Muni- FDC 6/3244 NDB RWY 28 AMDT 6...
Tarantine Field.
05/28/96....... FL Miami............ Miami Intl...... FDC 6/3287 ILS RWY 9R, AMDT 8A...
05/29/96....... NY Westhampton Beach The Francis S. FDC 6/3315 ILS RWY 24 AMDT 8A...
Gabreski.
05/29/96....... NY Westhampton Beach The Francis S. FDC 6/3316 NDB OR GPS RWY 24 AMDT 3...
Gabreski.
05/29/96....... TX Brenham.......... Brenham Muni.... FDC 6/3306 VOR/DME RWY 16, AMDT 1...
05/29/96....... TX Caldwell......... Caldwell Muni... FDC 6/3304 VOR/DME OR GPS-A, AMDT 2...
05/29/96....... VA Manassas......... Manassas FDC 6/3310 NDB OR GPS-A AMDT 8...
Regional/Harry
P. Davis Field.
----------------------------------------------------------------------------------------------------------------
[FR Doc. 96-14444 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-14425 Safety Zone; Ohio River, miles 309.0 to 312.5; Vicinity of the Huntington West End Bridge, Huntington, WV
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29021-29022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14425]
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DEPARTMENT OF TRANSPORTATION
33 CFR Part 165
[COTP Huntington 96-008]
RIN 2115-AA97
Safety Zone; Ohio River, miles 309.0 to 312.5; Vicinity of the
Huntington West End Bridge, Huntington, WV
AGENCY: Coast Guard, DOT.
ACTION: Temporary final rule.
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SUMMARY: The Coast Guard has established an emergency safety zone on
the Ohio River, miles 309.0 to 312.5, in the vicinity of the Huntington
West End Bridge, Huntington, WV. This regulation is needed to control
vessel traffic in the regulated area to prevent potential safety
hazards for transiting vessels and the general public resulting from a
sunken hopper barge located approximately 300 feet downstream from the
West End Bridge and subsequent salvage operations. The barge extends
from the center line of the channel towards the left descending bank
and is at a depth of 9 feet at normal pool of 24.7 feet on the
Huntington gauge. The barge is marked with two lighted buoys and
attended during periods of darkness and inclement weather by the M/V
BUNKER BEAVER, monitoring marine radio channels 13 and 16. This
regulations prohibits navigation in the regulated area during periods
of periodic navigation in the regulated area during periods of periodic
closure without the express permission of the Captain of the Port for
the safety of vessel traffic and the protection of life and property
along the river. Periods of closure will be announced via normally
scheduled Coast Guard Broadcast Notice to Mariners or by Coast Guard
personnel onscene.
EFFECTIVE DATES: This regulation is effective 7 p.m. EST on May 24,
1996. It terminates on June 12, 1996 at 7 a.m. EST, unless terminated
sooner by the Captain of the Port Huntington, WV.
FOR FURTHER INFORMATION CONTACT:
LTJG Todd A. Childers, Assistant Chief of the Port Operations
Department, Captain of the Port, Huntington, West Virginia at (304)
529-5524.
SUPPLEMENTARY INFORMATION:
Regulatory History
In accordance with 5 U.S.C. 553, a notice of proposed rulemaking
was not published for this regulation and good cause exists for making
it effective in less than 30 days after Federal Register publication.
Following normal rulemaking procedures will be impracticable.
Specifically, a sunken barge at mile 310.8, Ohio River, has created a
situation which presents an immediate hazard to navigation, life, and
property. The Coast Guard deems it to be in the public's best interest
to issue a regulation immediately.
Background and Purpose
The activities requiring this regulation are the hazards posed by
the sunken hopper barge and salvage operations that will be conducted
for the recovery of the sunken barge at mile 310.8, Ohio River. The
barge sank after taking on water following an allision with the
Huntington West End Bridge while being pushed by the M/V E.W. THOMPSON
on May 14, 1996. Due to river conditions salvage operations will not
begin until on or about May 29, 1996. During salvage operations, the
designated area will be subject to periodic closure and to traffic
restrictions as deemed necessary by on scene Coast Guard
representatives. This regulation is also required by falling water
conditions on the Ohio River which are resulting in reduced water
clearance over the sunken barge, making passage over the barge by
transiting vessels extremely hazardous. The Captain of the Port,
Huntington, WV will monitor the water conditions and the salvage
operations once initiated. In order to provide for the safety of vessel
traffic, the Captain of the Port Huntington intends to regulate vessel
[[Page 29022]]
traffic in that portion of the Ohio River from miles 309.0 to 312.5 for
all vessels except those engaged in salvage or surveying operations
until this hazard is mitigated. Transit of the area will be on a case-
by-case basis and only upon specific approval and direction of the
Captain of the Port Huntington during periods of river closure. The
Ohio side of the center channel is restricted in width, and the West
Virginia alternate channel has been opened to provide safe navigational
waters. Representatives of the Captain of the Port Huntington can be
reached via marine radio on channels 13 or 16. Salvage operators can be
reached by contacting the M/V ARKANSAS TRAVELER on marine radio
channels 13 or 16. The M/V BUNKER BEAVER will be stationed on scene
from 7 p.m. to 7 a.m. EST to render assistance as needed to transiting
vessels. The M/V BUNKER BEAVER will be monitoring marine radio channels
13 and 16. Regularly scheduled Broadcast Notice to Mariners will be
issued to keep vessel operators appraised of the status of the safety
zone.
Regulatory Evaluation
This regulation is not a significant regulatory action under
section 3(f) of Executive Order 12866 and does not require an
assessment of potential costs and benefits under section 6(a)(3) of
that order. It has been exempted from review by the Office of
Management and Budget under that order. It is not under the regulatory
policies and procedures of the Department of Transportation (DOT) (44
FR 11040; February 26, 1979). The Coast Guard expects the economic
impact of this regulation to be such that a full Regulatory Evaluation
under paragraph 10e of the regulatory policies and procedures of DOT is
unnecessary, due to the duration of the actual river closure.
Small Entities
The Coast Guard finds that the impact on small entities, if any, is
not substantial. Therefore, the Coast Guard certifies under section
605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) that
this temporary rule will not have a significant economic impact on a
substantial number of small entities.
Collection of Information
This rule contains no collection of information requirements under
the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Federalism Assessment
The Coast Guard has analyzed this regulation under the principles
and criteria contained in Executive Order 12612 and has determined that
it does not raise sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
Environmental Assessment
The Coast Guard considered the environmental impact of this
regulation and concluded that, under section 2.B.2 of Commandant
Instruction M16475.1B, (as revised by 59 FR 38654; July 29, 1994) this
regulation is categorically excluded from further environmental
documentation.
List of Subjects in 33 CFR Part 165
Harbors, Marine safety, Navigation (water), Records and
recordkeeping requirements, Security measures, Waterways.
Temporary Regulation
In consideration of the foregoing, Subpart F of Part 165 of Title
33, Code of Federal Regulations, is amended as follows:
PART 165--[AMENDED]
1. The authority citation for Part 165 continues to read as
follows:
Authority: 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1(g),
6.04-1, 6.04-6, and 160.5; 49 CFR 1.46.
2. A temporary section 165.T02-008 is added, to read as follows:
Sec. 165.T02-008 Safety Zone: Ohio River
(a) Location. The Ohio River between miles 309.0 and 312.5 is
established as a safety zone.
(b) Effective Dates. This section is effective from 7 p.m. e.s.t.
on May 24, 1996. It terminates on June 12, 1996 at 7 a.m. e.s.t. unless
terminated sooner by the Captain of the Port Huntington, WV.
(c) Regulations.
(1) Periods of river closure will be announced by Broadcast Notice
to Mariners, and/or by Coast Guard representatives on-scene via channel
13 and 16.
(2) Under the general regulations of section 165.23 of this part,
entry of vessels into this zone during periods of closure is prohibited
unless authorized by the Captain of the Port.
(3) All vessels must:
(i) Communicate with on-scene by personnel from the Coast Guard
Marine Safety Office, Huntington, WV, and/or the contract vessel M/V
ARKANSAS TRAVELER on channel 13 or 16 VHF-FM to arrange for safe
passage through the safety zone during all periods of closure.
(ii) Communicate with the contract vessel M/V BUNKER BEAVER on
channel 13 or 16 VHF-FM to arrange for safe passage through the safety
zone at all other times between the hours of 7 p.m. and 7 a.m. e.s.t.
or during periods of inclement weather.
(4) Vessels engaged in conducting or supporting salvage operations
may continue to operate as necessary.
Dated: May 24, 1996, 5 p.m. e.s.t.
G.H. Burns, III,
Lieutenant Commander, U.S. Coast Guard, Captain of the Port, Acting,
Huntington, WV.
[FR Doc. 96-14425 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-14424 Security Zone Regulations: U.S. Coast Guard Base Miami Beach; Miami Beach, FL
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29022-29023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14424]
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DEPARTMENT OF TRANSPORTATION
33 CFR Part 165
[COTP Miami 96-039]
RIN 2115-AA97
Security Zone Regulations: U.S. Coast Guard Base Miami Beach;
Miami Beach, FL
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
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SUMMARY: These regulations are initiated to remove 33 CFR
Sec. 165.T0706. This security zone regulation was established to
protect U.S. Coast Guard Base Miami Beach and vessels moored thereto
from potential subversive acts by any unknown person(s) hostile to the
United States. The potential threat stemmed from the United States'
support of the United Nations Resolutions calling for the removal of
Iraqi military forces from Kuwait. The Iraqi military forces have been
removed from Kuwait and the danger of subversive acts is no longer
present. Therefore, the Coast Guard is removing 33 CFR Sec. 165.T0706.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT:
BMC J.L. Belk, project officer, Port Management and Response
Department, USCG Marine Safety Office at (305) 536-5693.
SUPPLEMENTARY INFORMATION: The Coast Guard finds in accordance with 5
U.S.C. 553, good cause exists for proceeding directly to a final rule
and making this rule effective in less than 30 days. This final rule
removes a temporary security zone put in place during the Gulf War
1991. The potential threat to U.S. Coast Guard Base Miami Beach has not
existed since 1991 and the end of hostilities with Iraq. Therefore,
publishing an NPRM or delaying the effective date of this final rule is
unnecessary and the Coast Guard is proceeding directly to final rule,
effective on publication in the Federal Register.
[[Page 29023]]
Discussion of Regulations
The security zone regulations for Coast Guard Base Miami Beach were
published as an emergency rule in the Federal Register on February 13,
1991 [56 FR 5754]. These security zone regulations were established due
to the potential threat stemming from the United States' support of
United Nations Resolutions calling for the removal of Iraqi military
forces from Kuwait. This increased the possibility of acts of terrorism
or sabotage by unknown person(s) against United States Coast Guard Base
Miami Beach facilities. In 1991, the United States and other United
Nations member forces freed Kuwait and the region was restored to
order. This action decreased the possibility of acts of terrorism or
sabotage against United States Coast Guard Base Miami Beach facilities.
Therefore, this security zone regulation is no longer necessary, and
the Coast Guard is removing the rule at 33 CFR Sec. 165.T0706.
Regulatory Evaluation
This rule is not a significant regulatory action under section 3(f)
of Executive Order 12866 and does not require an assessment of
potential costs and benefits under section 6(a)(3) of that order. It
has not been reviewed by the Office of Management and Budget under that
order. It is not significant under the regulatory policies and
procedures of the Department of Transportation (DOT) (44 FR 11040;
February 26, 1979). The Coast Guard expects the economic impact of this
rule to be so minimal that a full Regulatory Evaluation under paragraph
10e of the regulatory policies and procedures of DOT is unnecessary.
This rule will remove a current security zone and thereby lessen any
economic burden.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Coast Guard must consider the economic impact on small entities of a
rule for which a general notice of proposed rulemaking is required.
``Small entities'' may include (1) small business and not-for-profit
organizations that are independently owned and operated and not
dominant in their fields and (2) governmental jurisdictions with
populations of less than 50,000.
For the reasons set forth above, the Coast Guard certifies this
action will not have a significant economic impact on small entities.
Collection of Information
This rule contains no collection-of-information requirements under
the Paperwork Reduction Act (44 U.S.C. 3501 et. seq.).
Federalism
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612, and it has been determined
that the rulemaking does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Environment
The Coast Guard has considered the environmental impact of this
rule and has determined pursuant to section 2.B.2. of Commandant
Instruction M16475.1B (as revised by 59 FR 38654, July 29, 1994) that
this rule is categorically excluded from further environmental
documentation. A categorical exclusion checklist and categorical
exclusion determination have been completed and are available for
inspection and copying.
List of Subjects in 33 CFR Part 165
Harbors, Marine safety, Navigation (water), Reports and
recordkeeping requirements, Security measures, Waterways.
In consideration of the foregoing, the Coast Guard amends, Subpart
D of Part 165 Title 33, Code of Federal Regulations as follows:
PART 165--[AMENDED]
1. The authority citation of Part 165 continues to read as follows:
Authority: 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1(g),
6.04-1, 6.04-6 and 160.5; 49 CFR 1.46.
Sec. 165.T0706 [Removed]
2. Section 165.T0706 is removed.
Dated: May 28, 1996.
D. F. Miller,
Captain, U.S. Coast Guard, Captain of the Port Miami.
[FR Doc. 96-14424 Filed 6-5-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-14423 Safety Zone: Lake Erie, Detroit to Cleveland
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29020-29021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14423]
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DEPARTMENT OF TRANSPORTATION
33 CFR Part 165
[CGD09-96-002]
RIN 2115-AA97
Safety Zone: Lake Erie, Detroit to Cleveland
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
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SUMMARY: The Coast Guard is establishing a moving safety zone around
the M/V AMERICAN REPUBLIC on Sunday, June 9, 1996, as it transits Lake
Erie from Detroit to Cleveland. During this time, the M/V AMERICAN
REPUBLIC will be transporting the 1996 Summer Olympics Torch Runner on
the Detroit to Cleveland leg of the cross-country relay. This safety
zone is necessary to protect the vessel and its passengers from vessels
which may impede its passage.
EFFECTIVE DATES: This rule is effective at 8 a.m. on June 9, 1996, and
terminates at 11 p.m. on June 9, 1996, unless terminated earlier by the
Coast Guard Captain of the Port Detroit or Cleveland.
FOR FURTHER INFORMATION CONTACT:
Lieutenant Commander Rhae Giacoma, Assistant Chief, Marine Port and
Environmental Safety Branch, Ninth Coast Guard District, Room 2069,
1240 E. Ninth Street, Cleveland, Ohio, 44199-2060, (216) 522-3994.
SUPPLEMENTARY INFORMATION:
Background and Purpose
Prior to the opening of the 1996 Summer Olympics in Atlanta, GA,
the Olympic Torch will be carried cross country by way of relay. The
relay will begin in Los Angeles, CA and terminate in Atlanta, GA. Part
of the relay includes an over-water leg from Detroit, MI to Cleveland,
OH. For this leg, the Olympic Torch and Runner will be transported
across Lake Erie onboard the Great Lakes cargo vessel M/V AMERICAN
REPUBLIC. The Torch Runner will arrive in Detroit Hart Plaza on the
morning of June 9, 1996, where he will board the M/V AMERICAN REPUBLIC
for transit to Cleveland. The vessel is expected to arrive at Cleveland
City Dock the evening of June 9, 1996.
The M/V AMERICAN REPUBLIC will be taking the following route: From
Detroit, the transit will follow the shipping channel down the Detroit
River, then 095 degrees true across northern Lake Erie (transiting
north of Pelee Island) to Pelee Passage Light, through Pelee Passage,
then 111 degrees true to Cleveland.
A 200-yard moving safety zone will be in place around the M/V
AMERICAN REPUBLIC during its entire voyage from Detroit to Cleveland.
The U.S. Coast Guard Cutter BRISTOL BAY will escort the M/V AMERICAN
REPUBLIC throughout the voyage. Other Coast Guard vessels (including
Coast Guard Auxiliary) will join in escorting the M/V AMERICAN REPUBLIC
at various locations where vessel congestion is expected to be heavy.
The safety zone is being established for the protection of the M/V
AMERICAN REPUBLIC and all personnel onboard, as well as for the
protection of vessels and personnel operating in the vicinity of the
vessel during it voyage. The M/V AMERICAN REPUBLIC is a 634 foot
vessel. Because of its size, it is restricted in its ability to
maneuver. Since the transit from Detroit to Cleveland will be taking
place on a Sunday, media and public interest is expected to be high.
Boating traffic on Lake Erie is anticipated to be heavy, particularly
in the areas close to the ports of Detroit and Cleveland. The safety
zone is essential to ensure vessels and personnel do not interfere with
the safe transit of the vessel throughout its voyage and to protect the
safety of spectator craft. However, the Captain of the Port may reduce
the size of the safety zone within the outer limits prescribed in the
regulation whenever it appears to the Captain of the Port that this may
be done so with due regard for safety.
This regulation is issued pursuant to 33 U.S.C. 1225 and 1231, as
set out in the authority section for all of Part 165.
Notice and Comment
A notice of proposed rulemaking was published on April 18, 1996 (61
FR
[[Page 29021]]
16886), inviting comments on this rulemaking. The deadline for comments
passed on May 20, 1996, with no objections or other comments received.
In accordance with 5 U.S.C. 553, good cause exists for making the rule
effective less than 30 days after Federal Register publication. Delay
in the effective date would be contrary to the public interest because
immediate action is necessary to prevent possible loss of life, injury,
or damage to property or the environment at the time of the scheduled
event.
Environment
The Coast Guard has considered the environmental impact of this
regulation and concluded that, under section 2.B.2.c of the Coast Guard
Commandant Instruction M16475.1B, it is categorically excluded from
further environmental documentation, and has so certified in the docket
file.
Federalism
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612, and it has been determined
that this regulation does not have sufficient federalism implications
to warrant the preparation of a Federalism Assessment.
Regulatory Evaluation
This regulation is considered to be nonsignificant under Executive
Order 12866 on Regulatory Planning and Review and nonsignificant under
Department of Transportation regulatory policies and procedures (44 FR
11034 of February 26, 1979).
Small Entities
The economic impact of this regulation is expected to be so minimal
that a full regulatory evaluation is unnecessary. Since the impact of
this regulation is expected to be minimal, the Coast Guard certifies
that, it will not have a significant economic impact on a substantial
number of small entities.
Collection of Information
This regulation will impose no collection of information
requirements under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
List of Subjects in 33 CFR Part 165
Harbors, Marine safety, Navigation (water), Security measures,
Vessels, Waterways.
Regulations: In consideration of the foregoing, the Coast Guard
amends Subpart C of Part 165 of title 33, Code of Federal Regulations
as follows:
1. The authority citation for Part 165 continues to read as
follows:
Authority: 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1(g),
6.04-6, and 160.5; and 49 CFR 1.46.
2. A new temporary regulation is added to read as follows:
Sec. 165.T09-002 Safety Zone: Lake Erie, From Detroit, MI to
Cleveland, OH.
(a) Location. The following area is a moving safety zone: Within
200 yards of the M/V AMERICAN REPUBLIC as it transits Lake Erie from
Detroit, MI to Cleveland, OH.
(b) Effective Date. This section is effective at 8 a.m. on June 9,
1996, and terminates at 11 p.m. on June 9, 1996, unless terminated
earlier by the Coast Guard Captain of the Port Detroit or Cleveland.
(c) Regulations. In accordance with the general regulations in
Sec. 165.23 of this part, entry into this zone is prohibited unless
authorized by the Captain of the Port.
Dated: 29 May 1996.
Paul J. Pluta,
Captain, U.S. Coast Guard, Commander, Ninth Coast Guard District,
Acting.
[FR Doc. 96-14423 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-14421 Special Local Regulations: Harborwalk Boat Race; Sampit River, Georgetown, SC
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29019-29020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14421]
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DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 100
[CGD07-96-015]
RIN 2115-AE46
Special Local Regulations: Harborwalk Boat Race; Sampit River,
Georgetown, SC
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
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SUMMARY: The Coast Guard is establishing permanent special local
regulations for the Harborwalk Boat Race. This event will be held
annually on the last Sunday of June, between 12 p.m. and 5:30 p.m. EDT
(Eastern Daylight Time). Historically, there have been approximately
sixty participants racing 14 to 20 foot outboard power boats on a
prescribed course on a portion of the Sampit River, Georgetown, South
Carolina. The nature of the event and the closure of the Sampit River
creates an extra or unusual hazard in the navigable waters. These
regulations are necessary to provide for the safety of life on the
navigable waters during the event.
DATES: July 8, 1996.
FOR FURTHER INFORMATION CONTACT:
ENS M. J. DaPonte, project officer, Coast Guard Group Charleston at
(803) 724-7621.
SUPPLEMENTARY INFORMATION:
Regulatory History
On March 26, 1996, the Coast Guard published a notice of proposed
rulemaking entitled ``Harborwalk Boat Race, Sampit River, Georgetown,
SC'' in the Federal Register (61 FR 13119). The comment period ended
May 28, 1996. The Coast Guard received no comments during the notice of
proposed rulemaking comment period. A public hearing was not requested
and one was not held.
Discussion of Regulations
These regulations are needed to provide for the safety of life
during the Harborwalk Boat Race. The rules are intended to promote safe
navigation on the waters off East Bay Park on the Sampit River during
the race by controlling the traffic entering, exiting, and traveling
within these waters. Historically, the anticipated concentration of
spector and participant vessels associated with the Harborwalk Boat
Race has posed a safety concern, which is addressed in these special
local regulations.
These regulations will not permit movement of spectator vessels and
other nonparticipating vessel traffic within the regulated area,
bounded by a line drawn from:
33 deg. 21.5' N, 079 deg. 17.10' W, thence to
33 deg. 21.7' N, 079 deg. 16.8' W, thence along the shore to
33 deg. 21.1' N, 079 deg. 16.7' W, thence to
33 deg. 21.1' N, 079 deg. 16.9' W thence back to
33 deg. 21.5' N, 079 deg. 17.10' W
From 12 p.m. to 5:30 p.m. EDT annually during the last Sunday of June.
All coordinates use datum: NAD 83. These regulations will permit the
movement of spectator vessels and other nonparticipants after the
termination of race, and during intervals between scheduled events at
the discretion of the Coast Guard Patrol Commander.
Regulatory Evaluation
This rule is not a significant regulatory action under Section 3(f)
of the Executive Order 12866 and does not require an assessment of the
potential costs and benefits under Section 6(a)(3) of that Order. It
has been exempted from review by the Office of Management and Budget
under that order. It is not significant under the regulatory policies
and procedures of the Department of Transportation (DOT) (44 FR 11040;
February 26, 1979). The Coast Guard expects the economic impact of this
proposed rule to be so minimal that a full Regulatory Evaluation under
paragraph 10e of the regulatory policies and procedures of DOT is
unnecessary. These regulations will last for only 5 and a half hours
each day of the event. No public comments were received during the
notice of proposed rulemaking comment period.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Coast Guard must consider whether this action will have a significant
economic impact on a substantial number of small entities. ``Small
entities'' include independently owned and operated small businesses
that are not dominant in their field and that otherwise qualify as
``small business concerns'' under Section 3 of the Small Business Act
(15 U.S.C. 632).
For reasons set forth in the above Regulatory Evaluation, the Coast
Guard certifies that this action will not have a
[[Page 29020]]
significant economic impact on a substantial number of small entities.
Collection of Information
These regulations contain no collection of information requirements
under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Federalism
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612, and it has been determined
that the rulemaking does not have sufficient Federalism implications to
warrant the preparation of a Federalism Assessment.
Environmental Assessment
The Coast Guard has considered the environmental impact of this
rule consistent with Section 2.B.2. of Commandant Instruction
M16475.1B. In accordance with that section, this action has been
environmentally assessed (EA completed), and the Coast Guard has
concluded that it will not significantly affect the quality of the
human environment. An environmental assessment and a finding of no
significant impact have been prepared and are available in the docket
for inspection or copying.
List of Subjects in 33 CFR Part 100
Marine safety, Navigation (water), Reporting and recordkeeping
requirements, Waterways.
Final Regulations
In consideration of the foregoing, Part 100 of Title 33, Code of
Federal Regulations, the Coast Guard amends as follows:
1. The authority citation for Part 100 continues to read as
follows:
PART 100--[AMENDED]
Authority: 33 U.S.C. 1233; 49 CFR 1.46 and 33 CFR 100.35.
2. A new section 100.713 is added to read as follows:
Sec. 100.713 Annual Harborwalk Boat Race; Sampit River, Georgetown,
SC.
(a) Definitions. (1) Regulated Area. The regulated area is formed
by a line from:
33 deg.21.5' N, 079 deg.17.10' W, thence to
33 deg.21.7' N, 079 deg.16.8' W, thence along the shore to
33 deg.21.1' N, 079 deg.16.7' W, thence to
33 deg.21.1' N, 079 deg.16.9' W, thence back to
33 deg.21.5' N, 079 deg.17.10' W.
All coordinates referenced use datum: NAD 83.
(2) Coast Guard Patrol Commander. The Coast Guard Patrol Commander
is a commissioned, warrant, or petty officer of the United States Coast
Guard who has been designated by the Commander, Coast Guard Group
Charleston, Charleston, South Carolina.
(b) Special local regulations. (1) Entry into the regulated area is
prohibited to all nonparticipants.
(2) After the termination of the Harborwalk Boat Race, and during
intervals between scheduled events, at the discretion of the Coast
Guard Patrol Commander all vessels may resume normal operations.
(c) Effective Dates. This section is in effect from 12 p.m. and
terminates at 5:30 p.m. EDT annually during the last Sunday of June.
Dated: May 31, 1996.
J.W. Lockwood,
Rear Admiral, U.S. Coast Guard Commander, Seventh Coast Guard District.
[FR Doc. 96-14421 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-14416 Removal of Obsolete Regulations Concerning Railroad Contracts
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29036-29037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14416]
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DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
49 CFR Part 1039
[STB Ex Parte No. 550]
Removal of Obsolete Regulations Concerning Railroad Contracts
AGENCY: Surface Transportation Board.
ACTION: Final rule.
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SUMMARY: The Surface Transportation Board (the Board) is removing from
the Code of Federal Regulations obsolete regulations exempting non-
agricultural railroad transportation contracts from the contract filing
requirement that previously applied to railroad contracts.
EFFECTIVE DATE: January 1, 1996.
[[Page 29037]]
FOR FURTHER INFORMATION CONTACT: Beryl Gordon, (202) 927-5660. [TDD for
the hearing impaired: (202) 927-5721.]
SUPPLEMENTARY INFORMATION: Effective January 1, 1996, the ICC
Termination Act of 1995, Pub. L. No. 104-88, 109 Stat. 803 (ICCTA)
abolished the Interstate Commerce Commission (ICC) and established the
Board within the Department of Transportation. Section 204(a) of the
ICCTA provides that ``[t]he Board shall promptly rescind all
regulations established by the [ICC] that are based on provisions of
law repealed and not substantively reenacted by this Act.''
Prior to the ICCTA, the ICC had issued regulations governing rail
contracts in 49 CFR part 1313, which included provisions for filing all
such contracts pursuant to former 49 U.S.C. 10713(b)(1). The ICC had
later exempted rail carriers from the contract filing requirement,
except where the contract was for the transportation of agricultural
commodities.1 Railroad Transportation Contracts, 8 I.C.C.2d 730
(1992). The regulations codifying this exemption were placed at 49 CFR
1039.23.2
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\1\ Rail carriers were still required to file contract
summaries for all their transportation contracts.
\2\ Minor changes were also made to part 1313.
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The ICCTA changed the underlying law governing railroad
transportation contracts, which is now located at 49 U.S.C. 10709, in
several important respects. As pertinent here, it eliminates any
regulation of non-agricultural contracts. Moreover, for agricultural
contracts, new 49 U.S.C. 10709(d)(1) only requires a contract summary
to be filed with the Board, and not the full contract.
In Railroad Contracts, STB Ex Parte No. 541 (STB served Mar. 26,
1996) (ANPR), published at 61 FR 13147, the Board issued an advance
notice of proposed rulemaking soliciting comments from the
transportation community as to appropriate regulations for
administering new Sec. 10709.3 We noted that the regulations set
forth at 49 CFR Part 1313 that implemented former Sec. 10713 are not
suitable for carrying out new Sec. 10709. While we will soon be issuing
proposed rules in response to comments responding to the ANPR, we see
no need in the interim to continue the obsolete regulations in
Sec. 1039.23. Because there is no longer a statutory requirement for
any contract filing, the exemption from filing contracts and contract
amendments for non-agricultural commodities is unnecessary. Moreover,
the statement in Sec. 1039.23 that contracts must be filed for
agricultural commodities is no longer true. We are therefore removing
the now obsolete Sec. 1039.23 regulations.
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\3\ The comment date was extended to May 28, 1996.
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Because this action merely reflects, and is required by, the
enactment of the ICCTA and will not have an adverse effect on the
interests of any person, this action will be deemed to be effective as
of January 1, 1996.
This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
List of Subjects in 49 CFR Part 1039
Agricultural commodities, Intermodal transportation, Manufactured
commodities, Railroads.
Decided: May 24, 1996.
By the Board, Chairman Morgan, Vice Chairman Simmons, and
Commissioner Owen.
Vernon A. Williams,
Secretary.
For the reasons set forth in the preamble and under the authority
of 49 U.S.C. 721(a), title 49, chapter X, Part 1039 of the Code of
Federal Regulations is amended as set forth below:
PART 1039--EXEMPTIONS
1. The authority citation for part 1039 continues to read as
follows:
Authority: 5 U.S.C. 553 and 49 U.S.C. 721 and 10502.
Sec. 1039.23 [Removed]
2. Section 1039.23 is removed.
[FR Doc. 96-14416 Filed 6-6-96; 8:45 am]
BILLING CODE 4915-00-P
Complete official Federal Register PDF
FR Doc. 96-14396 Policies Relating to Rulemaking Proceedings
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29018-29019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14396]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
14 CFR Part 399
[Docket No. OST-96-1429]
RIN 2105-AC55
Policies Relating to Rulemaking Proceedings
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
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SUMMARY: The Office of the Secretary (OST) is amending an outdated
policy statement of the Civil Aeronautics Board on rulemaking
proceedings to remove obsolete provisions and to cross-reference the
Department of Transportation's rulemaking procedures in another part.
This action is in response to the President's Regulatory Reinvention
Initiative.
EFFECTIVE DATE: This rule is effective June 7, 1996.
ADDRESSES: Docket Management Facility, U.S. Department of
Transportation, Room PL-401, 400 Seventh Street, SW., Washington, DC
20590-0001.
FOR FURTHER INFORMATION CONTACT: Gwyneth Radloff, Office of the
Assistant General Counsel for Regulation and Enforcement, U.S.
Department of Transportation, 400 Seventh Street, SW., Washington, DC
20590-0001, Telephone: (202) 366-9305.
SUPPLEMENTARY INFORMATION: In his Regulatory Reinvention Initiative
Memorandum of March 4, 1995, President Clinton directed Federal
agencies to conduct a page-by-page review of all of their regulations
and to ``eliminate or revise those that are outdated or otherwise in
need of reform.'' In response to that directive, the Department has
reviewed its aviation economic regulations contained in 14 CFR Chapter
II.
This rule is one of several that address reinvention of these
regulations. It eliminates obsolete language on rulemaking petitions
that changed with the sunset of the Civil Aeronautics Board and the
transfer of its remaining functions to the Department of Transportation
and replaces it with a cross-reference to the Department's procedural
rules. This rule also replaces the reference to the Board in the
section 399.73 definition of small business.
This rule is being issued as a final rule because it concerns
agency practice and procedure and, therefore, is exempt from prior
notice and comment requirements under section 553 (b) (3) (A) of the
Administrative Procedure Act (APA). The Department has determined that
notice and an opportunity for public comment are impracticable,
unnecessary, and contrary to the public interest. These changes are
ministerial, removing obsolete and redundant material or making minor
technical and terminology changes. These changes will not have
substantive impact, and the Department does not anticipate receiving
meaningful comments on them. Comment is therefore unnecessary, and it
would be contrary to the public interest to delay unnecessarily this
effort to eliminate or revise outdated rules. For these reasons, the
Department has determined that there is good cause under section 553
(d) (3) of the APA to make this rule effective immediately upon
publication.
Regulatory Process Matters
This final rule is not considered a significant regulatory action
under section 3(f) of Executive Order 12866, and therefore it was not
reviewed by the Office of Management and Budget. This rule is not
considered significant under the Department's regulatory policies and
procedures. The changes are being made solely for the purposes of
eliminating obsolete requirements and correcting out-of-date
references.
The Department also has determined that the economic impact of this
rule is so minimal that further economic analysis is unnecessary. This
rule does not impose unfunded mandates or requirements that will have
any impact on the quality of the human environment.
Executive Order 12612
The Department has analyzed this rule under the principles and
criteria contained in Executive Order 12612 (``Federalism'') and has
determined that
[[Page 29019]]
the rule does not have sufficient federalism implications to warrant
the preparation of a Federalism Assessment.
Regulatory Flexibility Act
The Department has evaluated the effects of this rule on small
entities. I certify this rule will not have a significant economic
impact on a substantial number of small entities, because we are merely
removing obsolete provisions and are cross-referencing the Department's
rulemaking procedures in another part. The substantive procedural
requirements are not changed.
Paperwork Reduction Act
This rule contains no reporting or recordkeeping requirements.
List of Subjects in 14 CFR Part 399
Administrative practice and procedure, Air carriers.
For the reasons set forth above, 14 CFR part 399 is amended as
follows.
PART 399--POLICIES RELATING TO RULEMAKING PROCEEDINGS
1. The authority citation for part 399 is revised to read as
follows:
Authority: 5 U.S.C. 551 et seq., 49 U.S.C. 40101 et seq.
2. Section 399, Subpart F is amended by revising Secs. 399.70 and
399.73, and removing Secs. 399.71, and 399.72, to read as follows:
Subpart F--Policies Relating to Rulemaking Proceedings
Sec. 399.70 Cross-references to the Office of the Secretary's
Rulemaking Procedures.
The rules and policies relating to the disposition of rulemaking
petitions by the Department of Transportation Office of the Secretary
are located in its rulemaking procedures contained in 49 CFR Part 5.
The criteria for identifying significant rules and determining whether
a regulatory analysis will be performed are set forth in the
Department's Regulatory Policies and Procedures, 44 FR 11034, February
26, 1979, and Executive Order 12866.
Secs. 399.71 and 399.72 [Removed]
Sec. 399.73 Definition of small business for Regulatory Flexibility
Act
For the purposes of the Department's implementation of chapter 6 of
title 5, United States Code (Regulatory Flexibility Act), a direct air
carrier or foreign air carrier is a small business if it provides air
transportation only with small aircraft as defined in Sec. 298.3 of
this chapter (up to 60 seats/18,000 pound payload capacity).
Issued in Washington, D.C. on May 31, 1996, under the authority
of 49 CFR part 1.
Charles A. Hunnicutt,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 96-14396 Filed 6-6-96; 8:45 am]
BILLING CODE 49107-62-P
Complete official Federal Register PDF
FR Doc. 96-14386 Airworthiness Directives; McDonnell Douglas Model DC-10 Series Airplanes and Model MD-11F (Freighter) Airplanes
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29008-29015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14386]
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[[Page 29009]]
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 95-NM-120-AD; Amendment 39-9661; AD 96-12-18]
RIN 2120-AA64
Airworthiness Directives; McDonnell Douglas Model DC-10 Series
Airplanes and Model MD-11F (Freighter) Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
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SUMMARY: This amendment adopts a new airworthiness directive (AD) that
is applicable to all McDonnell Douglas Model DC-10 series airplanes and
Model MD-11F airplanes. Among other things, this amendment requires
repetitive leak checks of the lavatory drain system and repair, if
necessary; provides for the option of revising the FAA-approved
maintenance program to include a schedule of leak checks; and requires
the installation of a cap on the flush/fill line. This amendment is
prompted by continuing reports of damage to engines and airframes,
separation of engines from airplanes, and damage to property on the
ground, caused by ``blue ice'' that forms from leaking lavatory drain
systems on transport category airplanes and subsequently dislodges from
the airplane fuselage. The actions specified by this AD are intended to
prevent such damage associated with the problems of ``blue ice.''
EFFECTIVE DATE: July 12, 1996.
ADDRESSES: Information related to this rulemaking action may be
examined at the FAA, Transport Airplane Directorate, 1601 Lind Avenue,
SW., Renton, Washington; or at the FAA, Los Angeles Aircraft
Certification Office, Transport Airplane Directorate, 3960 Paramount
Boulevard, Lakewood, California.
FOR FURTHER INFORMATION CONTACT: Walter Eierman, Aerospace Engineer,
Systems and Equipment Branch, ANM-130L, FAA, Los Angeles Aircraft
Certification Office, 3960 Paramount Boulevard, Lakewood, California
90712; telephone (310) 627-5336; fax (310) 627-5210.
SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal
Aviation Regulations (14 CFR part 39) to include an airworthiness
directive (AD) that is applicable to all Model DC-10 series airplanes
and MD-11F airplanes was published in the Federal Register on November
2, 1995 (60 FR 55668). That action proposed to require repetitive leak
checks of the lavatory drain system and repair, if necessary; to
provide for the option of revising the FAA-approved maintenance program
to include a schedule of leak checks; and to require the installation
of a cap on the flush/fill line.
Interested persons have been afforded an opportunity to participate
in the making of this amendment. Due consideration has been given to
the comments received.
Support for the Proposal
One commenter supports the proposal.
Request To Exclude All-Cargo Configured Airplanes From Applicability
One commenter requests that the applicability of the proposal be
revised to exclude airplanes operating in an all-cargo configuration,
where lavatories and lavatory fill/drain systems have been removed.
The FAA concurs. This final rule requires leak checks of the
lavatory/fill drain system. However, if no such system is installed on
the airplane then, obviously, the requirements of the AD cannot be
performed and, likewise, should not be required. Although the commenter
states that, for all-cargo configurations of the affected airplanes,
lavatory systems may be removed, the FAA is aware that most cases of
all-cargo-configured Model DC-10's have at least one (forward) lavatory
installed near the flightcrew deck. As long as there is one lavatory
drainage system installed on the airplane, the requirements of this AD
would still apply. To make this eminently clear to affected operators,
the FAA has revised the applicability of the final rule to clarify that
the AD applies to airplanes that are equipped with a lavatory drainage
system.
Request To Revise Dump Valve Leak Check Procedure
One commenter requests that the dump valve leak check procedures,
specified throughout the proposal, be revised to permit the check to be
performed using less fluid. The proposal states that the check is to be
performed by filling the toilet tank with fluid to a level such that
the bowl is approximately half full (at least 2 inches above the
flapper in the bowl). However, this commenter states that the check can
be accomplished and the same intent can be achieved with the use of
less fluid. This commenter, a U.S. operator, indicates that use of less
fluid would be more effective in terms of both time and cost. As an
example, the commenter states that many Model DC-10 airplanes are
equipped with aft waste tanks with a 90-gallon capacity; if the
proposed check procedures are accomplished, over 120 gallons of fluid
would be required to fill the toilet tanks to a level such that each of
the four toilet bowls are half full. The commenter requests that this
leak check on these airplanes be revised to require a maximum of only
50 gallons of fluid to be used. The commenter asserts that this
revision to the test procedures would still accomplish the same intent
and would decrease the time required to test the system.
The FAA does not concur. The procedure to fill the toilet bowl to
approximately \1/2\ full is also meant to check the tank and the rinse
line check valves. The FAA finds that performing the test using less
fluid does not do as complete and adequate a job as is necessary to
meet the intent of this AD.
Request To Delete the Method for Conducting Leak Checks
One commenter requests that the proposal be revised to delete the
defined method of conducting the leak check. The commenter suggests
that, in lieu of requiring the aircraft to be pressurized, the proposal
should merely stipulate that operators are to ``apply 3 psi [sic]
across the valve'' and then allow operators to determine the most
economical means of verifying the integrity of the seals. The commenter
contends that requiring pressurization of the airplane causes
unnecessary expenses to be incurred.
The FAA does not consider that any revision to the final rule is
necessary based on the commenter's request. The wording of the final
rule (and proposal) simply states that the check must be performed with
``a minimum of 3 PSID applied across the valve.'' To do this does not
require that the airplane be pressurized. The FAA acknowledges that the
NOTE contained in the proposal referred operators to the procedures
specified in chapter 38-30-00 of the DC-10 Maintenance Manual procedure
as one source of guidance for performing the check procedures, and
those particular procedures do call for pressurizing the airplane.
However, the reference to the Maintenance Manual procedure is merely
informational; it is not a requirement and, likewise, pressurizing the
airplane is not a requirement. The only requirement of the AD is that a
minimum of 3 PSID be applied across the valve when the check is
performed.
[[Page 29010]]
Request for Clarification of Check Requirements for Valves With Outer
Seals and Inner Caps
One commenter requests that proposed paragraphs (a)(3)(i) and
(a)(3)(ii) be revised to define more clearly which types of valves
require the outer seal to be pressure checked for leakage.
The FAA agrees that some clarification is warranted. Some valves
have an inner seal that is closed when the outer cap is closed. For
this type of valve, leakage from the outer cap could only be checked if
the inner seal were removed since, when the inner seal is correctly in
place, it will prevent any fluid from reaching the outer cap seal. For
this type of valve, paragraph (a)(3)(ii) of the final rule provides an
alternative to allow operators to inspect the seal and seal surface of
the outer cap seal in lieu of performing a leak check of the outer
seal. The FAA has included a new NOTE in paragraph (a)(3) to provide
this information.
Request To Increase Leak Check Interval for Certain Shaw Aero
Valves
One commenter requests that proposed paragraph (a)(1) and (b)(2)(i)
be revised to allow the following Shaw Aero valves to be leak checked
at 1,000-hour intervals:
331 series, all serial numbers;
332 series, all serial numbers;
10101000BA2, having serial numbers 130 and higher; and
10101000BB2, all serial numbers.
The commenter states that these valves have been accepted previously by
the FAA for a 1,000-hour leak check interval either in accordance with
AD 94-23-10, amendment 39-9073 (59 FR 59124, November 16, 1994), which
is applicable to Boeing Model 727 series airplanes; or a similar
proposed rule applicable to Boeing Model 737 series airplanes
(reference Docket No. 95-NM-111-AD; 60 FR 55673, November 2, 1995).
The FAA concurs in part. The FAA finds that the 1,000-hour leak
check interval is acceptable for most of the valves requested by the
commenter. However, based on data received, only 10101000BB2 series
valves having serial number 0011 and higher are acceptable for this
leak check interval. The final rule has been revised accordingly.
Request for Increase in Leak Check Interval for All Shaw Aero
Valves
This same commenter requests that proposed paragraph (a)(1) and
(b)(2)(i) be revised to permit the leak check interval of 1,000 hours
for specified Shaw Aero valves to be increased to 2,000 hours upon the
revision of an operator's maintenance procedures in accordance with the
proposal and the submittal of data to substantiate the longer interval.
The FAA does not consider that any change to the rule is necessary
based on this commenter's request. Paragraph (c) of the final rule
provides a procedure for collecting and submitting data to substantiate
an increase in the leak check interval for any valve. The procedure
specified in that paragraph is the appropriate one to follow for
requesting any such increase in the leak check interval.
Request To Increase Leak Check Interval for Certain Kaiser Valves
One commenter requests that proposed paragraphs (a)(1) and
(b)(2)(i) be revised to increase the 1,000-hour leak check interval for
Kaiser valves having part numbers 0218-0026 and 0218-0032. The
commenter requests that the interval be increased to 2,500 hours based
on qualification and test report data submitted.
The FAA cannot concur with the commenter's request since
insufficient data was submitted to support a longer inspection
interval.
Request for Special Procedures for Systems With ``Interlock''
Mechanisms
One commenter requests that proposed paragraph (b)(2)(ii) be
revised to include different requirements for systems that incorporate
an ``interlock'' mechanism that prevents the closure of the outer cap
if the ``donut'' is not installed. This commenter states that if the
functioning of the interlock mechanism is verified, the requirement for
pressure leak checks should be similar to the checks of other valves
that have both an inner and an outer seal.
The FAA does not concur. Though the interlock mechanism ensures
that the donut is installed, it does not ensure that the donut is in
good condition. This type of valve, therefore, should be inspected at
the same interval as other ``donut valves,'' unless data to
substantiate a longer inspection interval can be provided. For this
type of valve, the inner seal (the ``donut'') can be leak checked and
the outer cap seal and seal surface can be inspected for wear in
accordance with the procedures specified in paragraph (b)(2)(ii)(B) of
the final rule.
Request To Allow Installation of an Alternative Lock Cap
One commenter requests that proposed paragraph (d) be revised to
allow the installation of a \1/4\-turn ball lock cap as an alternative
to the proposed lever lock cap. This commenter, a non-U.S. operator,
states that its fleet is already equipped with these lock caps and the
commenter considers them equivalent to the caps that would be required
by the AD.
The FAA does not concur. Service experience has shown that, on many
occasions, caps have been missing from the airplane. The lever lock cap
installation required by this final rule secures the cap to the
airplane better than other types of cap installations that the FAA
currently knows of. However, under the provisions of paragraph (f) of
this final rule, the FAA would consider approval of the use of other
types of caps as an alternative method of compliance if sufficient data
are presented to justify the use of a different type of cap.
Request To Address Need for Heaters on Flush/Fill Lines
This same commenter indicates that the proposed installation of
caps on the flush/fill lines, as would be required by paragraph (d) of
the proposal, also may require the installation of heaters. Without
such heaters, residual water will collect at the flush/fill nipples and
freeze, thus hindering maintenance. This will increase the costs
associated with the proposed rule.
The FAA does not concur with the commenter's observation.
Typically, caps already are installed on airplanes; this AD will
require the installation of only a particular style of cap, and may not
change the possible need for heaters on some airplanes. If the lines
are allowed to drain thoroughly before the cap is closed, the need for
heaters also would be minimized or eliminated.
Request for Permission To Use Alternative Check Valves on Flush/
Fill Line
Several commenters request that proposed paragraph (d) be revised
to permit the use of Monogram 4803-86 series check valves on flush/fill
lines as an alternative to the proposed lever/lock caps. These
commenters point out that Monogram check valves with similar design
characteristics were approved previously by the FAA as an acceptable
alternative item for compliance with a similar proposed AD that is
applicable to Boeing Model 737 series airplanes (reference Docket No.
95-NM-111-AD).
The FAA concurs with the commenters' request. Paragraph (d) of the
final rule has been revised to specify that installation of Monogram
4803-86 series check valves on the flush/fill lines is an acceptable
action for compliance.
[[Page 29011]]
Additionally, paragraphs (a)(4) and (b)(3) of the final rule have
been revised to provide the necessary instructions for replacing the O-
rings associated with the Monogram 4803-86 series check valve, and for
testing the check valve for proper operation.
Request for Revision of Cost Impact Information
One commenter states that the cost impact information, as explained
in the preamble to the proposal, indicated that required parts for
installing a cap on the flush/fill line would cost $275 per airplane.
The commenter states that the cost of parts is $275 per unit; based on
an average of 8 units per airplane, the cost per airplane is $2,200.
The FAA concurs. The cost information presented in the proposal
inadvertently indicated the cost per unit, rather than the total cost
per airplane. The commenter's figures are correct and the cost impact
discussion, below, has been revised accordingly.
Conclusion
After careful review of the available data, including the comments
noted above, the FAA has determined that air safety and the public
interest require the adoption of the rule with the changes previously
described. The FAA has determined that these changes will neither
increase the economic burden on any operator nor increase the scope of
the AD.
Cost Impact
There are approximately 435 Model DC-10 series airplanes and Model
MD-11F airplanes of the affected design in the worldwide fleet. The FAA
estimates that 285 airplanes of U.S. registry, and 18 U.S. operators,
will be affected by this proposed AD.
For airplanes in the passenger configuration, the estimated costs
associated with the requirements of this AD are as follows:
1. Leak checks. It will take approximately 4 work hours per
airplane lavatory drain to accomplish each leak check, at an average
labor cost of $60 per work hour. There normally are two drains per
airplane. Depending upon the type of valve installed and the flight
utilization rate of the airplane, airplanes will be required to be
inspected as few as 3 times per year or as many as 15 times per year.
Based on these figures, the cost impact of the proposed leak check
requirement on U.S. operators is expected to be between $1,440 and
$7,200 per airplane per year.
2. Inspections. Should an operator elect to perform the inspection
of the service panel drain valve cap/door seal and seal mating surface,
the inspection will take approximately 2 work hours to accomplish, at
an average labor cost of $60 per work hour. Depending upon the type of
valves installed and the flight utilization rate of the airplane,
airplanes will be required to be inspected as few as 3 times per year
or as many as 15 times per year. Based on these figures, the cost
impact of the inspection requirements on U.S. operators will be between
$360 and $1,800 per airplane per year.
3. Installation of cap on flush/fill line. This installation will
take approximately 2 work hours to accomplish, at an average labor cost
of $60 per work hour. The cost of required parts is estimated to be
$2,200 per airplane. (There are 8 flush/fill lines per airplane, and
parts for each line will cost approximately $275.) There currently are
175 passenger-configured airplanes of U.S. registry that will be
subject to this requirement. Based on these figures, the cost impact of
the installation requirement on U.S. operators is expected to be
$553,000, or $3,160 per airplane.
For airplanes in the freighter configuration, the estimated costs
associated with the requirements of this AD are as follows:
1. Leak checks. It will take approximately 4 work hours per
airplane lavatory drain to accomplish each leak check, at an average
labor cost of $60 per work hour. There normally is one drain per
airplane. Depending upon the type of valve installed and the flight
utilization rate of the airplane, airplanes will be required to be
inspected as few as 3 times per year or as many as 15 times per year.
Based on these figures, the cost impact of the leak check requirement
on U.S. operators of these airplanes is expected to be between $720 and
$3,600 per airplane per year.
2. Inspections. Should an operator elect to perform the inspection
of the service panel drain valve cap/door seal and seal mating surface,
the inspection will take approximately 1 work hour to accomplish, at an
average labor cost of $60 per work hour. Depending upon the type of
valves installed and the flight utilization rate of the airplane,
airplanes will be required to be inspected as few as 3 times per year
or as many as 15 times per year. Based on these figures, the cost
impact of the inspection requirements on U.S. operators of these
airplanes will be between $180 and $900 per airplane per year.
3. Installation of cap on flush/fill line. This installation will
take approximately 2 work hours to accomplish, at an average labor cost
of $60 per work hour. The cost of required parts is estimated to be
$275 per airplane. (There is 1 flush/fill line per airplane.) There
currently are 110 freighter-configured airplanes of U.S. registry that
will be subject to this requirement. Based on these figures, the cost
impact of the installation requirement on U.S. operators of these
airplanes is expected to be $43,450, or $395 per airplane.
The number of required work hours, as indicated above, is presented
as if the accomplishment of the actions required by this AD were to be
conducted as ``stand alone'' actions. However, in actual practice,
these actions could be accomplished coincidentally or in combination
with normally scheduled airplane inspections and other maintenance
program tasks. Therefore, the actual number of necessary ``additional''
work hours will be minimal in many instances. Additionally, any costs
associated with special airplane scheduling should be minimal.
In addition to the costs discussed above, for those operators who
elect to comply with paragraph (b) of this AD action, the FAA estimates
that it will take approximately 40 work hours per operator to
incorporate the lavatory drain system leak check procedures into the
maintenance programs, at an average labor cost of $60 per work hour.
Based on these figures, the total cost impact of the maintenance
revision requirement of this AD on the 18 affected U.S. operators is
estimated to be $43,200, or $2,400 per operator.
The cost impact figures discussed above are based on assumptions
that no operator has yet accomplished any of the requirements of this
AD action, and that no operator would accomplish those actions in the
future if this AD were not adopted.
The FAA recognizes that the obligation to maintain aircraft in an
airworthy condition is vital, but sometimes expensive. Because AD's
require specific actions to address specific unsafe conditions, they
appear to impose costs that would not otherwise be borne by operators.
However, because of the general obligation of operators to maintain
aircraft in an airworthy condition, this appearance is deceptive.
Attributing those costs solely to the issuance of this AD is
unrealistic because, in the interest of maintaining safe aircraft,
prudent operators would accomplish the required actions even if they
were not required to do so by the AD.
A full cost-benefit analysis has not been accomplished for this AD.
As a matter of law, in order to be airworthy, an aircraft must conform
to its type
[[Page 29012]]
design and be in a condition for safe operation. The type design is
approved only after the FAA makes a determination that it complies with
all applicable airworthiness requirements. In adopting and maintaining
those requirements, the FAA has already made the determination that
they establish a level of safety that is cost-beneficial. When the FAA,
as in this AD, makes a finding of an unsafe condition, this means that
the original cost-beneficial level of safety is no longer being
achieved and that the required actions are necessary to restore that
level of safety. Because this level of safety has already been
determined to be cost-beneficial, a full cost-benefit analysis for this
AD would be redundant and unnecessary.
Regulatory Impact
The regulations adopted herein 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) will not have a
significant economic impact, positive or negative, on a substantial
number of small entities under the criteria of the Regulatory
Flexibility Act. A final evaluation has been prepared for this action
and it is contained in the Rules Docket. A copy of it may be obtained
from the Rules Docket at the location provided under the caption
ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding the following new
airworthiness directive:
96-12-18 McDonnell Douglas: Amendment 39-9661. Docket 95-NM-120-AD.
Applicability: Model DC-10 series airplanes and Model MD-11F
series airplanes; equipped with a lavatory drainage system, forward
or aft; certificated in any category.
Note 1: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (f) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it.
Compliance: Required as indicated, unless previously
accomplished.
To prevent engine damage, airframe damage, and/or a hazard to
persons or property on the ground as a result of ``blue ice'' that
has formed from leakage of the lavatory drain system and dislodged
from the airplane, accomplish the following:
Note 2: The toilet dump valve leak checks required by this AD
may be performed by filling the toilet tank with water/rinsing fluid
to a level such that the bowl is approximately half full (at least 2
inches above the flapper in the bowl) and checking for leakage after
a period of 5 minutes.
(a) Except as provided in paragraph (b) of this AD, accomplish
the applicable procedures specified in paragraphs (a)(1), (a)(2),
(a)(3), (a)(4), and (a)(5) of this AD. If the individual waste drain
system panel incorporates more than one type of valve, the
inspection interval that applies to that panel is determined by the
component with the longest inspection interval allowed. Each of the
components must be inspected or tested at that time at each service
panel location.
(1) Within 1,000 flight hours after the effective date of this
AD, and thereafter at intervals not to exceed 1,000 flight hours,
accomplish the applicable procedures specified in paragraphs
(a)(1)(i) and (a)(1)(ii) of this AD for each lavatory drain system
with a service panel drain valve installed that is listed in Table
1, below:
Table 1.--Valves Requiring Leak Checks at 1,000-Flight-Hour Intervals
------------------------------------------------------------------------
Manufacturer- Part No. Serial No.
------------------------------------------------------------------------
Kaiser Electroprecision......... 0218-0032 series.. All serial
numbers.
Shaw Aero Devices............... 1010100C-N (or All serial
higher dash numbers.
number).
Shaw Aero Devices............... 1010100B-A-1...... 0115 through 0121,
0146 through
0164, 0180 and
higher.
Shaw Aero Devices -............. 10101000BA2-...... 130 and higher.
Shaw Aero Devices -............. 10101000BB2-...... 0011 and higher.
Shaw Aero Devices -............. 331 series -...... All serial
numbers.
Shaw Aero Devices -............. 332 series -...... All serial
numbers.
Pneudraulics -.................. 9527 series-...... All serial
numbers.
------------------------------------------------------------------------
(i) Conduct a leak check of the dump valve and drain valve. The
service panel drain valve leak check must be performed with a
minimum of 3 PSID applied across the valve. Both the inner door/
closure device and the outer cap/door must be leak checked.
(ii) For service panel valves that have an inner seal: In lieu
of pressure testing, the outer cap seal and seal surface may be
visually inspected for damage or wear. Any damaged parts must be
replaced or repaired prior to further flight, or the affected
lavatory(s) must be drained and placarded inoperative until repairs
can be accomplished.
(2) Within 600 flight hours after the effective date of this AD,
and thereafter at intervals not to exceed 600 flight hours,
accomplish the applicable procedures specified in paragraphs
(a)(2)(i) and (a)(2)(ii) of this AD for each lavatory drain system
with a service panel drain valve installed that is listed in Table
2, below:
Table 2.--Valves Requiring Leak Checks at 600-Flight Hour Intervals
------------------------------------------------------------------------
Manufacturer- Part No.- Serial No.
------------------------------------------------------------------------
Kaiser Electroprecision -....... 0218-0026 series-. All serial
numbers.
[[Page 29013]]
Shaw Aero Devices -............. 1010100C series,
except as called
out in Table 1,
above,.
Shaw Aero Devices -............. 1010100B series,
except as called
out in Table 1,
above.
------------------------------------------------------------------------
(i) Conduct a leak check of the dump valve and the service panel
drain valve. The service panel drain valve leak check must be
performed with a minimum 3 PSID applied across the valve. Both the
inner door/closure device and the outer cap/door must be leak
checked.
(ii) For service panel valves that have an inner seal: In lieu
of pressure testing, the outer cap seal and seal surface may be
visually inspected for damage or wear. Any damaged parts must be
replaced or repaired prior to further flight, or the affected
lavatory(s) must be drained and placarded inoperative until repairs
can be accomplished.
(3) For each lavatory drain system not addressed in paragraph
(a)(1) or (a)(2) of this AD: Within 200 flight hours after the
effective date of this AD, and thereafter at intervals not to exceed
200 flight hours, accomplish the following procedures:
(i) Conduct a leak check of the dump valve and the service panel
drain valve. The service panel drain valve leak check must be
performed with a minimum 3 PSID applied across the valve. If the
service panel drain valve has an inner door with a second positive
seal, both the inner door and the outer cap/door must be leak
checked.
(ii) For service panel valves that have an inner seal: In lieu
of pressure testing, the outer cap seal and seal surface may be
visually inspected for damage or wear. Any damaged parts must be
replaced or repaired prior to further flight, or the affected
lavatory(s) must be drained and placarded inoperative until repairs
can be accomplished.
Note 3: Some service panel valves have an inner seal that is
closed when the outer cap is closed. For this type of valve, the
fluid leakage from the outer cap can be checked only if the inner
seal is removed; when the inner seal is in place, it prevents any
fluid from reaching the outer cap seal. For this type of valve, the
actions specified in paragraph (a)(3)(ii) are provided to allow
inspection of the seal and seal surface of the outer cap seal as an
alternative to leak checking the outer seal itself.
(4) For flush/fill lines: Within 5,000 flight hours after the
effective date of this AD, and thereafter at intervals not to exceed
5,000 flight hours, accomplish either of the procedures specified in
paragraphs (a)(4)(i) or (a)(4)(ii) of this AD, as appropriate for
the airplane's flush/fill line installation:
(i) For airplanes equipped with a flush/fill line cap,
accomplish either paragraph (a)(4)(i)(A) or (a)(4)(i)(B) of this AD:
(A) Conduct a leak check of the flush/fill line cap. This leak
check must be made with a minimum of 3 PSID applied across the cap.
Or
(B) Replace the seals on the toilet tank anti-siphon (check)
valve and the flush/fill line cap. Additionally, perform a leak
check of the toilet tank anti-siphon (check) valve with a minimum of
3 PSID across the valve.
Note 4: The Inspection/Check procedure specified in DC-10
Maintenance Manual, chapter 38-30-00, pages 601 and 602, dated June
1, 1993, may be referred to as guidance for the procedures required
by this paragraph.
(ii) For airplanes equipped with a check valve vacuum breaker,
Monogram part number series 4803-86: Replace the O-rings /seals in
the valve and test the check valve and vacuum breaker sections of
the valve for proper operation, in accordance with the
manufacturer's component maintenance/overhaul manual.
(5) If a leak is discovered during any leak check required by
paragraph (a) of this AD, prior to further flight, accomplish either
of the procedures specified in paragraph (a)(5)(i) or (a)(5)(ii) of
this AD:
(i) Repair the leak and retest. Or
(ii) Drain the affected lavatory system and placard the lavatory
inoperative until repairs can be accomplished.
(b) As an alternative to the requirements of paragraph (a) of
this AD: Within 180 days after the effective date of this AD, revise
the FAA-approved maintenance program to include the requirements
specified in paragraphs (b)(1), (b)(2), (b)(3), (b)(4), (b)(5), and
(b)(6) of this AD.
(1) For each lavatory drain system: Within 5,000 flight hours
after revision of the maintenance program in accordance with
paragraph (b) of this AD, and thereafter at intervals not to exceed
18 months, replace the valve seals. Any revision to this replacement
schedule must be approved by the Manager, Los Angeles Aircraft
Certification Office (ACO), FAA, Transport Airplane Directorate.
(2) Conduct periodic leak checks of the lavatory drain systems
in accordance with the applicable schedule specified in paragraphs
(b)(2)(i), (b)(2)(ii), and (b)(2)(iii) of this AD. If the individual
waste drain system panel incorporates more than one type of valve,
the inspection interval that applies to that panel is determined by
the component with the longest inspection interval allowed. Each of
the components must be inspected/tested at that time at each service
panel location. Any revision to the leak check schedule must be
approved by the Manager, Los Angeles ACO, FAA, Transport Airplane
Directorate.
(i) Within 1,000 flight hours after revising the maintenance
program in accordance with paragraph (b) of this AD, and thereafter
at intervals not to exceed 1,000 flight hours, accomplish the
applicable procedures specified in paragraphs (b)(2)(i)(A) and
(b)(2)(i)(B) of this AD for each lavatory drain system with a
service panel drain valve installed that is listed in Table 3,
below:
Table 3.--Valves Requiring Leak Checks at 1,000-Flight Hour Intervals
------------------------------------------------------------------------
Manufacturer Part No. Serial No.
------------------------------------------------------------------------
Kaiser Electroprecision......... 0218-0032 series.. All serial
numbers.
Kaiser Electroprecision......... 0218-0026 series.. All serial
numbers.
Shaw Aero Devices............... 1010100C series... All serial
numbers.
Shaw Aero Devices............... 1010100B series... All series
numbers.
Shaw Aero Devices............... 10101000BA2....... 130 and higher.
Shaw Aero Devices............... 10101000BB2....... 0011 and higher.
Shaw Aero Devices............... 331 series........ All serial
numbers.
Shaw Aero Devices............... 332 series........ All serial
numbers.
Pneudraulics.................... 9527 series....... All serial
numbers.
------------------------------------------------------------------------
(A) Conduct leak checks of the dump valve and service panel
drain valve. The service panel drain leak must be performed with a
minimum of 3 PSID applied across the valve. Only the inner door/
closure device of the service panel drain valve must be leak
checked. And
(B) Visually inspect the service panel drain valve outer cap/
door seal and seal mating surface for wear or damage that may cause
leakage. Any worn or damaged seal must be replaced, and any damaged
seal mating surface must be repaired or replaced, prior to further
flight, in accordance with the valve manufacturer's maintenance
manual.
(ii) Within 200 flight hours after revising the maintenance
program in accordance with paragraph (b) of this AD, and thereafter
at intervals not to exceed 200 flight hours, accomplish the
applicable procedures in
[[Page 29014]]
paragraph (b)(2)(ii)(A) and (b)(2)(ii)(B) of this AD for each
lavatory drain system with a lavatory drain system valve that
incorporates one of the valves listed in Table 4, below:
Table 4.--Valves Requiring Leak Checks at 200-Flight Hour Intervals
------------------------------------------------------------------------
Manufacturer Part No. Serial No.
------------------------------------------------------------------------
Kaiser Electroprecision -....... 4259-20 or 4259-31 All serial
``donut'' numbers.
assemblies -(or
substitute
assemblies from
another
manufacturer).
Kaiser Roylyn................... 2651-231..........
Kaiser Roylyn................... 2651-259..........
------------------------------------------------------------------------
(A) Conduct leak checks of the dump valve and the service panel
drain valve. The service panel drain valve leak check must be
performed with a minimum 3 PSID applied across the valve. Both the
donut and the outer cap/door must be leak checked.
(B) For service panel valves that have an inner seal: In lieu of
pressure testing, visually inspect the outer cap seal and seal
surface for damage or wear. Any damaged parts must be replaced or
repaired prior to further flight, or the affected lavatory(s) must
be drained and placarded inoperative until repairs can be
accomplished.
(iii) For each lavatory drain system that incorporates any other
type of approved valves: Within 400 flight hours after revising the
maintenance program in accordance with paragraph (b) of this AD, and
thereafter at intervals not to exceed 400 flight hours accomplish
both of the following procedures:
(A) Conduct leak checks of the dump valve and the service panel
drain valve. The service panel drain valve leak check must be
performed with a minimum 3 PSID applied across the valve. If the
service panel drain valve has an inner door/closure device with a
second positive seal, only the inner door must be leak checked. And
(B) If the valve has an inner door/closure device with a second
positive seal: Visually inspect the service panel drain valve outer
door/cap seal and seal mating surface for wear or damage that may
cause leakage. Any worn or damaged seal must be replaced and any
damaged seal mating surface must be repaired or replaced, prior to
further flight, in accordance with the valve manufacturer's
maintenance manual.
(3) For flush/fill lines: Within 5,000 flight hours after the
effective date of this AD, and thereafter at intervals not to exceed
5,000 flight hours, accomplish the procedure specified in either
paragraph (b)(3)(i) or (b)(3)(ii) of this AD, as appropriate for the
airplane's flush/fill line installation:
(i) For airplanes equipped with a flush/fill line cap,
accomplish either paragraph (b)(3)(i)(A) or (b)(3)(i)(B) of this AD:
(A) Conduct a leak check of the flush/fill line cap. This leak
check must be made with a minimum of 3 PSID applied across the cap.
Or
(B) Replace the seals on the toilet tank anti-siphon (check)
valve and the flush/fill line cap. Additionally, perform a leak
check of the toilet tank anti-siphon (check) valve with a minimum of
3 PSID across the valve.
Note 5: The Inspection/Check procedure specified in DC-10
Maintenance Manual, chapter 38-30-00, pages 601 and 602, dated June
1, 1993, may be referred to as guidance for the procedures required
by this paragraph.
(ii) For airplanes equipped with a check valve vacuum breaker,
Monogram part number series 4803-86: Replace the O-rings/seals in
the valve and test the check valve and vacuum breaker sections of
the valve for proper operation, in accordance with the
manufacturer's component maintenance/overhaul manual.
(4) Provide procedures for accomplishing visual inspections to
detect leakage, to be conducted by maintenance personnel at
intervals not to exceed 4 calendar days or 45 flight hours,
whichever occurs later.
(5) Provide procedures for reporting leakage. These procedures
shall provide that any ``horizontal blue streak'' findings must be
reported to maintenance and that, prior to further flight, the
leaking system shall either be repaired, or be drained and placarded
inoperative.
(6) Provide training programs for maintenance and servicing
personnel that include information on ``Blue Ice Awareness'' and the
hazards of ``blue ice.''
(c) For operators who elect to comply with paragraph (b) of this
AD: Any revision to (i.e., extension of) the leak check intervals
required by paragraph (b) of this AD must be approved by the
Manager, Los Angeles ACO, FAA, Transport Airplane Directorate.
Requests for such revisions must be submitted to the Manager of the
Los Angeles ACO through the FAA Principal Maintenance Inspector
(PMI), and must include the following information:
(1) The operator's name;
(2) A statement verifying that all known cases/indications of
leakage or failed leak tests are included in the submitted material;
(3) The type of valve (make, model, manufacturer, vendor part
number, and serial number);
(4) The period of time covered by the data;
(5) The current FAA leak check interval;
(6) Whether or not seals have been replaced between the seal
replacement intervals required by this AD;
(7) Whether or not leakage has been detected between leak check
intervals required by this AD, and the reason for leakage (i.e.,
worn seals, foreign materials on sealing surface, scratched or
damaged sealing surface or valve, etc.);
(8) Whether or not any leak check was conducted without first
inspecting or cleaning the sealing surfaces, changing the seals, or
repairing the valve. [If such activities have been accomplished
prior to conducting the periodic leak check, that leak check shall
be recorded as a ``failure'' for purposes of the data required for
this request submission. The exception to this is the normally
scheduled seal change in accordance with paragraph (b)(1) of this
AD. Performing this scheduled seal change prior to a leak check will
not cause that leak check to be recorded as a failure.]
Note 6: Requests for approval of revised leak check intervals
may be submitted in any format, provided that the data give the same
level of assurance specified in paragraph (c) of this AD.
Note 7: For the purposes of expediting resolution of requests
for revisions to the leak check intervals, the FAA suggests that the
requester summarize the raw data; group the data gathered from
different airplanes (of the same model) and drain systems with the
same kind of valve; and provide a recommendation from pertinent
industry group(s) and/or the manufacturer specifying an appropriate
revised leak check interval.
(d) For all airplanes: Within 5,000 flight hours after the
effective date of this AD, accomplish the requirements of either
paragraph (d)(1) or (d)(2) of this AD:
(1) Install a lever/lock cap on the flush/fill lines for all
lavatory service panels. The cap must be either an FAA-approved
lever/lock cap; or a lever/lock cap installed in accordance with
McDonnell Douglas Service Bulletin 38-65 (for Model DC-10 series
airplanes) or Service Bulletin 38-39 [for Model MD-11F series
airplanes (freighter)], as applicable. Or
(2) Install a Monogram 4803-86 series check valve on the flush/
fill lines for all lavatory service panels.
(e) For any affected airplane acquired after the effective date
of this AD: Before any operator places into service any airplane
subject to the requirements of this AD, a schedule for the
accomplishment of the leak checks required by this AD shall be
established in accordance with either paragraph (e)(1) or (e)(2) of
this AD, as applicable. After each leak check has been performed
once, each subsequent leak check must be performed in accordance
with the new operator's schedule, in accordance with either
paragraph (a) or (b) of this AD as applicable.
(1) For airplanes previously maintained in accordance with this
AD, the first leak check to be performed by the new operator must be
accomplished in accordance with the previous operator's schedule or
with the new operator's schedule, whichever would result in the
earlier accomplishment date for that leak check.
(2) For airplanes that have not been previously maintained in
accordance with this AD, the first leak check to be performed by the
new operator must be accomplished prior to further flight, or in
accordance with a schedule approved by the FAA PMI, but within a
period not to exceed 200 flight hours.
(f) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Los Angeles ACO, FAA, Transport
Airplane Directorate. Operators shall submit their requests through
an appropriate FAA PMI, who may add comments and then send it to the
Manager, Los Angeles ACO.
Note 8: Information concerning the existence of approved
alternative methods of
[[Page 29015]]
compliance with this AD, if any, may be obtained from the Los
Angeles ACO.
Note 9: For any valve that is not eligible for the extended leak
check intervals of this AD: To be eligible for the leak check
interval specified in paragraphs (a)(1) and (b)(2)(i), the service
history data of the valve must be submitted to the Manager, Los
Angeles ACO, FAA, Transport Airplane Directorate, with a request for
an alternative method of compliance with this AD. The request should
include an analysis of known failure modes for the valve, if it is
an existing design, and known failure modes of similar valves.
Additionally, the request should include an explanation of how
design features will preclude these failure modes, results of
qualification tests, and approximately 25,000 flight hours or 25,000
flight cycles of service history data, including a winter season,
collected in accordance with the requirements of paragraph (c) of
this AD or a similar program.
(g) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(h) This amendment becomes effective on July 12, 1996.
Issued in Renton, Washington, on June 3, 1996.
Darrell M. Pederson,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 96-14386 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 96-14385 Airworthiness Directives; McDonnell Douglas Model DC-9-80 Series Airplanes, Model MD-88 Airplanes, and Model MD-90 Airplanes
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29006-29008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14385]
-----------------------------------------------------------------------
[[Page 29007]]
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 96-NM-111-AD; Amendment 39-9664; AD 96-12-21]
RIN 2120-AA64
Airworthiness Directives; McDonnell Douglas Model DC-9-80 Series
Airplanes, Model MD-88 Airplanes, and Model MD-90 Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: This amendment adopts a new airworthiness directive (AD) that
is applicable to all McDonnell Douglas Model DC-9-80 series airplanes,
Model MD-88 airplanes, and Model MD-90 airplanes. This action requires
revising the Airplane Flight Manual to include limitations and
procedures to address situations in which the autopilot or autothrottle
fails to disengage. This amendment is prompted by incidents in which
the flightcrew was unable to disconnect the autopilot or autothrottle
function from the engaged position, due to a discrepancy in a
microswitch that is associated with the operation of those functions.
The actions specified in this AD are intended to ensure the flight
crew's ability to control the airplane manually if the autopilot or
autothrottle function fails to disengage.
DATES: Effective June 24, 1996.
Comments for inclusion in the Rules Docket must be received on or
before August 6, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Transport Airplane Directorate, ANM-103,
Attention: Rules Docket No. 96-NM-111-AD, 1601 Lind Avenue, SW.,
Renton, Washington 98055-4056.
Information concerning this rulemaking action may be examined at
the FAA, Transport Airplane Directorate, 1601 Lind Avenue, SW., Renton,
Washington; or at the FAA, Los Angeles Aircraft Certification Office,
Transport Airplane Directorate, 3960 Paramount Boulevard, Lakewood,
California.
FOR FURTHER INFORMATION CONTACT: J. Kirk Baker, Aerospace Engineer,
Systems and Equipment Branch, ANM-130L, FAA, Los Angeles Aircraft
Certification Office, 3960 Paramount Boulevard, Lakewood, California
90712; telephone (310) 627-5345; fax (310) 627-5210.
SUPPLEMENTARY INFORMATION: The FAA has received several reports of
incidents in which either the autopilot or the autothrottle function on
McDonnell Douglas Model DC-9-80 series airplanes failed to disconnect
from the engaged position. Two incidents occurred in which the flight
crew was unable to disengage the autopilot function. As a result of one
of these incidents, which occurred when the airplane was on final
approach, the flight crew found it necessary to declare an emergency
and to perform a go-around. At least two other incidents occurred in
which the flight crew was unable to disengage the autothrottle
function.
Investigation of these incidents revealed that the toggle/cam
assembly of a microswitch, which is used for the autopilot and
autothrottle functions on the Digital Flight Guidance Control Panel
(DFGCP), can fail the functions in the engaged position. Further
investigation revealed that the flight crew was able to disengage the
autopilot or authrottle function by depressing and holding the release
button for the functions (which are located on the control column and
throttle levers). However, once the release button was released, the
function re-engaged.
Failure of the autopilot or autothrottle function to disconnect
from the engaged position can adversely affect the flight crew's
ability to control the airplane manually.
Since the toggle/cam assembly of the subject microswitch that is
installed on Model DC-9-80 series airplanes may also be installed on
Model MD-88 and MD-90 airplanes, all of these airplane models may be
subject to this same unsafe condition.
Explanation of the Requirements of the Rule
Since an unsafe condition has been identified that is likely to
exist or develop on other Model DC-9-80 series, Model MD-88, and Model
MD-90 airplanes of the same type design, this AD is being issued to
ensure the flight crew's ability to continue to control the airplane
manually if the autopilot or autothrottle function fails to disengage.
This AD requires a revision to the FAA-approved Airplane Flight Manual
(AFM) to include limitations and procedures to address situations in
which the autopilot or autothrottle fails to disengage.
The FAA points out that failure of the autopilot or autothrottle
function to disconnect from the engaged position can occur during any
phase of flight. If it occurs during cruise, the flight crew can
readily address the situation and continue to fly the airplane manually
with the autopilot or autothrottle engaged. However, a safety concern
arises if the failure occurs during approach, when the flight crews
workload is particularly heavy and the airplane is close to the ground;
the optimal environment for the flight crew during approach is one that
is free from distraction. The limitation and associated abnormal
procedures that are required by this AD to be included in the AFM will
ensure that the flight crew is briefed on the appropriate procedures
and, thereby, will be less distracted during that critical phase of
flight.
The requirements of this AD are considered to be interim action
until final action is identified, at which time the FAA may consider
additional rulemaking.
Determination of Rule's Effective Date
Since a situation exists that requires the immediate adoption of
this regulation, it is found that notice and opportunity for prior
public comment hereon are impracticable, and that good cause exists for
making this amendment effective in less than 30 days.
Comments Invited
Although this action is in the form of a final rule that involves
requirements affecting flight safety and, thus, was not preceded by
notice and an opportunity for public comment, comments are invited on
this rule. Interested persons are invited to comment on this rule by
submitting such written data, views, or arguments as they may desire.
Communications shall identify the Rules Docket number and be submitted
in triplicate to the address specified under the caption ADDRESSES. All
communications received on or before the closing date for comments will
be considered, and this rule may be amended in light of the comments
received. Factual information that supports the commenter's ideas and
suggestions is extremely helpful in evaluating the effectiveness of the
AD action and determining whether additional rulemaking action would be
needed.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the rule that might
suggest a need to modify the rule. All comments submitted will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report that
summarizes each FAA-public contact concerned with the substance of this
AD will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this rule must submit a self-addressed,
stamped
[[Page 29008]]
postcard on which the following statement is made: ``Comments to Docket
Number 96-NM-111-AD.'' The postcard will be date stamped and returned
to the commenter.
Regulatory Impact
The regulations adopted herein 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
The FAA has determined that this regulation is an emergency
regulation that must be issued immediately to correct an unsafe
condition in aircraft, and that it is not a ``significant regulatory
action'' under Executive Order 12866. It has been determined further
that this action involves an emergency regulation under DOT Regulatory
Policies and Procedures (44 FR 11034, February 26, 1979). If it is
determined that this emergency regulation otherwise would be
significant under DOT Regulatory Policies and Procedures, a final
regulatory evaluation will be prepared and placed in the Rules Docket.
A copy of it, if filed, may be obtained from the Rules Docket at the
location provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding the following new
airworthiness directive:
96-12-21 McDonnell Douglas: Amendment 39-9664. Docket 96-NM-111-AD.
Applicability: Model DC-9-81 (MD-81), DC-9-82 (MD-82), DC-9-83
(MD-83), DC-9-87 (MD-87), MD-88, and MD-90 airplanes; certificated
in any category.
Note 1: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (c) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it.
Compliance: Required as indicated, unless accomplished
previously.
To ensure the flight crew's ability to continue to control the
airplane manually if the autopilot or autothrottle function fails to
disengage, accomplish the following:
(a) Within 14 days after the effective date of this AD, revise
the Limitations section of the FAA-approved Airplane Flight Manual
(AFM) to include the following statement. This may be accomplished
by inserting a copy of this AD in the AFM.
``If the autopilot or autothrottle fails to disconnect normally,
press and hold the autopilot release button or either autothrottle
release button, as appropriate. Refer to the Abnormal Procedures
section for procedures if the autopilot or autothrottle fails to
disconnect.''
(b) Within 14 days after the effective date of this AD, revise
the Abnormal Procedures section of the FAA-approved AFM to include
the following information. This may be accomplished by inserting a
copy of this AD in the AFM.
``AUTOPILOT:
If the Autopilot (A/P) disconnects when the AUTOPILOT RELEASE
button on either control wheel is depressed, and re-engages when the
AUTOPILOT RELEASE button is released, accomplish the following
procedures:
PROCEDURE: Use Autopilot (as desired)
AUTOPILOT RELEASE button--PRESS AND HOLD
Hold either yoke (yellow) Autopilot Release button
while continuing to fly the aircraft manually. The A/P will remain
disengaged while depressing the button.
When the Autopilot Release button is released, the A/P
will engage and all A/P functions should work normally.
TO SILENCE THE AURAL WARNING:
CAWS C/B (P-38)--PULL
Circuit breaker is located behind the Captain's seat.
Pulling the C/B will disable the Stall Warning SSRS-1,
Landing Gear, Takeoff, Cabin Altitude, Speed Brake aural warnings,
in addition to the Autopilot aural warning.
CAUTION:
Do not attempt to overpower the autopilot. When the autopilot is
engaged, applying force to the column may allow the alternate trim
to reposition the stabilizer. If the force is applied long enough,
it will result in an out-of-trim condition.''
``AUTOTHROTTLE:
If the Autothrottle (A/T) disconnects when either throttle
disconnect button is depressed, and re-engages when throttle
disconnect button is released, accomplish the following procedures:
PROCEDURE: Use Autothrottle System (as desired)
WHEN A DISCONNECT IS NECESSARY:
AUTOTHROTTLE RELEASE BUTTON--PRESS AND HOLD
Press and hold either button until flashing red A/T
annunciation is illuminated. Flashing red light indicates
autothrottle is disconnected.
AUTOTHROTTLE RELEASE BUTTON may then be released.
The FMA A/T window will annunciate as though the A/T is
engaged.
The flashing red A/T annunciation of the FMA cannot be
extinguished with repeated depression of the autothrottle release
button.
If the throttle levers are retarded to the idle stop,
the flashing red A/T annunciation will extinguish, and the A/T
system will re-engage.
If the DFGC is selected to the IAS mode and the A/T
SPEED mode is selected, the A/T system will re-engage.''
(c) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Los Angeles Aircraft Certification
Office (ACO), FAA, Transport Airplane Directorate. Operators shall
submit their requests through an appropriate FAA Principal
Maintenance Inspector, who may add comments and then send it to the
Manager, Los Angeles ACO.
Note 2: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Los Angeles ACO.
(d) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(e) This amendment becomes effective on June 24, 1996.
Issued in Renton, Washington, on June 3, 1996.
Darrell M. Pederson,
Acting Manager, Transport Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 96-14385 Filed 6-06-96; 8:45 am]
BILLING CODE 4910-13-P
Complete official Federal Register PDF
FR Doc. 96-14368 United States Government Life Insurance
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29024-29025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14368]
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 6
RIN 2900-AH52
United States Government Life Insurance
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the Department of Veterans Affairs (VA)
regulations relating to United States Government Life Insurance
(USGLI). It deletes provisions that have become obsolete. It also
deletes provisions contained in insurance policies that consist of
material not required to be published in the Federal Register.
Additionally, it deletes restatements of statute and makes changes for
purposes of clarity.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: George Poole, Chief, Insurance Program
Administration, Department of Veterans Affairs Regional Office and
Insurance Center, PO Box 8079, Philadelphia, PA 19101, (215) 951-5718.
SUPPLEMENTARY INFORMATION: With the enactment of the National Service
Life Insurance Act of 1940, as amended, issuance of USGLI policies
ceased in April, 1951. Additionally, all USGLI policies were declared
paid-up effective January 1, 1983. Furthermore, all USGLI term policies
were converted to Ordinary Life policies in May, 1993. Consequently,
regulations pertaining to issuance, premium payments (other than being
declared paid-up), reinstatements of lapsed policies, or term policies
are obsolete and are eliminated accordingly. It also deletes provisions
contained in insurance policies that consist of material not required
to be published in the Federal Register. Additionally, it deletes
restatements of statute and makes changes for purposes of clarity.
This final rule consists of nonsubstantive changes and, therefore,
is not subject to the notice-and-comment and effective-date provisions
of 5 U.S.C. 553.
The Secretary of Veterans Affairs hereby certifies that this final
rule will not have a significant economic impact on a substantial
number of small entities as they are defined in the Regulatory
Flexibility Act, 5 U.S.C. 601-612. This final rule will not affect any
entity since it does not contain any substantive provisions. Therefore,
pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial
and final regulatory flexibility analysis requirements of sections 603
and 604.
The Catalog of Federal Domestic Assistance Program number for these
regulations is 64.103.
List of Subjects in 38 CFR Part 6
Life insurance, Military personnel, Veterans.
Approved: May 31, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set forth in the preamble, 38 CFR part 6 is amended
as set forth below:
PART 6--UNITED STATES GOVERNMENT LIFE INSURANCE
1. The authority citation for part 6 is revised to read as follows:
Authority: 38 U.S.C. 501, 1940-1963, 1981-1988, unless otherwise
noted.
2. The undesignated center headings preceding Secs. 6.2, 6.3, 6.7,
6.31, 6.46, 6.47, 6.78, 6.90, 6.106, 6.111, 6.150, 6.153, 6.155, 6.159,
6.170, 6.186 and 6.202 are removed.
Secs. 6.2 through 6.7, 6.16 through 6.40, 6.46 through 6.53, 6.56,
6.57, 6.63, 6.67, 6.69 through 6.92, 6.101 through 6.111, 6.116, 6.120
through 6.121, 6.123 through 6.123c, 6.125, 6.126, 6.128 through 6.186,
6.192 through 6.210 [Removed]
3. In part 6, the following sections are removed:
a. Sections 6.2 through 6.7;
b. Sections 6.16 through 6.40;
c. Sections 6.46 through 6.53;
d. Section 6.56;
e. Section 6.57;
f. Section 6.63;
g. Section 6.67;
h. Sections 6.69 through 6.92;
i. Sections 6.101 through 6.111;
j. Section 6.116;
k. Sections 6.120 through 6.121;
l. Sections 6.123 through 6.123c;
m. Section 6.125;
n. Section 6.126;
o. Sections 6.128 through 6.186; and
p. Sections 6.192 through 6.210.
Secs. 6.12, 6.13, 6.45, 6.55, 6.58, 6.60, 6.62, 6.64, 6.65, 6.68, 6.95,
6.96, 6.100, 6.115, 6.117, 6.117a, 6.119, 6.122, 6.127, 6.191,
6.211 [Redesignated as Secs. 6.1 through 6.21]
4. Part 6 is amended by redesignating the following sections as set
forth below:
------------------------------------------------------------------------
Old section New section
------------------------------------------------------------------------
6.12................................. 6.1
6.13................................. 6.2
6.45................................. 6.3
6.55................................. 6.4
6.58................................. 6.5
6.60................................. 6.6
6.62................................. 6.7
6.64................................. 6.8
[[Page 29025]]
6.65................................. 6.9
6.68................................. 6.10
6.95................................. 6.11
6.96................................. 6.12
6.100................................ 6.13
6.115................................ 6.14
6.117................................ 6.15
6.117a............................... 6.16
6.119................................ 6.17
6.122................................ 6.18
6.127................................ 6.19
6.191................................ 6.20
6.211................................ 6.21
------------------------------------------------------------------------
Sec. 6.2 [Amended]
5. In newly redesignated Sec. 6.2, the first sentence is removed.
Sec. 6.3 [Amended]
6. In newly redesignated Sec. 6.3, paragraph (a) is removed and the
paragraph designation (b) is removed.
Sec. 6.4 [Amended]
7. Newly redesignated Sec. 6.4 is amended by removing
``Secs. 3.1(j), 3.204, 3.205 (a) and (b) and 3.209 of `` and adding, in
its place, ``38 U.S.C. 103(c) and Part 3''.
Sec. 6.7 [Amended]
8. In newly redesignated Sec. 6.7, paragraphs (a), (b) and (c) are
removed; and paragraph (d) is redesignated as paragraph (a); newly
redesignated Sec. 6.7 is further amended by revising the section
heading and by adding a new paragraph (b) to read as follows:
Sec. 6.7 Claims of creditors, taxation.
* * * * *
(b) The provisions of 38 U.S.C. 5301(b) which entitle the United
States to collect by setoff out of benefits payable to any beneficiary
under a United States Government life insurance policy do not apply to
dividends being held to the credit of the insured for the payment of
premiums under the provisions of section 1946 of title 38 U.S.C.
* * * * *
9. Newly redesignated Sec. 6.8 is revised to read as follows:
Sec. 6.8 Selection, revocation and election.
The insured under a United States Government Life Insurance policy
may, upon written notice, select an optional settlement. Such optional
settlement may be revoked by written notice. If the insured does not
select one of the optional settlements, as set out under the provisions
of the policy, the insurance shall be payable in 240 monthly
installments unless the beneficiary elects in writing a different
option.
Sec. 6.9 [Amended]
10. In newly redesignated Sec. 6.9, the first sentence of the
introductory text is removed.
11. Newly redesignated Sec. 6.10 is revised to read as follows:
Sec. 6.10 Options.
Insurance will be payable in one sum only when selected by the
insured during his or her lifetime or by his or her last will and
testament.
12. In newly redesignated Sec. 6.11, paragraph (d) and the first
sentence of paragraph (a) are removed; paragraphs (e) and (f) are
redesignated as paragraphs (d) and (e), respectively. Newly
redesignated paragraph (d) is amended by removing ``as provided in
paragraph (f) of this section'', and by removing ``in Sec. 6.62'' and
adding, in its place, ``in Sec. 6.7''. Newly redesignated Sec. 6.11 is
further amended by revising the section heading, paragraph (b) and
newly redesignated paragraph (e) to read as follows:
Sec. 6.11 How dividends are paid.
* * * * *
(b) If the insured has a National Service Life Insurance policy or
policies in force, dividends used to pay premiums in advance will be
held to the credit of the insured, unless otherwise directed by the
insured.
* * * * *
(e) Dividend credit of the insured held for payment of premiums or
dividends left to accumulate on deposit may be applied to the payment
of premiums in advance on any National Service Life Insurance policy
upon written request of the insured made before default in payment of
premium. Upon maturity of the policy, any unpaid dividend will be paid
to the person(s) currently entitled to receive payments under the
policy.
13. In newly redesignated Sec. 6.13, the section heading is revised
to read as follows:
Sec. 6.13 Policy loans.
* * * * *
Sec. 614 [Amended]
14. In newly redesignated Sec. 6.14, the seventh and eight
sentences are removed; the section heading is amended by removing ``5-
year level premium term policy and''; the first sentence is amended by
removing ``the 5-year level premium term or''; the second sentence is
amended by removing ``at the end of the first policy year and at the
end of any policy year thereafter'', and the fourth sentence is amended
by removing ``provided the policy has been in force for at least 1
year''.
15. Newly redesignated Sec. 6.16 is revised to read as follows:
Sec. 6.16 Payment of cash value in monthly installments.
Effective January 1, 1971, in lieu of payment of cash value in one
sum, the insured may elect to receive payment in monthly installments
under option 2 as set forth in the insurance contract or as a refund
life income option. If the insured dies before the agreed number of
monthly installments have been paid, the remaining unpaid monthly
installments will be payable to the designated beneficiary in one sum,
unless the insured or such beneficiary has elected to continue the
installments under the option selected by the insured. If no designated
beneficiary survives, the present value of any remaining unpaid
installments shall be paid to the estate of the insured, provided such
payment would not escheat.
16. Newly redesignated Sec. 6.18 is revised to read as follows:
Sec. 6.18 Other disabilities deemed to be total and permanent.
(a) In addition to the conditions specified in 38 U.S.C. 1958, the
following also will be deemed to be total and permanent disabilities:
Organic loss of speech; permanently helpless or permanently bedridden.
(b) Organic loss of speech will mean the loss of the ability to
express oneself, both by voice and whisper, through the normal organs
of speech if such loss is caused by organic changes in such organs.
Where such loss exists, the fact that some speech can be produced
through the use of an artificial appliance or other organs of the body
will be disregarded.
Sec. 6.19 [Amended]
17. Newly redesignated Sec. 6.19 is amended by removing
``Secs. 3.204, 3.211 and 3.212'' and adding, in its place, ``Part 3''.
[FR Doc. 96-14368 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14367 Soldiers' and Sailors' Civil Relief
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29025-29027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14367]
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 7
RIN 2900-AH53
Soldiers' and Sailors' Civil Relief
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the Department of Veterans Affairs (VA)
regulations captioned ``Soldiers' and Sailors' Civil Relief'' which
were established under the Soldiers' and
[[Page 29026]]
Sailors' Civil Relief Act of 1940, as amended (50 U.S.C. app. 511 et
seq.). It deletes provisions that became obsolete because they were
superseded by subsequent amendments to that Act. It also eliminates
regulations that merely restate provisions of the Act and amendments
thereto. Other provisions are rewritten for purpose of clarification.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: George Poole, Chief, Insurance Program
Administration, Department of Veterans Affairs Regional Office and
Insurance Center, P.O. Box 8079, Philadelphia, Pennsylvania 19101,
(215) 951-5718.
SUPPLEMENTARY INFORMATION: This final rule consists of nonsubstantive
changes and, therefore, is not subject to the notice-and-comment and
effective-date provisions of 5 U.S.C. 553.
The Secretary of Veterans Affairs hereby certifies that this final
rule will not have a significant economic impact on a substantial
number of small entities as they are defined in the Regulatory
Flexibility Act, 5 U.S.C. 601-612. This final rule will not affect any
entity since it does not contain any substantive provisions. Therefore,
pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial
and final regulatory flexibility analysis requirements of sections 603
and 604.
The Catalog of Federal Domestic Assistance Program number for these
regulations is 64.103.
List of Subjects in 38 CFR Part 7
Life insurance, Military personnel.
Approved: May 31, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 7 is amended
as set forth below:
PART 7--SOLDIERS' AND SAILORS' CIVIL RELIEF
1. The authority citation for part 7 is revised to read as follows:
Authority: 50 U.S.C. app. 511, 540-547, unless otherwise noted.
Secs. 7.2 through 7.16, 7.23 through 7.25, 7.28, 7.30 through 7.32 and
7.34 [Removed]
2. Sections 7.2 through 7.16, 7.23 through 7.25, 7.28, 7.30 through
7.32, and 7.34 are removed.
Secs. 7.20 through 7.22, 7.26, 7.27, 7.29 and 7.33 [Redesignated as
7.2--7.8]
3. Sections 7.20 through 7.22, 7.26, 7.27, 7.29, and 7.33 are
redesignated as Secs. 7.2 through 7.8, respectively.
4. Newly redesignated Sec. 7.2 is revised to read as follows:
Sec. 7.2 Certification of military service.
(a) A statement over the signature of the Commanding Officer or a
commissioned officer of equal or higher rank than the insured, on the
insured's application, may be accepted as a certification that the
insured is a person in the military service.
(b) If the insured is unavailable because of service, the
application may be certified by the person who has custody of the
insured's service record.
(c) If an application is submitted by a person designated by the
insured or by the insured's beneficiary, the Department of Veterans
Affairs will obtain from the service department evidence that the
insured is a person in the military service.
(Authority 50 U.S.C. app. 547)
Sec. 7.3 [Amended]
5. In newly redesignated Sec. 7.3, the introductory text and
paragraph (b) are removed; paragraphs (c) and (d) are redesignated as
paragraphs (b) and (c), respectively; and newly redesignated paragraph
(c) is amended by removing ``and if a policy provides for installment
payments as a death benefit they will be calculated in accordance with
the terms of the policy on the hypothesis of the death of the insured
on the due date of the first premium to be guaranteed by the
Government:'' and adding, in its place, ``;'' immediately after the
word ``benefit.''
6. In newly redesignated Sec. 7.4, paragraph (a) is amended by
removing ``percentum'' and adding, in its place, ``percent''; paragraph
(c) is removed; this section is further amended by revising the
introductory text and paragraph (b) to read as follows:
Sec. 7.4 The premium.
The term premium as defined under 50 U.S.C. app. 540(b) shall
include membership dues and assessments in an association.
* * * * *
(b) Premiums will not be guaranteed for benefits additional to the
primary death benefit if, when combined with the amount of the primary
death benefit, the total benefit would result in a payment in excess of
$10,000 or if liability for such benefits is excluded or restricted by
military service or any activity which the insured may be called upon
to perform in connection with military service. In the event that
premiums for the primary and additional benefits are not separable
under the terms of the policy the entire policy will be guaranteed, if
the policy is otherwise eligible for protection under the law.
7. In newly redesigned Sec. 7.5 paragraphs (b) and (d) are removed;
paragraph (c) is redesignated as paragraph (b); newly redesignated
paragraph (b) is amended by removing ``at Washington DC, on the form
prescribed for that purpose, VA-Form 9-381 (as revised)'' and adding,
in its place, ``Regional Office and Insurance Center at Philadelphia,
Pennsylvania''; and paragraph (a) is revised to read as follows:
Sec. 7.5 Application.
(a) The benefits of the Act are not available except upon
application. The insured may designate any person, firm, or corporation
to submit an application on his or her behalf. The designation must be
in writing, signed by the insured and attached to the application.
* * * * *
Sec. 7.6 [Amended]
8. In newly redesignated Sec. 7.6, the first sentence of the
introductory text is amended by removing ``, but this guarantee will
not extend for more than two years after the date when the act ceases
to be in force''.
9. In newly redesignated Sec. 7.7, paragraphs (a), (c) and (e) are
removed; paragraphs (b) and (d) are redesignated as paragraphs (a) and
(b), respectively; newly redesignated paragraph (a) is amended by
removing ``(section 405, Soldiers'' and Sailors' Civil Relief Act
Amendments of 1942),'' and adding, in its place,'' (SSCRA, as
amended)''; and newly redesignated paragraph (b) is revised to read as
follows:
Sec. 7.7 Maturity.
* * * * *
(b) Upon the expiration of the period of protection, the insurer
will submit to the Department of Veterans Affairs a complete statement
of the account on each policy, which will show the amount of
indebtedness by reason of the premiums with interest and the credits,
if any, then available and will be subject to audit and approval by the
Department of Veterans Affairs. The statement of account will include
the rate of interest charged on all indebtedness, the date of debit and
credit entries, and such other information as may be deemed necessary
in making an audit of the account.
10. Newly redesignated Sec. 7.8 is revised to read as follows:
Sec. 7.8 Beneficiary or assignee.
The consent of a beneficiary, assignee, or any other person who may
have a right or interest in the proceeds of the
[[Page 29027]]
policy is not a prerequisite for placing a policy under the protection
of the Act.
[FR Doc. 96-14367 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14366 Veterans Mortgage Life Insurance
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Page 29027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14366]
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 8a
RIN 2900-AH54
Veterans Mortgage Life Insurance
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the Department of Veterans Affairs (VA)
regulations relating to Veterans Mortgage Life Insurance (VMLI) by
eliminating regulations that merely restate statutory provisions; and
by deleting provisions that have no legal effect.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: George Poole, Chief, Insurance Program
Administration, Department of Veterans Affairs Regional Office and
Insurance Center, PO Box 8079, Philadelphia, PA 19101, (215) 951-5718.
SUPPLEMENTARY INFORMATION: The Insurance Service of the Veterans
Benefits Administration has determined that various regulations
relating to VMLI are merely restatements of statutory provisions. Since
they are redundant, they are unnecessary and may be eliminated.
This final rule consists of nonsubstantive changes and, therefore,
is not subject to the notice-and-comment and effective-date provisions
of 5 U.S.C. 553. The Secretary of Veterans Affairs hereby certifies
that this final rule will not have a significant economic impact on a
substantial number of small entities as they are defined in the
Regulatory Flexibility Act, 5 U.S.C. 601-612. This final rule will not
affect any entity since it does not contain any substantive provisions.
Therefore, pursuant to 5 U.S.C. 605(b), this amendment is exempt from
the initial and final regulatory flexibility analysis requirements of
sections 603 and 604.
The Catalog of Federal Domestic Assistance Program number for these
regulations is 64.103.
List of Subject in 38 CFR Part 8a
Mortgage insurance, Veterans.
Approved: May 31, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 8a is amended
as set forth below:
PART 8a--VETERANS MORTGAGE LIFE INSURANCE
1. The authority citation for part 8a is revised to read as
follows:
Authority: 38 U.S.C. 501, and 2101 through 2106, unless
otherwise noted.
Secs. 8a.5 through 8a.7 [Removed]
2. Sections 8a.5 through 8a.7 are removed.
Sec. 8a.1 [Amended]
3. In Sec. 8a.1, paragraphs (a) and (b) are removed; paragraphs
(c), (d), (e), (f) and (g) are redesignated as paragraphs (a), (b),
(c), (d) and (e) respectively; newly redesignated paragraph (b) is
amended by adding ``(VMLI)'' after ``Veterans Mortgage Life
Insurance''; and newly redesignated paragraph (e)(3) is amended by
removing ``Chief Benefits Director'' and adding, in its place, ``Under
Secretary for Benefits''.
Sec. 8a.2 [Amended]
4. In Sec. 8a.2, paragraph (a), is a amended by removing ``Veterans
Mortgage Life Insurance (VMLI)'' and adding, in its place, ``VMLI'';
paragraph (a) is further amended by removing ``8a.4(b) of this title,
the amount of Veterans Mortgage Life Insurance'' and adding, in its
place, ``8a.4(a) the amount of VMLI''; paragraph (b)(4) is amended by
removing, ``purchased or adapted in part with a grant, or subsequently
acquired housing unit''; in paragraph (b)(6) the first sentence is
removed; and paragraphs (b)(4), (b)(6), (b)(8) and (c) are amended by
removing ``Veterans Mortgage Life Insurance'' each time and adding, in
its place, ``VMLI''.
Sec. 8a.3 [Amended]
5. In Sec. 8a.3, paragraphs (a), (b), (c), and (e) are amended by
removing ``Veterans Mortgage Life Insurance'' each time and adding, in
its place, ``VMLI''.
Sec. 8a.4 [Amended]
6. In Sec. 8a.4, paragraph (a) is removed; paragraphs (b), (c) and
(d) are redesignated as paragraph (a), (b) and (c) respectively; and
newly redesignated paragraphs (a) and (c) are amended by removing
``Veterans Mortgage Life Insurance'' each time and adding, in its
place, ``VMLI''.
[FR Doc. 96-14366 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14364 Rules of Practice: Elimination of Unnecessary Provisions Relating to Representation, Witnesses, and Access to Board Records
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29027-29028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14364]
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 20
RIN 2900-AI15
Rules of Practice: Elimination of Unnecessary Provisions Relating
to Representation, Witnesses, and Access to Board Records
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the Rules of Practice for the Board of
Veterans' Appeals (Board) to eliminate unnecessary provisions
concerning individuals who may assist an attorney in presenting
evidence and argument at the Board, concerning testimony from members
of Congress and Congressional staffs, and concerning Board records. The
Board adjudicates appeals of denials of claims for veterans' benefits.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: Steven L. Keller, Chief Counsel, Board
of Veterans' Appeals, Department of Veterans Affairs, 810 Vermont
Avenue, NW., Washington, DC 20420 (202-565-5978).
SUPPLEMENTARY INFORMATION: This document eliminates from the Board's
Rules of Practice provisions which are no longer necessary.
In Sec. 20.606, relating to legal interns, law students and
paralegals, former paragraph (a) is deleted. Previously, that paragraph
limited to two the number of such individuals who may assist an
attorney in presenting evidence and argument at the Board. Particularly
with the limitation in former paragraph (d) of Sec. 20.606--which
limits to two the number of such individuals who may make a
presentation at a hearing and permits the presiding Member to limit
participation at a hearing--we do not believe the limitation in
paragraph (a) is needed. New paragraph (d) (former paragraph (e)) is
amended to provide that a presiding Member of a hearing--as well as the
Chairman--may withdraw permission for a legal intern, law student or
paralegal to prepare and present cases before the Board if the
individual demonstrates incompetence, unprofessional conduct, or
interference with the appellate process.
Section 20.710, relating to witnesses at hearings, is rewritten to
delete specific instructions that Members of Congress and Congressional
staff may testify at a hearing, and to delete the extensive discussion
of the nature of an affirmation (as opposed to an oath). We do not
believe either provision is necessary.
Section 20.1300, relating to access to Board records, is rewritten
to limit its
[[Page 29028]]
applicability to removal of Board records. Previous paragraphs (b)
through (e) restate statutory and other regulatory provisions regarding
access to records which we believe are unnecessary in the Board's Rules
of Practice.
This final rule concerns agency procedure or practice and,
consequently, pursuant to 5 U.S.C. 553, is exempt from notice and
comment requirements.
The Secretary hereby certifies that this final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. This rule will affect VA beneficiaries and will not affect small
businesses. Therefore, pursuant to 5 U.S.C. 605(b), this final rule is
exempt from the initial and final regulatory flexibility analyses
requirements of Secs. 603 and 604.
List of Subjects in 38 CFR Part 20
Administrative practice and procedure, Claims, Lawyers, Legal
services, Veterans.
Approved: May 31, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 20 is amended
as set forth below:
PART 20--BOARD OF VETERANS' APPEALS: RULES OF PRACTICE
1. The authority citation for part 20 continues to read as follows:
Authority: 38 U.S.C. 501(a).
Subpart G--Representation
Sec. 20.606 [Amended]
2. In Sec. 20.606, paragraph (a) is removed; and paragraphs (b),
(c), (d) and (e) are redesignated as paragraphs (a), (b), (c) and (d),
respectively.
3. In Sec. 20.606, newly redesignated paragraph (c) is amended by
removing ``paragraph (b)'' in the fourth sentence and adding, in its
place, ``paragraph (a)''
4. In Sec. 20.606, newly redesignated paragraph (d) is amended by
adding ``or presiding Member'' immediately following ``Chairman'' in
the last sentence.
Subpart H--Hearings on Appeal
5. Section 20.710 is revised to read as follows:
Sec. 20.710 Rule 710. Witnesses at hearings.
The testimony of witnesses, including appellants, will be heard.
All testimony must be given under oath or affirmation. Oath or
affirmation is not required for the sole purpose of presenting
contentions and argument.
Authority: 38 U.S.C. 7102, 7105(a), 7107.
Subpart N--Miscellaneous
6. Section 20.1300 is revised to read as follows:
Sec. 20.1300 Rule 1300. Removal of Board records.
No original record, paper, document or exhibit certified to the
Board may be taken from the Board except as authorized by the Chairman
or except as may be necessary to furnish copies or to transmit copies
for other official purposes.
Authority: 38 U.S.C. 5701.
[FR Doc. 96-14364 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14332 Office of the Assistant Secretary for Housing-Federal Housing Commissioner; Real Estate Settlement Procedures Act (RESPA); Statement of Policy 1996-3, Rental of Office Space, Lock-outs, and Retaliation
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29264-29266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14332]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR-3638-N-05]
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Real Estate Settlement Procedures Act (RESPA); Statement
of Policy 1996-3, Rental of Office Space, Lock-outs, and Retaliation
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Statement of Policy 1996-3, Rental of Office Space, Lock-outs,
and Retaliation.
-----------------------------------------------------------------------
SUMMARY: This statement sets forth the Department's interpretation of
Section 8 of the Real Estate Settlement Procedures Act (RESPA) and its
implementing regulations with regard to the rental of office space,
lock-outs and retaliation. It is published to give guidance and to
inform interested members of the public of the Department's position on
enforcement of this section of the law.
FOR FURTHER INFORMATION CONTACT: David R. Williamson, Director of the
Office of Consumer and Regulatory Affairs, Room 5241, telephone: (202)
708-4560. For legal enforcement questions, Peter Race, Assistant
General Counsel for Program Compliance, or Rebecca J. Holtz, Attorney,
Room 9253, telephone: (202) 708-4184. (The telephone numbers are not
toll-free.) For hearing- and speech-impaired persons, this number may
be accessed via TTY (text telephone) by calling the Federal Information
Relay Service at 1-800-877-8339. The address for the above-listed
persons is: Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410.
SUPPLEMENTARY INFORMATION:
General Background
Section 8 (a) of the Real Estate Settlement Procedures Act (RESPA)
prohibits any person from giving or accepting any fee, kickback, or
thing of value for the referral of settlement service business
involving a federally related mortgage loan. 12 U.S.C. 2607(a).
Congress specifically stated it intended to eliminate kickbacks and
referral fees that tend to increase unnecessarily the costs of
settlement services. 12 U.S.C. 2601(b)(2).
Since July 1993, the Department has been seeking comments and
advice concerning the final rule of November 2, 1992, implementing
Section 8 of RESPA. On July 21, 1994, the Department published a new
proposed rule on certain Section 8 issues. Simultaneously with the
issuance of this Statement of Policy, HUD is publishing a final rule in
that rulemaking. As part of that rulemaking process, the Department
received comments concerning the application of Section 8 of RESPA to
the rental of office space, lock-outs and retaliation in connection
with real estate brokerage office practices. In addition, the
Department's enforcement officials have received numerous complaints
dealing with these same issues.
Rental of Office Space
In the last few years, the Department has received numerous
complaints alleging that certain settlement service providers,
particularly lenders, are leasing desks or office space in real estate
brokerage offices at higher than market rate in exchange for referrals
of business. In HUD's rulemaking docket, number R-94-1725 (FR-3638),
many commenters argued that HUD should scrutinize this rental practice.
The concern expressed is that real estate brokers charge, and
settlement service providers pay, high rent payments for the desk or
office space to disguise kickbacks to the real estate broker for the
referral of business to the settlement service provider. In this
Statement of Policy, the Department sets forth how it distinguishes
legitimate payments for rentals from payments that are for the referral
of business in violation of Section 8.
Lock-outs
The Department also received comments and complaints alleging that
settlement service providers were being excluded from, or locked-out
of, places of business where they might find
[[Page 29265]]
potential customers. The most common occurrence cited was where a real
estate brokerage company had leased space to a particular provider of
services, and had prevented any other provider from entering its office
space.
As part of the July 21, 1994, rulemaking, a Nebraska lender
commented:
We are experiencing a rapid growth of lender lock-out
relationships wherein real estate companies lease office space
within their sales offices to a particular mortgage company. A part
of the agreement is that other lenders are not allowed in the sales
offices to solicit business. This clearly prevents free competition
in financing to the home buyer.
* * * * *
* * * [I]t is very clear that the [real estate] office managers
are exerting a lot of control to keep all other lenders out. This
would not be done without proper incentive ($$$) * * *.
Several other commenters alleged that real estate office space
arrangements with particular lenders, coupled with limiting or denying
rival lenders access to customers, were being used in their communities
to eliminate competition. These commenters called for special RESPA
rules to ban these practices.
Retaliation
The Department also has received complaints concerning retaliation
practices used to influence consumer referrals. In one complaint,
financial service representatives in a real estate broker's office were
given specific quotas of referrals of home buyers to an affiliated
lender and were threatened with the loss of their jobs if they did not
meet the quotas.
Commenters on the proposed rules also alleged that some employers
were engaging in practices of retaliation or discrimination against
employees and agents who did not refer business to affiliated entities.
Reprisals could range from loss of benefits, such as fewer sales leads,
higher desk fees, less desirable work space, and ultimately, loss of
job. Some commenters requested that the Department issue guidelines or
other regulatory provisions to restrict such retaliatory activities.
The Coalition to Retain Independent Services in Settlement (CRISIS)
called for a rule prohibiting retaliation against employees and agents
who refer business to non-affiliated entities as most consistent with
the language of the RESPA statute. CRISIS suggested strong language to
prohibit negative actions against employees and agents who refer
business to non-affiliated entities, including prohibitions against
more subtle actions, such as loss of work space or increases in desk
fees.
Statement of Policy--1996-3
To give guidance to interested members of the public on the
application of RESPA and its implementing regulations to these issues,
the Secretary, pursuant to Section 19(a) of RESPA and 24 CFR
3500.4(a)(1)(ii),1 hereby issues the following Statement of
Policy.
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\1\ All citations in this Statement of Policy refer to recently
streamlined regulations published on March 26, 1996 (61 FR 13232),
in the Federal Register (to be codified at 24 CFR part 3500).
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Rental of Office Space
Section 8 of RESPA prohibits a person from giving or from accepting
any fee, kickback or thing of value pursuant to an agreement that
business incident to a settlement service involving a federally related
mortgage loan shall be referred to any person. 12 U.S.C. Sec. 2607(a).
An example of a thing of value is a rental payment that is higher than
that ordinarily paid for the facilities. The statute, however, permits
payments for goods or facilities actually furnished or for services
actually performed. 12 U.S.C. Sec. 2607(c)(2). Thus, when faced with a
complaint that a settlement service provider is paying a high rent for
referrals of settlement service business, HUD analyzes whether the
rental payment is bona fide or is really a disguised referral fee.
HUD's regulations implement the statutory provisions at 24 CFR
3500.14 and give greater guidance to this analysis. Section
3500.14(g)(2) of the regulations provides that the Department may
investigate high prices to see if they are the result of a referral fee
or a split of a fee. It states: ``If the payment bears no reasonable
relationship to the market value of the goods or services provided,
then the excess is not for services or goods actually performed or
provided * * *. The value of a referral (i.e., the value of any
additional business obtained thereby) is not to be taken into account
in determining whether the payment exceeds the reasonable value of such
goods, facilities or services.'' Id.
Thus, under existing regulations, when faced with a complaint that
a person is renting space from a person who is referring business to
that person, HUD examines the facts to determine whether the rental
payment bears a reasonable relationship to the market value of the
rental space provided or is a disguised referral fee. The market value
of the rental space may include an appropriate proportion of the cost
for office services actually provided to the tenant, such as
secretarial services, utilities, telephone and other office equipment.
In some situations, a market price rental payment from the highest
bidding settlement service provider could reflect payments for
referrals of business to that settlement service provider from the
person whose space is being rented. Thus, to distinguish between rental
payments that may include a payment for referrals of settlement service
business and a payment for the facility actually provided, HUD
interprets the existing regulations to require a ``general market
value'' standard as the basis for the analysis, rather than a market
rate among settlement service providers.
In a rental situation, the general market value is the rent that a
non-settlement service provider would pay for the same amount of space
and services in the same or a comparable building. A general market
value standard allows payments for facilities and services actually
furnished, but does not take into account any value for the referrals
that might be reflected in the rental payment. A general market
standard is not only consistent with the existing regulations, it
furthers the statute's purpose. Congress specifically stated that it
intended to protect consumers from unnecessarily high settlement
charges caused by abusive practices. 12 U.S.C. Sec. 2601. Some
settlement service providers might be willing to pay a higher rent than
the general market value to reflect the value of referrals of
settlement service business. The cost of an above-general-market-rate
rental payment could likely be passed on to the consumer in higher
settlement costs. If referrals of settlement service business are
taking place in a given rental situation, and the rental payment is
above the general market value, then it becomes difficult to
distinguish any increase in rental payment over the general market from
a referral fee payment.
HUD, therefore, interprets Section 8 of RESPA and its implementing
regulations to allow payments for the rental of desk space or office
space. However, if a settlement service provider rents space from a
person who is referring settlement service business to the provider,
then HUD will examine whether the rental payments are reasonably
related to the general market value of the facilities and services
actually furnished. If the rental payments exceed the general market
value of the space provided, then HUD will consider the excess amount
to be for the referral of business in violation of Section 8(a).
[[Page 29266]]
As an additional consideration, HUD will examine whether the rent
is calculated, in whole or in part, on a multiple of the number or
value of the referrals made. If the rental payment is conditioned on
the number or value of the referrals made, then HUD will consider the
rental payment to be for the referral of business in violation of
Section 8(a).
In its RESPA enforcement work, HUD has also encountered ``bogus''
rental arrangements that are really agreements for the payment of
referral fees. For example, one case involved a title insurance company
that paid a ``rental fee'' to a real estate broker for the ``per use
rental'' of a conference room for closings. The title insurance company
paid a $100 fee for each transaction. This ``rental fee'' was greater
than the general market value for the use of the space. In addition,
the facts revealed that the room was rarely actually used for closings.
In this case, HUD examined whether a ``facility'' was actually
furnished at a general market rate. HUD concluded that this was a sham
rental arrangement; the ``rent'' was really a disguised referral fee in
violation of Section 8(a).
Lock-outs
A lock-out situation arises where a settlement service provider
prevents other providers from marketing their services within a setting
under that provider's control. A situation involving a rental of desk
or office space to a particular settlement service provider could lead
to other, competing, settlement service providers being ``locked-out''
from access to the referrers of business or from reaching the consumer.
The existence of a lock-out situation could, therefore, give rise to a
question of whether a rental payment is bona fide. A lock out situation
without other factors, however, does not give rise to a RESPA
violation.
The RESPA statute does not provide HUD with authority to regulate
access to the offices of settlement service providers or to require a
company to assist another company in its marketing activity. This
interpretation of RESPA does not bear on whether State consumer,
antitrust or other laws apply to lock-out situations. Of course,
Section 8 still applies to any payments made to a referrer of business
by a settlement service provider who is not ``locked out'' of the
referrer's office and receives referrals of settlement service business
from that office.
Retaliation
Section 8 of RESPA expressly prohibits giving positive incentives,
``things of value,'' for the referral of settlement service business.
12 U.S.C. 2607(a). The Act is silent as to disincentives. If HUD were
to find that Section 8 also prohibited disincentives for failure to
make referrals, HUD would find itself being called upon to resolve
numerous employment disputes under RESPA. HUD does not believe that
Congress intended that RESPA reach these matters. Retaliatory actions
against employees are more appropriately governed by State labor,
contract, and other laws. However, the Department will continue to
examine for possible violations of Section 8 whether payments or other
positive incentives are given employees or agents to make referrals to
other settlement service providers.
New RESPA regulations are being issued simultaneously with this
Statement of Policy. With regard to this area, the public should note
the new exemptions for payments to employees in 24 CFR 3500.14.
Authority: 12 U.S.C. 2617; 42 U.S.C. 3535(d).
Dated: May 31, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-14332 Filed 6-6-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-14331 Office of the Assistant Secretary for Housing-Federal Housing Commissioner; Real Estate Settlement Procedures Act (RESPA); Statement of Policy 1996-2 Regarding Sham Controlled Business Arrangements
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29258-29264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14331]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR-3638-N-04]
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Real Estate Settlement Procedures Act (RESPA); Statement
of Policy 1996-2 Regarding Sham Controlled Business Arrangements
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Statement of policy 1996-2, sham controlled business
arrangements.
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SUMMARY: This statement sets forth the factors that the Department uses
to determine whether a controlled business arrangement is a sham under
the Real Estate Settlement Procedures Act (RESPA) or whether it
constitutes a bona fide provider of settlement services. It provides an
interpretation of the legislative and regulatory framework for HUD's
enforcement practices involving sham arrangements that do not come
within the definition of and exception for controlled business
arrangements under Sections 3(7) and 8(c)(4) of the Real Estate
Settlement Procedures Act (RESPA). It is published to give guidance and
to inform interested members of the public of the Department's
interpretation of this section of the law.
FOR FURTHER INFORMATION CONTACT: David Williamson, Director, Office of
Consumer and Regulatory Affairs, Room 5241, telephone (202) 708-4560.
For legal enforcement questions, Rebecca J. Holtz, Attorney, Room 9253,
telephone: (202) 708-4184. (The telephone numbers are not toll-free.)
For hearing- and speech-impaired persons, this number may be accessed
via TTY (text telephone) by calling the Federal Information Relay
Service at 1-800-877-8339. The address for the above-listed persons is:
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410.
SUPPLEMENTARY INFORMATION:
General Background
Section 8 (a) of the Real Estate Settlement Procedures Act (RESPA)
prohibits any person from giving or accepting any fee, kickback, or
thing of value for the referral of settlement service business
involving a federally related mortgage loan. 12 U.S.C. Sec. 2607(a).
Congress specifically stated it intended to eliminate kickbacks and
referral fees that tend to increase unnecessarily the costs of
settlement services. 12 U.S.C. Sec. 2601(b)(2).
After RESPA's passage, the Department received many questions
asking if referrals between affiliated settlement service providers
violated RESPA. Congress held hearings in 1981. In 1983, Congress
amended RESPA to permit controlled business arrangements (CBAs) under
certain conditions, while retaining the general prohibitions against
the giving and taking of referral fees. Congress defined the term
``controlled business arrangement'' to mean an arrangement:
[I]n which (A) a person who is in a position to refer business
incident to or a part of a real estate settlement service involving
a federally related mortgage loan, or an associate of such person,
has either an affiliate relationship with or a direct or beneficial
ownership interest of more than 1 percent in a provider of
settlement services; and (B) either of such persons directly or
indirectly refers such business to that provider or affirmatively
influences the selection of that provider.
12 U.S.C. 2602(7) (emphasis added).
In November 1992, HUD issued its first regulation covering
controlled business arrangements, 57 FR 49599 (Nov. 2, 1992), codified
at 24 CFR 3500.15. 1 That rule provided that a controlled business
arrangement was not a violation of Section 8 and allowed referrals of
business to an affiliated settlement service provider so long as: (1)
The consumer receives a written disclosure of the nature of the
relationship and an estimate of the affiliate's charges; (2) the
consumer is not required to use the controlled entity; and (3) the only
thing of value received from the arrangement, other than payments for
services rendered, is a return on ownership interest.
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\1\ All citations in this Statement of Policy refer to recently
streamlined regulations published on March 26, 1996 (61 FR 13232),
in the Federal Register (to be codified at 24 CFR part 3500).
---------------------------------------------------------------------------
Section 3500.15(b) sets out the three conditions of the controlled
business arrangement exception. The first condition concerns the
disclosure of the relationship. The rule provides that the person
making the referral must provide the consumer with a written statement,
in the format set out in appendix D to part 3500. This statement must
be provided on a separate piece of paper. The referring party must give
the statement to the consumer no later than the time of the referral.
24 CFR 3500.15(b)(1).
The second condition involves the non-required use of the referred
entity. Section 3500.15(b)(2) provides that the person making the
referral may not require the consumer to use any particular settlement
service provider, except in limited circumstances. A
[[Page 29259]]
lender may require a consumer to pay for the services of an attorney,
credit reporting agency or real estate appraiser to represent the
lender's interest in the transaction. An attorney may use a title
insurance agency that operates as an adjunct to the attorney's law
practice as part of the attorney's representation of that client in a
real estate transaction. 24 CFR 3500.15(b)(2).
The third condition relates to what is received from the
relationship. The rule provides that the only thing of value that comes
from the arrangement, other than permissible payments for services
rendered, is a return on an ownership interest or franchise
relationship. 24 CFR 3500.15(b)(3). The rule describes what are not
proper returns on ownership interest at 24 CFR 3500.15(b)(3)(ii). These
include ownership returns that vary by the amount of business referred
to a settlement service provider, or situations where adjustments are
made to an ownership share based on referrals made.
Both the statute and HUD's 1992 regulation make the controlled
business arrangement exemption available in situations where referrals
are made to a ``provider of settlement services.'' These provisions do
not authorize compensation to shell entities or sham arrangements that
are not a bona fide ``provider of settlement services.'' Since issuing
the 1992 RESPA rule, HUD has received numerous complaints that some
CBAs are being established to circumvent RESPA's prohibitions and are
sham arrangements. The complaints often use the expression ``joint
venture'' as a generic way to describe these new sham arrangements.
While many joint ventures are bona fide providers of settlement
services, permissible under the exemption, it does appear that some are
not.
A joint venture is a special combination of two or more legal
entities which agree to carry out a single business enterprise for
profit, and for which purpose they combine their property, money,
effects, skill and knowledge. Some of the alleged sham arrangements may
be joint ventures; others, however, may involve different legal
structures, such as limited partnerships, limited liability companies,
wholly owned corporations, or combinations thereof. Regardless of form,
the common feature of these arrangements is that at least two parties
are involved in their creation: a referrer of settlement service
business (such as a real estate broker or real estate agent) and a
recipient of referrals of business (such as a mortgage banker, mortgage
broker, title agent or title company). At least one, if not both, of
these parties will have an ownership, partnership or participant's
interest in the arrangement.
Many of the complaints about these arrangements allege that the new
entity performs little, if any, real settlement services or is merely a
subterfuge for passing referral fees back to the referring party. For
example, in a letter to HUD dated September 30, 1994, the Mortgage
Bankers Association of America (MBA) expressed growing concern about
``sham joint venture'' controlled business arrangements. The MBA
stated:
Under this scenario, a lender and a real estate broker jointly
fund a new subsidiary that purports to be a mortgage broker but has
no staff and minimal funding, does no work (out sources all process
to the lender), receives all business by referral from the broker
parent, sells all production to the lender parent, and pays profits
to both parents in the form of dividends. We oppose such
arrangements because they afford compensation to brokers but impose
on them no work or business risk. In short, they are disguised
referral fee arrangements.
The MBA encouraged HUD to define eligible joint venture entities. It
suggested that such entities should have their own employees, perform
substantive functions in the mortgage process and share in the risks
and rewards of any viable enterprise in the marketplace.
Complaints also included arrangements that are wholly-owned by a
referring entity. An example of such a complaint involved an
arrangement promoted by a mortgage broker to real estate brokers to
help them set up a wholly owned mortgage brokerage subsidiary. The
mortgage broker claimed that the real estate broker ``can earn hundreds
or even thousands of dollars each month without investing any money or
changing [his or her] current business practices.'' The mortgage
broker's pitch was that ``my current staff can work for my company and
also for yours.'' The real estate broker's new company ``can use my
investors, my office, my phones, my copy machines, my promotional
material * * * Your company will have no overhead other than the taxes
due on the income you generate and the bank fees for the money accounts
your company must have. The entire annual expenses can be covered on
the first loan your company closes * * * I can manage your company at
the same time I manage mine so you won't have any time investment
either.'' HUD's concern about this and similar complaints prompted the
Department to issue this Statement of Policy.
In many of the arrangements that have come to HUD's attention, the
substantial functions of the settlement service business that the new
arrangement purports to provide are actually provided by a pre-existing
entity that otherwise could have received referrals of business
directly. In such arrangements the entity actually performing the
settlement services reduces its profit margin and shares its profits
with the referring participant in the arrangement. In some situations,
such as in the last example, companies that could have received
referrals of settlement service business directly (hereafter
``creators'') have assisted the referring parties in creating wholly
owned subsidiaries at little or no cost to the referring party. These
subsidiaries in turn refer or contract out most of the essential
functions of its settlement service business back to a creator that
helped set them up or use the creator to run the business.
The following illustrates the two general types of arrangements:
BILLING CODE 4210-27-P
[[Page 29260]]
[GRAPHIC] [TIFF OMITTED] TR07JN96.002
BILLING CODE 4210-27-C
[[Page 29261]]
There are numerous variations on these two general arrangements.
Regulatory and Legislative Framework
In amending RESPA to permit controlled businesses, Congress
specifically stated that it did not intend to ``change current law
which prohibits the payment of unearned fees, kickbacks, or other
things of value in return for referrals of settlement service
business.'' H.R. Rep. No. 123, 98th Cong., 1st Sess. at 76 (1983). The
statute's definition of ``controlled business arrangement'' uses the
term ``provider of settlement services'' to describe the entity
receiving the referral of business. 12 U.S.C. 2602(7). The term
``provider of settlement services'' means a person that renders
settlement services. The statute further defines ``settlement
services'' to include any service provided in connection with a real
estate settlement and includes a list of such services. If the
controlled entity performs little or none of its settlement service
function, it may not be ``providing'' settlement services, and
therefore may not meet the statutory definition of a controlled
business arrangement.
HUD's existing regulations address a shell controlled entity that
contracts out all of its functions to another entity. See Appendix B to
Part 3500, Illustration 10.2 Where the shell controlled entity
provides no substantive services for its portion of the fee, HUD deems
the arrangement as violating Section 8(a) and (b) of RESPA because the
controlled entity is merely passing unearned fees back to its owner for
referring business to another provider. Besides this Illustration,
however, HUD has not addressed arrangements that perform some, but not
all of the settlement service functions it purports to provide.
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\2\ Illustration 10. Facts: A is a real estate broker who refers
business to its affiliate title company B. A makes all required
written disclosures to the homebuyer of the arrangement and
estimated charges and the homebuyer is not required to use B. B
refers or contracts out business to C who does all the title work
and splits the fee with B. B passes its fee to A in the form of
dividends, a return on ownership interest.
Comments: The relationship between A and B is a controlled
business arrangement. However, the controlled business arrangement
exemption does not provide exemption between a controlled entity, B,
and a third party, C. Here, B is a mere ``shell'' and provides no
substantive services for its portion of the fee. The arrangement
between B and C would be in violation of Section 8(a) and (b). Even
if B had an affiliate relationship with C, the required exemption
criteria have not been met and the relationship would be subject to
Section 8.
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RESPA's earliest legislative history shows that Congress tried to
address whether a payment is for services actually performed or is a
disguised referral fee. See H.R. Rep. No. 1177, 93d Cong., 2d Sess.
1974 (hereafter ``the Report''). The Report stated that RESPA's anti-
kickback provisions were not intended to prohibit the payments for
goods furnished or services actually rendered, ``so long as the payment
bears a reasonable relationship to the value of the goods or services
received by the person or company making the payment. To the extent the
payment is in excess of the reasonable value of the goods provided or
services performed, the excess may be considered a kickback or referral
fee * * *. `` Id. at 7-8. The Report stated:
Those persons and companies that provide settlement services
should therefore take measures to ensure that any payments they make
or commissions they give are not out of line with the reasonable
value of the services received. The value of the referral itself
(i.e., the additional business obtained thereby) is not to be taken
into account in determining whether the payment is reasonable.
Id. at 8. The Report further explained that section 8(c) set forth the
``types of legitimate payments that would not be proscribed.'' As an
example, the Report noted that commissions paid by a title insurance
company to a duly appointed agent for services actually performed in
the issuance of a policy of title insurance would be permitted. The
Report explained:
Such agents * * * typically perform substantial services for and
on behalf of a title insurance company. These services may include a
title search, an evaluation of the title search to determine the
insurability of the title (title examination), the actual issuance
of the policy on behalf of the title insurance company, and the
maintenance of records relating to the policy and policy-holder. In
essence, the agent does all of the work that a branch office of the
title insurance company would otherwise have to perform.
Id. at 8 (emphasis added). Thus, the Report shows that Congress
anticipated that reasonable payments could be paid to entities that
perform ``all of the work'' normally associated with the settlement
service being provided.
The legislative history for the controlled business arrangement
provides guidance for cases in which a new entity does not perform
``all of the work'' that would otherwise need to be performed by a
fully functioning service provider. The testimony of officials of
existing affiliated companies at Congressional hearings in 1981
provided an analysis of companies that do little substantive work. Real
Estate Settlement Procedures Act--Controlled Business: Hearings Before
the Subcomm. on Housing and Community Development of the House Comm. on
Banking, Finance and Urban Affairs, 97th Cong., 1st Sess. 24, (1981)
(hereafter ``Hearings''). Charles R. Hilton, then Senior Vice
President, Coldwell, Banker & Co. stated: ``In our line of operation,
all of our ancillary services are operated as a full line service
company. We do our title searches; we do the examinations; we share in
the risk; we take all of the risk, in some cases.'' Hearings at 423.
Stanley Gordon, then Vice President and General Counsel for the
residential group of Coldwell, Banker & Co., acknowledged that some
title agencies may have been formed to circumvent Section 8 of RESPA.
He said:
The most common examples of circumvention are those agencies
which provide little or no service to their customers. They do not
perform a search of the title records, and have few of the other
characteristics of an ongoing business, such as a staff of employees
and related operating expenses. Such agencies, in our opinion, come
within the prohibition of Section 8.
* * * * *
There must be, for a violation of Section 8, the involvement of
a third party, such as a title insurance underwriter of a title
agency, that has agreed to make a kickback to the broker. This
arrangement is best established by the absence of reasonable
compensation from the underwriter to the title agency for the
services actually rendered by the title agency. The kickback is the
payment by the title insurer to the title agency (which is then
passed through to the broker owner) where there is no service being
rendered which reasonably corresponds to the payment * * *.
Hearings at 429-431.
Consequently, in cases where work is contracted out to another
entity (be it an independent third party, a creator, an owner, or a
participant in a joint venture), HUD has looked at whether the
contracting party receives payments from the new entity at less than
the reasonable value of the services rendered. If so, then the
difference between the payments made to the contracting party and the
reasonable value of the services rendered may be seen as a disguised
referral fee in violation of Section 8. 24 CFR 3500.14(g)(2).
Statement of Policy--1996-2
To give guidance to interested members of the public on the
application of RESPA and its implementing regulations to these issues,
the Secretary, pursuant to Section 19(a) of RESPA and 24 CFR
3500.4(a)(1)(ii), hereby issues the following Statement of Policy.
Congress did not intend for the controlled business arrangement
(``CBA'') amendment to be used to
[[Page 29262]]
promote referral fee payments through sham arrangements or shell
entities. H.R. Rep. 123, 98th Cong., 1st Sess. 76 (1983). The CBA
definition addresses associations between providers of settlement
services. 12 U.S.C. 2602(7). In order to come within the CBA exception,
the entity receiving the referrals of settlement service business must
be a ``provider'' of settlement service business. If the entity is not
a bona fide provider of settlement services, then the arrangement does
not meet the definition of a CBA. If an arrangement does not meet the
definition of a CBA, it cannot qualify for the CBA exception, even if
the three conditions of Section 8(c) are otherwise met. 12 U.S.C.
2607(c)(4)(A-C). Therefore, subsequent compliance with the CBA
conditions concerning disclosure, non-required use and payments from
the arrangement that are a return on ownership interest, will not
exempt payments that flow through an entity that is not a provider of
settlement services.
Thus, in RESPA enforcement cases involving a controlled business
arrangement created by two existing settlement service providers, HUD
considers whether the entity receiving referrals of business
(regardless of legal structure) is a bona fide provider of settlement
services. When assessing whether such an entity is a bona fide provider
of settlement services or is merely a sham arrangement used as a
conduit for referral fee payments, HUD balances a number of factors in
determining whether a violation exists and whether an enforcement
action under Section 8 is appropriate. Responses to the questions below
will be considered together in determining whether the entity is a bona
fide settlement service provider. A response to any one question by
itself may not be determinative of a sham controlled business
arrangement. The Department will consider the following factors and
will weigh them in light of the specific facts in determining whether
an entity is a bona fide provider:
(1) Does the new entity have sufficient initial capital and net
worth, typical in the industry, to conduct the settlement service
business for which it was created? Or is it undercapitalized to do the
work it purports to provide?
(2) Is the new entity staffed with its own employees to perform the
services it provides? Or does the new entity have ``loaned'' employees
of one of the parent providers?
(3) Does the new entity manage its own business affairs? Or is an
entity that helped create the new entity running the new entity for the
parent provider making the referrals?
(4) Does the new entity have an office for business which is
separate from one of the parent providers? If the new entity is located
at the same business address as one of the parent providers, does the
new entity pay a general market value rent for the facilities actually
furnished?
(5) Is the new entity providing substantial services, i.e., the
essential functions of the real estate settlement service, for which
the entity receives a fee? Does it incur the risks and receive the
rewards of any comparable enterprise operating in the market place?
(6) Does the new entity perform all of the substantial services
itself? Or does it contract out part of the work? If so, how much of
the work is contracted out?
(7) If the new entity contracts out some of its essential
functions, does it contract services from an independent third party?
Or are the services contracted from a parent, affiliated provider or an
entity that helped create the controlled entity? If the new entity
contracts out work to a parent, affiliated provider or an entity that
helped create it, does the new entity provide any functions that are of
value to the settlement process?
(8) If the new entity contracts out work to another party, is the
party performing any contracted services receiving a payment for
services or facilities provided that bears a reasonable relationship to
the value of the services or goods received? Or is the contractor
providing services or goods at a charge such that the new entity is
receiving a ``thing of value'' for referring settlement service
business to the party performing the service?
(9) Is the new entity actively competing in the market place for
business? Does the new entity receive or attempt to obtain business
from settlement service providers other than one of the settlement
service providers that created the new entity?
(10) Is the new entity sending business exclusively to one of the
settlement service providers that created it (such as the title
application for a title policy to a title insurance underwriter or a
loan package to a lender)? Or does the new entity send business to a
number of entities, which may include one of the providers that created
it?
Even if an entity is a bona fide provider of settlement services,
that finding does not end the inquiry. Questions may still exist as to
whether the entity complies with the three conditions of the controlled
business arrangement exception. 12 U.S.C. Sec. 2607(c)(4)(A-C). Issues
may arise concerning whether the consumer received a written disclosure
concerning the nature of the relationship and an estimate of the
controlled entity's charges at the time of the referral. 12 U.S.C.
Sec. 2607(c)(4)(A); 24 CFR 3500.15(b)(1). Other issues may arise
concerning whether the referring party is requiring the consumer to use
the controlled entity. 12 U.S.C. Sec. 2607(c)(4)(B); 24 CFR
3500.15(b)(2).
Still another area that may arise concerns the third condition of
the CBA exception, whether the only thing of value that comes from the
arrangement, other than permissible payments for services rendered, is
a return on ownership interest or franchise relationship. 12 U.S.C.
Sec. 2607(c)(4)(C); 24 CFR 3500.15(b)(3). Section 3500.15(b)(3)(ii) of
the regulations provides that a return on ownership interest does not
include payments that vary by the amount of actual, estimated or
anticipated referrals or payments based on ownership shares that have
been adjusted on the basis of previous referrals. When assessing
whether a payment is a return on ownership interest or a payment for
referrals of settlement service business, HUD will consider the
following questions:
(1) Has each owner or participant in the new entity made an
investment of its own capital, as compared to a ``loan'' from an entity
that receives the benefits of referrals?
(2) Have the owners or participants of the new entity received an
ownership or participant's interest based on a fair value contribution?
Or is it based on the expected referrals to be provided by the
referring owner or participant to a particular cell or division within
the entity?
(3) Are the dividends, partnership distributions, or other payments
made in proportion to the ownership interest (proportional to the
investment in the entity as a whole)? Or does the payment vary to
reflect the amount of business referred to the new entity or a unit of
the new entity?
(4) Are the ownership interests in the new entity free from tie-ins
to referrals of business? Or have there been any adjustments to the
ownership interests in the new entity based on the amount of business
referred? Responses to these questions may be determinative of whether
an entity meets the conditions of the CBA exception. If an entity does
not meet the conditions of the CBA exception, then any payments given
or accepted in the arrangement may be subject to further analysis under
Section 8(a) and (b). 12 U.S.C. Sec. 2607(a) and (b).
[[Page 29263]]
Some examples of how HUD will use these factors in an analysis of
specific circumstances are provided below.
Examples:
1. An existing real estate broker and an existing title
insurance company form a joint venture title agency. Each
participant in the joint venture contributes $1000 towards the
creation of the joint venture title agency, which will be an
exclusive agent for the title insurance company. The title insurance
company enters a service agreement with the joint venture to provide
title search, examination and title commitment preparation work at a
charge lower than its cost. It also provides the management for the
joint venture. The joint venture is located in the title insurance
company's office space. One employee of the title insurance company
is ``leased'' to the joint venture to handle closings and prepare
policies. That employee continues to do the same work she did for
the title insurance company. The real estate broker participant is
the joint venture's sole source of business referrals. Profits of
the joint venture are divided equally between the real estate broker
and title insurance company.
HUD Analysis. After reviewing all of the factors, HUD would
consider this an example of an entity which is not a bona fide provider
of settlement service business. As such, the payments flowing through
the arrangement are not exempt under Section 8(c)(4) and would be
subject to further analysis under Section 8. In looking at the amount
of capitalization used to create the settlement service business, it
appears that the entity is undercapitalized to perform the work of a
full service title agency. In this example, although there is an equal
contribution of capital, the title insurance company is providing much
of the title insurance work, office space and management oversight for
the venture to operate. Although the venture has an employee, the
employee is leased from and continues to be supervised by the title
insurance company. This new entity receives all the referrals of
business from the real estate broker participant and does not compete
for business in the market place. The venture provides a few of the
essential functions of a title agent, but it contracts many of the core
title agent functions to the title insurance company. In addition, the
title insurance company provides the search, examination and title
commitment work at less than its cost, so it may be seen as providing a
``thing of value'' to the referring title agent, which is passed on to
the real estate broker participant in a return on ownership.
2. A title insurance company solicits a real estate broker to
create a company wholly owned by the broker to act as its title
agent. The title insurance company sets up the new company for the
real estate broker. It also manages the new company, which is
staffed by its former employees that continue to do their former
work. As in the previous example, the new company also contracts
back certain of the core title agent services from the title
insurance company that created it, including the examination and
determination of insurability of title, and preparation of the title
insurance commitment. The title insurance company charges the new
company less that its costs for these services. The new company's
employees conduct the closings and issue only policies of title
insurance on behalf of the title insurance company that created it.
HUD Analysis. As was the case in the first example, HUD would not
consider the new entity to be a bona fide settlement service provider.
The legal structure of the new entity is irrelevant. The new company
does little real work and contracts back a substantial part of the core
work to the title insurance company that set it up. Further, the
employees of the new company continue to do the work they previously
did for the title insurance company which also continues to manage the
employees. The new entity is not competing for business in the market
place. All of the referrals of business to the new entity come from the
real estate broker owner. The creating title insurance company provides
the bulk of the title work. On balance HUD would consider these factors
and find that the new entity is not a bona fide title agent, and the
payments flowing through the arrangement are not exempt under Section
8(c)(4) and would be subject to further analysis under Section 8.
3. A lender and a real estate broker form a joint venture
mortgage broker. The real estate broker participant in the joint
venture does not require its prospective home buyers to use the new
entity and it provides the required CBA disclosures at the time of
the referral. The real estate broker participant is the sole source
of the joint venture's business. The lender and real estate broker
each contributes an equal amount of capital towards the joint
venture, which represents a sufficient initial capital investment
and which is typical in the industry. The new entity, using its own
employees, prepares loan applications and performs all other
functions of a mortgage broker. On a few occasions, to accommodate
surges in business, the new entity contracts out some of the loan
processing work to third party providers, including the lender
participant in the joint venture. In these cases, the new entity
pays all third party providers a similar fee, which is reasonably
related to the processing work performed. The new entity manages its
own business affairs. It rents space in the real estate
participant's office at the general market rate. The new entity
submits loan applications to numerous lenders and only a small
percent goes to the lender participant in the joint venture.
HUD Analysis. After reviewing all of the factors, HUD would
consider this an example of an entity which is a bona fide provider of
settlement service business rather than a sham arrangement. The new
entity would appear to have sufficient capital to perform the services
of a mortgage broker. The participant's interests appear to be based on
a fair value contribution and free from tie-ins to referrals of
business. The new entity has its own staff and manages its own
business. While it shares a business address with the real estate
broker participant, it pays a fair market rent for that space. It
provides substantial mortgage brokerage services. Even though the joint
venture may contract out some processing overflow to its lender
participant, this work does not represent a substantial portion of the
mortgage brokerage services provided by the joint venture. Moreover,
the joint venture pays all third party providers a similar fee for
similar processing services.
While the real estate broker participant is the sole source of
referrals to the venture, the venture only sends a small percent of its
loan business to the lender participant. The joint venture mortgage
broker is thus actively referring loan business to lenders other than
its lender participant. Since the real estate broker provides the CBA
disclosure and does not require the use of the mortgage broker and the
only return to the participants is based on the profits of the venture
and not reflective of referrals made to the venture, it meets the CBA
exemption requirements. HUD would consider this a bona fide controlled
business arrangement.
4. A real estate brokerage company decides that it wishes to
expand its operations into the title insurance business. Based on a
fair value contribution, it purchases from a title insurance company
a 50 percent ownership interest in an existing full service title
agency that does business in its area. The title agency is liable
for the core title services it provides, which includes conducting
the title searches, evaluating the title search to determine the
insurability of title, clearing underwriting objections, preparing
title commitments, conducting the closing, and issuing the title
policy. The agent is an exclusive title agent for its title
insurance company owner. Under the new ownership, the real estate
brokerage company does not require its prospective home buyers to
use its title agency. The brokerage has its real estate agents
provide the required CBA disclosures when the home buyer is referred
to the affiliated title insurance agency. The real estate brokerage
company is not the sole source of the title agency's business. The
real estate brokerage company receives a return on ownership in
proportion to its 50%
[[Page 29264]]
ownership interest and unrelated to referrals of business.
HUD Analysis. A review of the factors reflects an arrangement
involving a bona fide provider of settlement services. In this example,
the real estate brokerage company is not the sole source of referrals
to the title agency. However, the title agency continues its exclusive
agency arrangement with the title insurance company owner. While this
last factor initially may raise a question as to why other title
insurance companies are not used for title insurance policies, upon
review there appears to be nothing impermissible about these referrals
of title business from the title agency to the title insurance company.
This example involves the purchase of stock in an existing full
service provider. In such a situation, HUD would carefully examine the
investment made by the real estate brokerage company. In this example,
the real estate brokerage company pays a fair value contribution for
its ownership share and receives a return on its investment that is not
based on referrals of business. Since the real estate brokerage
provides the CBA disclosure, does not require the use of the title
agency and the only return to the brokerage is based on the profits of
the agency and not reflective of referrals made, the arrangement meets
the CBA exemption requirements. HUD would consider this a bona fide
controlled business arrangement.
5. A mortgage banker sets up a limited liability mortgage
brokerage company. The mortgage banker sells shares in divisions of
the limited liability company to real estate brokers and real estate
agents. For $500 each, the real estate brokers and agents may
purchase separate ``divisions'' within the limited liability
mortgage brokerage company to which they refer customers for loans.
In later years ownership may vary by the amount of referrals made by
a real estate broker or agent in the previous year. Under this
structure, the ownership distributions are based on the business
each real estate broker or real estate agent refers to his/her
division and not on the basis of their capital contribution to the
entity as a whole. The limited liability mortgage brokerage company
provides all the substantial services of a mortgage broker. It does
not contract out any processing to its mortgage banker owner. It
sends loan packages to its mortgage banker owner as well as other
lenders.
HUD analysis. Although HUD would consider the mortgage brokerage
company to be a bona fide provider of mortgage brokerage services, this
example illustrates an arrangement that fails to meet the third
condition of the CBA exception. 12 U.S.C. 2607(c)(4)(C). Here, the
capitalization, ownership and payment structure with ownership in
separate ``divisions'' is a method in which ownership returns or
ownership shares vary based on referrals made and not on the amount
contributed to the capitalization of the company. In cases where the
percent of ownership interest or the amount of payment varies by the
amount of business the real estate agent or broker refers, such
payments are not bona fide returns on ownership interest, but instead,
are an indirect method of paying a kickback based on the amount of
business referred. 24 CFR 3500.15(b)(3).
Authority: 12 U.S.C. 2617; 42 U.S.C. 3535(d).
Dated: May 31, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-14331 Filed 6-6-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-14330 Office of the Assistant Secretary for Housing-Federal Housing Commissioner; Real Estate Settlement Procedures Act (RESPA); Statement of Policy 1996-1, Regarding Computer Loan Origination Systems (CLOs)
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29255-29258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14330]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR-3638-N-03]
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Real Estate Settlement Procedures Act (RESPA); Statement
of Policy 1996-1, Regarding Computer Loan Origination Systems (CLOs)
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Statement of Policy 1996-1: Computer Loan Origination Systems
(CLOs).
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SUMMARY: This Statement of Policy sets forth the Department's
interpretation of Section 8 of the Real Estate Settlement Procedures
Act (RESPA) and its implementing regulations with regard to the
applicability of RESPA to payments for services from certain computer
systems, frequently called CLOs, used by settlement service providers
in connection with the origination of mortgage loans or the provision
of other settlement services covered by RESPA. This statement explains
the statutory and regulatory framework for HUD's treatment of payments
to CLOs.
In reading this policy statement, the reader should be aware that
HUD's RESPA rule was recently streamlined through a separate
rulemaking. 61 FR 13232 (Mar. 26, 1996). This streamlining caused
several provisions of the RESPA rule to be renumbered. Except as is
otherwise indicated in the context of the policy statement, this policy
statement refers to provisions by their current section number,
incorporating all revisions to date as a result of the streamlining and
today's rulemaking, published elsewhere in the Federal Register.
FOR FURTHER INFORMATION CONTACT: David Williamson, Director, Office of
Consumer and Regulatory Affairs, Room 5241, telephone (202) 708-4560;
or, for legal questions, Kenneth Markison, Assistant General Counsel
for GSE/RESPA, or Grant E. Mitchell, Senior Attorney for RESPA, Room
9262, telephone (202) 708-1550. (The telephone numbers are not toll-
free.) For hearing- and speech-impaired persons, this number may be
accessed via TTY (text telephone) by calling the Federal Information
Relay Service at 1-800-877-8339. The address for the above-listed
persons is: Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410.
SUPPLEMENTARY INFORMATION: Individuals and firms have developed and are
developing various systems that employ computer technology to assist
consumers in finding a lender, selecting a mortgage product,
originating a mortgage, or choosing among other settlement service
providers and products. These systems are sometimes called computer
loan origination systems (hereafter ``CLOs''), although other
terminology may be used, such as computer loan information systems.
These systems differ in the way they interact with consumers, in the
way they collect and display information on mortgage options, in the
range of choices of products and services they provide to consumers,
and in the extent to which they share work with other providers in the
settlement service process. HUD expects product diversity to increase
as technology evolves and new telecommunication options become
available.
The following exemption was set forth in the November 2, 1992 final
rule, effective December 2, 1992: Section 8 of RESPA does not prohibit
* * * any payment by a borrower for computer loan origination services,
so long as the disclosure set forth in Appendix E of this part is
provided to the borrower. 24 CFR 3500.14(g)(2)(iii).
This exemption from Section 8 was for ``any payment by a borrower
for computer loan origination services,'' as long as certain
disclosures were provided. This rule did not address payments made by
lenders, thus leaving such payments subject to Section 8 scrutiny.
Although the term ``CLO exemption'' is frequently used, including in
the preamble of the 1992 final rule, the exemption was not for the CLO
itself, but only for payments made for CLO services by borrowers. The
1992 final rule did not speak to other issues; notably it did not
define a CLO or explain how RESPA applies to payments by lenders to
CLOs for CLO services. The November 2, 1992 rule also withdrew all
previous informal legal opinions, including those stating the
Department's views on various CLO issues.
In response to numerous expressions of concern about the new
exemption and other aspects of the revised regulations, HUD requested
public comments in a Federal Register Notice on July 6, 1993, and held
public hearings on August 6, 1993.
On July 21, 1994, HUD issued proposed regulations that would repeal
the general CLO exemption for borrower payments and, in its place,
establish an exemption for borrower payments to certain ``qualified
CLOs'', that is, CLOs having characteristics that HUD considered
beneficial to consumers. The proposed exemption would apply only to
payments by borrowers, but HUD did solicit public comments on whether
to provide a similar exemption for payments by lenders to qualified
CLOs. Under the proposed rule, payments by borrowers to CLO systems
that did not qualify for the exemption were subject to scrutiny under
section 8 of RESPA. HUD also invited those with active CLOs or those
developing CLOs to demonstrate their systems at a Technology
Demonstration Fair on September 30, 1994. Twenty-one CLO operators
accepted the invitation and participated in this all-day demonstration
in Washington, D.C.
The public comments in response to the proposed rule raised a
number of specific questions about the proposed exemption for payments
to qualified CLOs, and generally displayed skepticism or uncertainty
about the usefulness of the proposal. Concerned that the comments did
not adequately address all the issues, HUD held two informal meetings
with industry and consumer groups to seek additional individual input
on the likely future development of CLOs. These meetings were held on
August 11, 1995, and September 21, 1995. While HUD learned many things
from the public comments and the meetings with industry and consumer
groups, one message seemed to predominate. All parties wanted clearer
guidance from HUD on how RESPA's disclosure and anti-kickback
provisions apply to borrower and lender payments for CLO services.
Both the 1992 and the proposed 1994 exemptions for borrower
payments to CLOs were offered because of concern that uncertainty about
how RESPA applied to payments to CLOs might be impeding the development
or use of potentially beneficial technology. However, by limiting the
exemptions to borrower payments, in both cases, HUD did not address the
primary issue of how RESPA's anti-kickback provisions applied to lender
payments to CLOs.
Many participants in the informal meetings urged that it was
impossible to
[[Page 29256]]
create a useful safe harbor or exemption for ``qualified CLOs'',
because changes in technology and in its use in the market would
repeatedly make that safe harbor obsolete. CLO service providers would
take their chances of running afoul of RESPA, rather than develop
systems to meet the ``qualified CLO'' criteria. More helpful, many
participants argued, would be if HUD explained clearly how RESPA's
anti-kickback prohibitions and disclosure requirements applied to
various sorts of CLO payments.
After considering the public comments and informal meetings, HUD
has decided: (1) To eliminate the exemption for borrower payments to
CLOs and the associated disclosure; (2) to abandon the idea of
establishing a similar or broader exemption for qualified CLOs; and (3)
to issue this policy statement to help those developing and using CLOs
to understand better how RESPA applies to their activities.
HUD does not think it is useful to continue a modest exemption or
to develop a separate and elaborate regulatory structure for a still
emerging industry. However, clarification of certain matters in the
form of a policy statement would be useful to the industry and
consumers. The effect of this action is to subject payments to CLOs to
the same RESPA provisions as payments for any other service; however,
HUD is providing specific guidance on how HUD will apply these
provisions in the CLO context.
Today HUD is simultaneously issuing a revision to the 1992 rule.
The preamble to this new final rule contains a fuller discussion of the
decision- making process leading from the November 2, 1992 rule to the
withdrawal of the exemption and the issuance of this guidance.
To the extent this guidance interprets rules that become effective
120 days from the date of this publication, then this guidance will be
applicable as of the effective date of such rules.
Statement of Policy--1996-1
To give guidance to interested members of the public on the
application of RESPA and its implementing regulations to these issues,
the Secretary, pursuant to Section 19(a) of RESPA (12 U.S.C. 2617(a))
and 24 CFR 3500.4(a)(1)(ii), hereby issues the following statement of
policy.
For purposes of this statement of policy, a CLO is a computer
system that is used by or on behalf of a consumer to facilitate a
consumer's choice among alternative products or settlement service
providers in connection with a particular RESPA-covered real estate
transaction. Such a computer system: (1) may provide information
concerning products or services; (2) may pre-qualify a prospective
borrower; (3) may provide consumers with an opportunity to select
ancillary settlement services; (4) may provide prospective borrowers
with information regarding the rates and terms of loan products for a
particular property in order for the borrower to choose a loan product;
(5) may collect and transmit information concerning the borrower, the
property, and other information on a mortgage loan application for
evaluation by a lender or lenders; (6) may provide loan origination,
processing, and underwriting services, including but not limited to,
the taking of loan applications, obtaining verifications and
appraisals, and communicating with the borrower and lender; and (7) may
make a funding decision.
This definition is not meant to be restrictive or exhaustive; it
merely attempts to describe existing practices of service providers.
With the use of technology evolving so rapidly, however, it is
difficult for the Department to provide guidance on future unspecified
practices in the abstract.
This statement of policy provides guidance on how RESPA applies to
service providers and interprets existing law. It does not add any new
restrictions on business practices.
Section 3 of RESPA defines ``settlement services'' to include:
[A]ny service provided in connection with a real estate
settlement including, but not limited to * * * the origination of a
federally related mortgage loan (including, but not limited to, the
taking of loan applications, loan processing, and the underwriting
and funding of loans), and the handling of the processing, and
closing or settlement. 12 U.S.C. 2602(3).
The regulations define a ``settlement service'' to mean ``any
service provided in connection with a prospective or actual
settlement.'' 24 CFR 3500.2. This definition specifically includes the
providing of any services related to the origination, processing, or
funding of a federally-related mortgage loan. 24 CFR 3500.2. To the
extent that a CLO performs ``settlement services'', it is a settlement
service provider. Conversely, if a CLO does not perform settlement
services, it is not a settlement service provider.
NOTHING IN THIS POLICY STATEMENT SHOULD BE READ AS A HUD
ENDORSEMENT OF ANY CHARGE TO CONSUMERS OR AS A REQUIREMENT FOR ANY
CHARGE TO CONSUMERS.
1. Payments by Consumers to CLOs
CLOs that provide services to consumers may charge consumers for
services performed. 12 U.S.C. 2607(c)(2). RESPA requires that all
charges for settlement services be reported on the Good Faith Estimate
and the HUD-1 or HUD-1A; however, the regulations do not address the
exact timing of the payment. 12 U.S.C. 2603(a) and 2604(c). Similarly,
any payment for CLO services that is paid outside of closing must be so
identified on the HUD-1 or HUD-1A settlement statement. 24 CFR 3500,
App. A, General Instructions. In addition, settlement service providers
whose products are made available on CLOs may reimburse consumers for
any fee charged them by the CLO.
2. Payments by Settlement Service Providers to CLOs
Section 8(a) of RESPA prohibits payments for the referral of a
consumer to a settlement service provider; however, Section 8(c)(2)
permits payments for goods or facilities actually furnished or for
services actually performed. 12 U.S.C. 2607(c)(2).
The definition used in this policy statement encompasses various
types of CLOs. Regardless of the type of CLO, compensable goods,
facilities, or services must be provided by the CLO in return for
payments by settlement service providers. Any such payment must bear a
reasonable relationship to the value of the goods, facilities, or
services provided. 24 CFR 3500.14(g)(2). A charge for which no or
nominal services are performed or for which duplicative fees are
charged is an unearned fee. 24 CFR 3500.14(c). For example, if a CLO
lists only one settlement service provider and only presents basic
information to the consumer on the provider's products, then there
would appear to be no or nominal compensable services provided by the
CLO to either the settlement service provider or the consumer, only a
referral; and any payment by the settlement service provider for the
CLO listing could be considered a referral fee in violation of section
8 of RESPA. Note, however, that a new provision of HUD's RESPA rules at
24 CFR 3500.14(g)(1)(ix), discussed at Section 4 below, allows
employees who do not perform settlement services to market settlement
services or products of an affiliated entity and to receive employer
payments for these referrals. A company may not pay any other company
for the
[[Page 29257]]
referral of settlement service business. 24 CFR 3500.14(b).
RESPA places no restrictions on the pricing structure of CLOs as
long as the payments are not referral fees and are reasonably related
to the value of the services provided. However, the value of a referral
is not to be taken into account in determining whether the payment
exceeds the reasonable value of the goods, facilities, or services. 24
CFR 3500.14(g)(2). If these requirements are met, CLOs may charge
settlement service providers a fixed or periodic fee or a fee for each
closed transaction arising from the use of the CLO. However, if a CLO
charges different fees to different settlement service providers in
similar situations, an incentive may exist for the CLO to steer the
consumer to the settlement service provider paying the highest fees.
HUD may scrutinize these circumstances to determine if the
differentials constitute referral fees.1
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\1\ Depending upon the circumstances of the referrals and the
design of the CLO system, this steering of consumers may violate the
Fair Housing Act, as may selective marketing of CLO systems.
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Settlement service providers may pay CLOs a reasonable fee for
services provided by the CLO to the settlement service provider, such
as, having information about the provider's products made available to
consumers for comparison with the products of other settlement service
providers. If a CLO elects to act as a mortgage broker, as that term is
defined in 24 CFR 3500.2, then all RESPA rules related to compensation
of mortgage brokerage services apply to the CLO. On December 13, 1995,
HUD convened a negotiated rulemaking that could result in changes to
these RESPA rules. CLOs should review carefully any changes in the
regulations applicable to mortgage brokers and others that result from
this rulemaking.
3. CLOs in a Controlled Business Context
When a CLO is used in a controlled business arrangement, the RESPA
regulations relating to controlled business arrangements apply. Section
3(7) of RESPA (12 U.S.C. 2602(7)) defines a controlled business
arrangement in terms of an affiliate relationship or a direct or
beneficial ownership. The regulations provide definitions of affiliate
relationship, beneficial ownership, and direct ownership. 24 CFR
3500.15(c). Separate entities are a necessary component of the
controlled business arrangement definitions. For example, if a real
estate brokerage firm uses a CLO within its own business structure and
there is no separate affiliated business entity involved, then the CLO
is not being used in a controlled business arrangement with the real
estate brokerage firm.
A controlled business arrangement does not violate RESPA if three
conditions are met. 12 U.S.C. 2607(c)(4)(A)-(C). Section 3500.15(b) of
the regulations elaborates on the three requirements. First, when
consumers are referred from one business entity to an affiliated
business entity, a written disclosure of the affiliate relationship
must be provided. For example, if a real estate firm has an affiliate
relationship with a company providing CLO services and an agent of the
real estate firm refers a customer to the CLO company, then the real
estate agent must provide the required disclosure to the customer at
the time of the referral. Similarly, if the CLO company has an
affiliate relationship with one of the settlement service providers
listed on the CLO, then the CLO operator must provide the customer with
the required disclosure before the consumer uses the CLO. Second there
can be no required use, i.e., the referring entity cannot require the
consumer to use the CLO and the CLO cannot require the consumer to use
an affiliated company listed on the CLO. Thirdly, the only thing of
value that is received by one business entity from other business
entities in the controlled business arrangement, other than payments
permitted under 24 CFR 3500.14(g) for services actually performed, is a
return on an ownership interest or franchise relationship.
4. Payments of Commissions or Bonuses to Employees
CLOs are subject to the same RESPA provisions regarding employee
compensation as any service provider. For example, a settlement service
provider listed on the CLO may not pay a CLO employee a referral fee or
commission if the consumer selects that settlement service provider. 24
CFR 3500.14(b). Employees of a CLO may receive a bona fide salary or
compensation from the CLO--their employer. 24 CFR 3500.14(g)(1)(iv).
Compensation from CLOs to their employees may include commissions for
transactions closed on the system. 24 CFR 3500.14(g)(1)(vii). However,
if a CLO pays commissions for transactions closed with some settlement
service providers but not for transactions closed with other settlement
service providers, HUD may scrutinize these payments to determine if
the commissions constitute referral fees or are exempt under other
provisions (see below).
HUD established two new exemptions related to compensation of
employees in a final rule published today and effective 120 days from
their publication. The first exemption (24 CFR 3500.14(g)(1)(viii))
allows an employer to pay managerial employees who do not routinely
deal with the public bonuses related to the referral of settlement
service business to a business entity in a controlled business
arrangement. The CLO employee who routinely deals with customers is not
considered a managerial employee within the meaning of 24 CFR 3500.2. A
CLO may have managerial employees within the meaning of 24 CFR 3500.2,
such as a district manager who oversees several CLO operators who work
in different locations. Such a managerial employee may receive bonuses
based on criteria related to the performance of a business entity in an
affiliate relationship, such as profitability, capture rate, or other
thresholds. However, the amount of such bonus may not be calculated as
a multiple of the number or value of referrals of settlement services
business to a business entity in a controlled business arrangement. 24
CFR 3500.14(g)(1)(viii).
The second exemption (24 CFR 3500.14(g)(1)(ix)) allows employer
payments to their own bona fide employees for referrals of business to
affiliated entities if the employee does not perform settlement
services in any transaction and provides the consumer with a written
disclosure in the format of the Controlled Business Arrangement
Disclosure Statement. Employer payments to a CLO employee who does not
perform settlement services may qualify for this exemption. This
exemption permits employer payments to employees who do not perform
settlement services for referrals to affiliates. Under this exemption,
the employee may market a settlement service or product of an
affiliated entity, including collecting and conveying information and
taking an application or order for the services of an affiliated
entity. Marketing also may include incidental communications with the
consumer after the application or order, such as providing the consumer
with information about the status of an application or order; marketing
may not include serving as the ongoing point of contact for
coordinating the delivery and provision of settlement services. Under
the exemption, a CLO employee who takes an application and collects
information for an affiliate but performs no other settlement services,
may receive a payment from his or her
[[Page 29258]]
employer for a referral to an affiliated entity.
5. Neutral Display of Information on Settlement Service Providers and
Their Products
Section 8(a) of RESPA prohibits compensated referrals. HUD may
scrutinize non-neutral displays of information on settlement service
providers and their products because favoring one settlement service
provider over others may be affirmatively influencing the selection of
a settlement service provider which could constitute a referral under
RESPA. 24 CFR 3500.14(f). An agreement or understanding for the
referral of business incident to or part of a settlement service may be
established by a practice, pattern, or course of conduct. 24 CFR
3500.14(e). For example, if one lender always appears at the top of any
listing of mortgage products and there is no real difference in
interest rates and charges between the products of that lender and
other lenders on a particular listing, then this may be a non-neutral
presentation of information which affirmatively influences the
selection of a settlement service provider. Furthermore, if there is an
affiliate relationship between the CLO and a favored settlement service
provider, the non-neutral presentation of information under certain
circumstances could constitute a required use in violation of
3500.15(b)(2). This guidance on neutral displays should not be read to
discourage CLOs from assisting consumers in determining which products
are most advantageous to them. For example, if a CLO consistently ranks
lenders and their mortgage products on the basis of some factor
relevant to the borrower's choice of product, such as APR calculated to
include all charges and to account for the expected tenure of the
buyer, HUD would consider this practice as a neutral display of
information.
Authority: 12 U.S.C. 2617; 42 U.S.C. 3535(d).
Dated: May 31, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-14330 Filed 6-6-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-14329 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Amendments to Regulation X, the Real Estate Settlement Procedures Act: Withdrawal of Employer-Employee and Computer Loan Origination Systems (CLOs) Exemptions
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29238-29255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14329]
[[Page 29237]]
_______________________________________________________________________
Part IV
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 3500
Real Estate Settlement Procedures Act; Statements of Policy, Withdrawal
of Employer-Employee and Computer Loan Origination Systems Exemptions;
Final Rules
Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Rules
and Regulations
[[Page 29238]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR-3638-F-06]
RIN 2502-AG26
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Amendments to Regulation X, the Real Estate Settlement
Procedures Act: Withdrawal of Employer-Employee and Computer Loan
Origination Systems (CLOs) Exemptions
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: In this final rule, the Department of Housing and Urban
Development is revising Regulation X, which implements the Real Estate
Settlement Procedures Act of 1974 (RESPA). This rule completes a
process that started with a public hearing and comment period on August
6, 1993, followed by a proposed rule published on July 21, 1994.
In the interest of protecting consumers from practices prohibited
by RESPA, while making available to consumers the potential benefits of
innovative business arrangements, this rule withdraws an exemption for
employer-employee payments, introduces two more-limited exemptions for
payments that would otherwise be prohibited by the statute--employer
payments to managerial employees and employees who do not perform
settlement services in any transaction. In addition, to relieve any
uncertainty, the rule adds an additional exemption to clarify that
payments made to an employer's own bona fide employee for generating
business for that employer are permissible. The rule also revises
certain controlled business disclosure requirements. HUD has chosen to
use its exemption authority under Section 8(c)(5) of RESPA, having
consulted with other Federal agencies as required by that provision, as
well as the authority under Section 19(a) of RESPA, to permit these
payments.
The rule also withdraws an exemption for payments made by borrowers
for computer loan origination (CLO) services, because the exemption was
found to be of little benefit to consumers or the loan origination
industry. However, in order to assure that consumers in the mortgage
lending marketplace continue to benefit from technological innovation,
simultaneously with the publication of this rule, the Department is
issuing a Statement of Policy analyzing payments for CLOs under the
RESPA regulations. In addition, the Department is simultaneously
publishing two other Statements of Policy on issues raised by comments
on the proposed rule, although not directly related to the proposed
rule, and which involve interpretation rather than new rulemaking.
EFFECTIVE DATE: This rule is effective on October 7, 1996.
FOR FURTHER INFORMATION CONTACT: David Williamson, Director, Office of
Consumer and Regulatory Affairs, Room 5241, telephone (202) 708-4560;
or, for legal questions, Kenneth Markison, Assistant General Counsel
for GSE/RESPA, or Grant E. Mitchell, Senior Attorney for RESPA, Room
9262, telephone (202) 708-1550. (The telephone numbers are not toll-
free.) For hearing- and speech-impaired persons, this number may be
accessed via TTY (text telephone) by calling the Federal Information
Relay Service at 1-800-877-8339. The address for the above-listed
persons is: Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act Statement
The information collection requirements regarding controlled
business disclosures (Appendix D of this rule) have been approved by
the Office of Management and Budget, under the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501-3520), and assigned OMB control number 2502-
0265. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless the
collection displays a valid control number.
The Department has eliminated the CLO disclosure statement which
previously was contained in Appendix E to the RESPA rule. Based on
prior cost estimates, the Department estimates the annual savings to
business from eliminating this paperwork requirement to be $3,247,100.
I. Events Leading to Today's Final Rule
A. History of CBAs and CLOs
1. Controlled Business Arrangements
In 1983, Congress enacted the ``controlled business arrangement''
amendment to RESPA. This amendment, codified under section 461 of the
Housing and Urban-Rural Recovery Act of 1983 (HURRA) (Pub. L. 98-181,
97 Stat. 1230) established that controlled business arrangements do not
violate RESPA, provided that:
(a.) The relationship between the person performing settlement
services and the person making the referral is disclosed, along with
the estimated charges of the provider;
(b.) Consumers are not required to use an affiliated settlement
service provider, except under certain specified exemptions under
Section 8 of RESPA; and
(c.) Nothing of value is received by the referring party, beyond a
return on ownership interest or franchise relationship or payments
otherwise permissible under Section 8(c) of RESPA.
Following the enactment of these amendments, HUD issued several
informal legal opinions concerning the extent to which employers could
pay referral fees to employees. The opinions stated that bona fide
full-time employees could be compensated for generating business for
their own employers, as this would be within the scope of their
employment. These opinions also made clear that uncompensated referrals
to affiliated companies were not prohibited. HUD did not, however,
broadly approve compensation to employees for referrals to affiliated
companies.
2. Computer Loan Origination Systems (CLOs)
During the 1980's, a number of private companies and trade
organizations began to develop systems where some or most of the usual
mortgage origination services could be performed by computers. These
computer services frequently linked real estate brokerage offices to
lenders or other settlement service providers. Concerns were raised to
HUD regarding the interplay of these systems with Section 8 of RESPA,
particularly whether the existence of such systems could result in
illegal steering or compensation for referrals of business, or whether
the use of the systems would allow the operators to impose charges for
activities which represented little or no actual services. Several
developers of such systems and potential competitors asked HUD for its
views on payments made in connection with these systems under RESPA.
In the mid-1980's, HUD issued several informal interpretations
generally concluding that payments for CLO systems did not violate
Section 8 of RESPA. The opinions stated that, so long as payments by
the lenders (or real estate brokerage offices) went to cover
``operational fixed costs'' of the CLO services, no referral fees
existed. Moreover, the opinions stated that
[[Page 29239]]
borrower payments to CLOs were analogous to arrangements whereby
borrowers voluntarily pay mortgage brokers for locating lenders.
Accordingly, the Department concluded that such payments were not
pursuant to a prohibited ``agreement or understanding'' under Section
8(a) of RESPA and thus, were not proscribed by Section 8(a) of RESPA.
On two subsequent occasions, the Department revisited RESPA's role
in payments for CLO services through informal opinions. Both cases
involved payments to CLO operators from either lenders or real estate
brokers. In these two opinions, the Department concluded that such fees
did not violate Section 8(b) of RESPA so long as the fees were
reasonably related to services actually rendered. Controversy continued
to surround the use of CLO systems, with many mortgage bankers
opposing, and realtors supporting, HUD's position. All opinions were
withdrawn pursuant to a final rule published on November 2, 1992 (57 FR
49600) under RESPA (hereinafter ``final rule'' or ``1992 final rule'').
In May 16, 1988, HUD opened up this matter for review and
discussion without specifically mentioning CLOS, by proposing a rule
(53 FR 17428, 17438) that would have added an exception under
Sec. 3500.14, to allow the following:
Voluntary payment by a borrower to a person who has acted as a
mortgage broker or has otherwise assisted in bringing the lender and
borrower together, provided that such voluntary payment is disclosed
on both the good faith estimate of settlement costs and the HUD-1
settlement statement and is not a condition of the loan or other
settlement service.
The 1992 final rule did not adopt the so-called ``mortgage broker
exception'', but did adopt a CLO exemption.
B. The 1992 Rule
On November 2, 1992, HUD published the 1992 final rule, which
became effective on December 2, 1992. The 1992 final rule contained
provisions implementing congressional amendments to RESPA regarding
controlled businesses and created an exemption for payments by
borrowers to computer loan origination systems. The final rule also
updated the original RESPA regulations, which had not been amended
since 1976.
1. Employer-Employee Exemption
The 1992 final rule went beyond HUD's previous positions, as
articulated through informal legal opinions that were withdrawn by the
1992 final rule, and created an exemption for payments by an employer
to its own employees for any referrals of settlement service business.
Employees were thus allowed to receive compensation from their
employers for generating business for their own employer or for any
other business entity (including affiliates). The final rule contained
a stricture, in Sec. 3500.14(b), that the business entity receiving the
referrals of settlement business could not directly or indirectly
compensate anyone for such business. The rule did not limit this
exemption to controlled business arrangements. The exemption, however,
had little utility for entities outside an affiliate business setting,
since it was unlikely that an employer would pay its own employees for
making referrals to unaffiliated individuals or companies. As noted,
while the rule permitted an employer to compensate its own employees
for referrals, it also indicated that if the business entity receiving
the referral reimbursed the employer of the employees making the
referrals, Section 8 of RESPA would be violated.\1\
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\1\ The 1992 final rule was a marked departure from HUD
interpretations in recent years. After the issuance of the May 1988
proposed rule, which led to the 1992 final rule, HUD's position,
expressed in a number of General Counsel's opinions, was that an
employer could not compensate its employee for referrals to other
business entities (including affiliates). These opinions only
indicated that an employer could compensate its employees for
generating business for that employer (not to affiliates).
---------------------------------------------------------------------------
Following the 1992 final rule's issuance, two lawsuits were filed
objecting to provisions of the revised regulations as inconsistent with
the statute and claiming failure by the Department to comply with the
Administrative Procedure Act in the rule's promulgation.\2\ In
addition, upon assuming office, HUD officials in the new Administration
were inundated with comments about the final rule.
---------------------------------------------------------------------------
\2\ Plaintiffs in Mortgage Bankers Association of America v.
United States of America, No. 92-2699 (D.D.C.), and Coalition to
Retain Independent Services in Settlements (CRISIS) v. Cisneros, No.
92-2700 (D.D.C.), filed separate actions seeking a declaration that
the ``employee exception'' provision was invalid and injunctive
relief enjoining implementation of this provision. The MBA suit also
alleged that the CLO provision was invalid. These suits were
dismissed without prejudice, that is, subject to reinstatement. A
hearing regarding the Department's progress in issuing revised
regulations is scheduled for October 1996.
---------------------------------------------------------------------------
The Department received allegations that the final rule created
uncertainty about whether referral fees were in fact prohibited by
RESPA. Some entities critical of the 1992 final rule characterized the
provision permitting employers' payments to their own employees for
referrals as broadly sanctioning referral payments. The trade and
business press frequently restated this position without examination.
Also, some commenters claimed that the creation of an employer-employee
exemption from the prohibition on referral fees prompted some persons
to set up sham employer-employee relationships to shield prohibited
referral fees, and it prompted others to ``extort'' referral fees from
other settlement service providers on the premise that HUD now allowed
such compensation. While the final rule was not intended to permit sham
arrangements, neither did it clarify the extent of the employer-
employee exemption. Commenters argued that the final rule failed to
establish a bright line, comprehensible to industry participants,
between permissible and impermissible activities.
2. CLO Exemption
The 1992 final rule also introduced a CLO exemption, which provided
that borrower payments to CLO systems were exempt from Section 8 so
long as a specified disclosure was made. The 1992 final rule did not
adopt the mortgage broker exception proposed in the May 1988 proposed
rule. The Department reasoned that well-informed choices by consumers
did not require special protection under RESPA. Moreover, this
exemption was intended to prevent RESPA's restrictions against unearned
fees from unduly inhibiting the development of technology which could
permit consumers to shop, apply for and/or obtain mortgage loans
electronically. CLO systems were not specifically defined in the 1992
rule.
C. A Public Dialogue
Given the controversy over the 1992 final rule, the Secretary
determined that a review of the previous policy--primarily concerning
the exemptions for employer payments to employees and borrower payments
to CLOs--was needed. The review would particularly focus on the final
rule's impact on consumers. The Secretary articulated three principles
to guide that review:
1. HUD's responsibility is to protect the consumer--not to mediate
among industry interests.
2. HUD should regulate multimillion dollar industries responsibly--
principally by acting quickly to end uncertainty.
3. Technological and business arrangement innovations have the
potential to provide significant consumer benefits, and HUD does not
serve consumers well if its regulations unduly stifle such
advancements.
On July 6, 1993, in an effort to ensure that the views of all
interested parties
[[Page 29240]]
were heard, the Department published a ``notice of written comment
period and informal public hearing'' (58 FR 38176), inviting testimony
and written comments on the following four provisions of the final
rule:
Issue 1--The ``employer-employee'' exemption. Section
3500.14(g)(2)(ii) of the 1992 final rule, which provided that Section 8
of RESPA does not prohibit ``an employer's payment to its own employees
for any referral activities * * *.''
Issue 2--The ``computer loan origination'' (CLO)
exemption. Section 3500.14(g)(2)(iii) of the 1992 final rule, which
provided that Section 8 of RESPA does not prohibit ``any payment by a
borrower for computer loan origination services, as long as the
disclosure set forth in appendix E is provided the borrower.''
Issue 3--Preemption policy. Section 3500.13(b)(2) of the
1992 final rule, which provided that ``in determining whether
provisions of State law or regulations concerning controlled business
arrangements are inconsistent with RESPA * * * the Secretary may not
construe those provisions that impose more stringent limitations on
controlled business arrangements as inconsistent with RESPA, as long as
they give more protection to consumers and/or competition.'' \3\
---------------------------------------------------------------------------
\3\ As discussed, infra, HUD announced in a July 21, 1994,
proposed rule that it would not propose new rules on this issue and
would consider preemption questions on a case-by-case basis. Since
HUD has not changed its position on this issue, this final rule does
not address the issue further.
---------------------------------------------------------------------------
Issue 4--Controlled business disclosure policy. Section
3500.15(b)(1) of the 1992 final rule, which provided for a written
disclosure in controlled business situations regarding the ownership
and financial relationships between referring and referred-to parties,
and for certain timing and other methods for disclosure.
On August 6, 1993, HUD conducted a public hearing, which produced
testimony and documents from 36 interested parties. The request for
written comment generated 1,526 public comments on these four issues.
D. The 1994 Proposed Rule
Following a detailed examination of the testimony and comments, HUD
published a proposed rule (59 FR 37360, July 21, 1994) \4\ containing
substantial revisions to the RESPA regulation. The proposed rule
discussed the views expressed in response to the pre-rule solicitation
of public comment and took positions on each of the earlier-presented
four major issues, inviting further public comment in light of the
additional revisions to the RESPA regulation that HUD was proposing.
---------------------------------------------------------------------------
\4\ A more comprehensive discussion of the issues presented, the
Secretary's initial position on further amendment of the RESPA
regulations, and a summary of the hearing testimony and the comments
received are contained in the preamble of the proposed rule.
---------------------------------------------------------------------------
The proposed rule reflected the Secretary's conclusion that the
1992 final rule's employer-employee exemption was too broad. In the
proposed rule, HUD proposed to withdraw this exemption because it
compromised the statute's purpose of protecting the consumer from being
referred to settlement service providers because of financial gain to
the referrer, rather than because of the quality and price of the
services. The proposed rule would have removed an exemption that
permitted an employer to pay employees referral fees for referrals to
an affiliate business entity.\5\ The proposed rule rejected the view
that all employer payments to its employees for referrals to third-
party settlement service providers should be exempt. When HUD viewed
the payments from the perspective of the consumer, it was clear that
payments by the employer to an employee, who performs settlement
services, for third-party referrals were indistinguishable from
payments directly from the third-party settlement service provider.
While HUD has the authority to exempt all employer payments for third-
party referrals under its Sections 8(c)(5) \6\ or 19(a) authority, the
Secretary concluded in the proposed rule, as a policy matter, that such
a broad exemption was inconsistent with the purposes of RESPA. In this
final rule, the Secretary is exercising this authority under Sections
8(c)(5) and 19(a) to exempt employer payments to their employees in
those circumstances where adequate consumer protection exists.
---------------------------------------------------------------------------
\5\ This proposal was consistent with congressional admonitions.
See H.R. Rep. No. 123, 98th Cong., 1st Sess. 76 (1983) (controlled
business provisions are not intended to change current prohibitions
against unearned fees, kickbacks, or other things of value in return
for referrals of settlement service business).
\6\ In accordance with section 8(c)(5) of RESPA, HUD consulted
with the other agencies listed before exercising its authority under
section 8(c)(5).
---------------------------------------------------------------------------
In adopting the proposed rule, the Department also recognized that
Congress had clearly established that controlled business arrangements
were permissible under certain conditions. In the interest of avoiding
undue interference with the internal operations of controlled
businesses, expressly permitted under the 1983 amendments to RESPA, the
proposed rule would not have prohibited the payment of bonuses and
compensation to managerial employees in controlled businesses for such
purposes as the generation of business among affiliates provided,
however, that:
1. No employee or agent could receive compensation from his or her
employer or any other source when the compensation is tied on a one-to-
one basis to, or is calculated as a multiple of the number or value of,
referrals of business to an affiliate business entity; and
2. The compensation of agents or employees who routinely are in
direct contact with the public could not be based, in whole or in part,
on the value or number of referrals made to affiliated entities.
These clarifications were designed to minimize any incentive that a
person in a position to make or influence a referral might have to make
a referral based on his or her own, or his or her employer's, financial
interests, without requiring HUD to interfere unduly with the internal
operations of controlled business arrangements.
As it relates to the regulation of payments to CLO systems, the
proposed rule reflected a determination that it was desirable to amend
the final rule to establish minimum standards for qualified systems,
payments to which would be exempt from Section 8. Under
Sec. 3500.14(g)(3) of the proposed rule, ``qualified'' systems would
have had to meet a number of specific regulatory requirements.\7\ The
proposed rule also asked for advice as to whether to create a similar
exemption for payments by lenders to operators of ``qualified'' CLOs.
---------------------------------------------------------------------------
\7\ These requirements are described in Part II, Section C, of
this preamble.
---------------------------------------------------------------------------
To assist in the promulgation of a final rule, the Secretary
requested comments and invited information on the effect of all of the
above proposals on the settlement services industry and consumers. As
an additional vehicle for obtaining public input, on September 30,
1994, as part of the rulemaking process, the Department conducted an
open house for operators of CLO systems to demonstrate their systems to
HUD and to the public.8
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\8\ Twenty-one CLO operators accepted the Department's
invitation and demonstrated their systems to officials of the
Department and to the public during an all-day session on September
30, 1994.
---------------------------------------------------------------------------
Later in the rulemaking process, in August and September 1995, the
Department convened two working group meetings of interested industry,
government, and public officials, to obtain their individual input and
to
[[Page 29241]]
further explore the development and use of CLOs.
E. Today's Final Rule
Today's final rule addresses the comments received in response to
the proposed rule and considering the comments, promulgates rules
relating to Issues 1 (the employer-employee exemption), Issue 2
(payments to CLOs), and Issue 4 (controlled business disclosure
format). With respect to Issue 1, the rule withdraws the employer-
employee exemption and introduces three more-limited exemptions
designed to recognize the variety of business organizations without
doing damage to RESPA's core objective of consumer protection. On Issue
2, the rule withdraws the CLO exemption and issues a related Statement
of Policy that illustrates how CLO payments and activities are analyzed
under the existing and new RESPA regulations. As discussed, supra,
respecting Issue 3, the proposed rule did not propose any changes to
the preemption provisions, for the reasons explained in the proposed
rule, and, therefore, requested no comments. On Issue 4, the rule
revises the Controlled Business Arrangement Disclosure Statement.
In reading this preamble, the reader should be aware that HUD's
RESPA rule was recently streamlined through a separate rulemaking (61
FR 13232, March 26, 1996). This streamlining caused several provisions
of the RESPA rule to be renumbered. Except as is otherwise indicated in
the context of the preamble, this rulemaking refers to provisions by
their current section number, incorporating all revisions to date as a
result of the streamlining and today's rulemaking.
II. Analysis of Issues in Final Rule
A. Overview of the Public Comments
The Department received 354 \9\ comments on the July 21, 1994,
proposed rule. Of these, 100 were from attorneys, most of whom stated
that they were, or previously had been, actively engaged as settlement
lawyers. Only 2 comments from attorneys were identified by the writers
as written on behalf of clients; the remaining 98 appeared to be
individually originated comments by the attorneys or law firms on their
own behalf.\10\ An additional 73 comments came from bank holding
companies, banks, or other mortgage lenders; comments were received
from 46 real estate brokers; 34 comments were from mortgage brokers; 19
were identifiable as multi-service real estate service organizations;
\11\ 14 comments were from title company executives, 9 comments came
from credit unions; 8 from CLO service providers; and 6 commenters
identified themselves as consultants. One comment was received from a
journalist, one from a mortgage insurance firm, one from a credit
reporting service, and one from a student, and three comments were
received from persons whose professional interest in the rule could not
be determined.
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\9\ Three-hundred fifty-seven comments were received, but three
were found to be duplicate copies of other comments.
\10\ Not included as ``attorney comments'' were comment letters
written by house counsel for banks, lenders, or other organizations
communicating, through counsel, on their own behalf.
\11\ It was not always clear from a commenter's remarks, or from
the commenter's business letterhead, whether the commenter spoke for
a multiple-service entity. Accordingly, some commenters classified
here as lenders, mortgage brokers, real estate brokers, or other
categories may also, in fact, be multiple-service business entities.
---------------------------------------------------------------------------
Twenty-two State, local, or regional organizations representing
portions of the real estate brokerage, lending, and settlement
industries provided comments, as did 16 organizations classified as
national advocacy organizations.
Attitudes toward the proposed rule varied greatly, not only
according to the professional background of the commenters, but also
according to whether a commenter was engaged in a controlled business
arrangement. For this reason, lenders and other settlement service
providers expressed a wide variety of views concerning the rule. The
majority (but by no means all) of the comments received from real
estate brokers and agents favored the existing regulatory structure
(the 1992 final rule) and sought to discourage changes in the rule
which, they argued, would impede their ability to provide benefits to
consumers.
Issue 1 (the employer-employee exemption) attracted the greatest
attention among commenters. Virtually all commenters, on both sides of
the issue, were at least moderately dissatisfied with the proposed
rule's revisions. Commenters who opposed any authorization of referral
payments frequently thanked the Department for the effort made in the
proposed rule to limit the practice, but virtually all of these
commenters were displeased that the Department was proposing to exclude
from RESPA coverage certain compensation to managerial employees in
controlled businesses.
On the other hand, commenters who wanted referral payments to
employees to continue to be allowable expressed strong opposition to
the proposed rule's limitation on such payments. Additionally, many of
these commenters asked for clarifications concerning the scope of the
``managerial'' exemption.
Issue 2 (the CLO exemption) was the second-most-frequently
addressed subject. A significant minority of the commenters who
addressed the issue credited the Department with a good effort at
better defining ``CLO services'' in the proposed rule, and there was
some positive support for the HUD definition. However, most commenters
who addressed the CLO question found fault with HUD's proposed
disposition of the issue, with the proposed CLO definition, or both. A
wide variety of suggestions for further refinement of the definition
was provided.
Issue 3 (the preemption issue) drew a few comments, even though the
Department had not requested any comments on it and had determined in
the July 21, 1994 proposed rule not to propose new rules on this issue.
The Department stated in the proposed rule that ``setting out
comprehensive and informative preemption standards present[ed] an
almost insurmountable task, in the absence of a wide array of specific
fact situations that are raising preemption issues.'' The Department
determined to consider preemption questions on a case-by-case basis.
Accordingly, the final rule does not address this issue.
Issue 4 (the controlled business arrangement disclosure statement)
attracted a significant amount of comment. In general, commenters on
both sides of the other issues were undisturbed by what they perceived
as the somewhat minor changes in the controlled business disclosure
statement that HUD proposed to adopt. There were, however, a number of
technical suggestions, and significant criticism of what was regarded
as the unduly negative tone of language proposed to be employed in the
Appendix D format to suggest that consumers shop for services.
Additionally, commenters continued to identify unresolved questions
about the disclosure form and to suggest modifications of both its
language and its applicability.
What follows is a more comprehensive discussion of the views
expressed by the commenters on Issues 1, 2, and 4, together with the
Department's rule-making decisions.
B. Issue 1: Withdrawal of Employer-Employee Exemption
1. In General
In the proposed rule, the Department proposed the withdrawal of the
existing regulatory exemption that permits
[[Page 29242]]
employers to pay referral fees to their own employees for referring
settlement service business to business entities, including those
within an affiliate relationship. This exemption applied whether or not
employers were in an affiliate or ``controlled business'' relationship,
but practically only benefited affiliate arrangements, as an employer
was unlikely to compensate its employees for referrals to unaffiliated
providers. The proposal included a limited exemption for payment of
bonuses for managerial employees who did not deal with the public,
provided such bonuses were not correlated on a one-to-one basis or
calculated as a multiple of the number or value of any referral of
settlement service business by the employee or the employee's
organizational unit to an entity affiliated with the employer or
principal.
2. The Public Comments
Virtually all of the comments from attorneys approved of the
proposal to eliminate the employer-employee exemption. (About 30
percent of all the comments received on the proposed rule were from law
firms providing settlement services, and the overwhelming majority of
attorney comments were focused upon the employer-employee exemption.)
The combined comments of the Attorneys General of 11 States commended
the Department for focusing the rule's impact on consumers and for
articulating, as the first of HUD's guiding principles, the protection
of the consumer, rather than the mediation of industry interests. They
called the proposed rule a ``vast improvement'' over the November 2,
1992, rule.
Some major industry organizations expressed support for the
withdrawal of the exemption. For example, the Mortgage Bankers
Association expressed its ``substantially favorable reaction'' to the
changes HUD was proposing. MBA called employer-paid referral fees
``fundamentally inconsistent with the purposes of RESPA,'' and approved
the proposed rule's elimination of the exemption for fees paid to
employees with direct contact with consumers.
The basic premise of these commenters, who wanted a total
withdrawal of the employer-employee exemption, was that Section 8(a) of
RESPA should be construed to prohibit all ``compensated referrals,''
and any standard less than this bright line test opened up this civil
and criminal statute to unnecessary ambiguity and uncertainty. These
commenters generally maintained that no exceptions or exemptions should
be made.
In contrast, comments favoring the retention of the employer-
employee exemption argued that the 1992 formulation of the regulations
had not yet had time to work and be measured, much less to be found
insufficient. One diversified real estate, finance, management, and
insurance company from Illinois argued that ``controlled business
arrangements'' was an unfortunate misnomer that left the impression
that great control was being exercised over consumers. The commenter's
own company, it was claimed, had a ``capture rate'' of only around 14
percent of its real estate customers choosing to use its mortgage
services:
This means that at least 86 percent of those customers still
seek a different mortgage provider. This hardly represents a
coercive customer problem that's needing more regulation * * *. The
real danger in attempting to further regulate companies such as ours
[is that it] will result in reduced customer choice which we clearly
provide, and retarding competition * * *
An Illinois local office of a nationwide finance organization
argued strenuously that the elimination of employer-employee referral
fees would change little.
* * * [I]n the absence of any referral compensation, employees
will not discontinue referring consumers to affiliate settlement
service providers. This is because, when dealing with the consumer,
the employee is an agent of the employer and, as such, acts in
accordance with [his] employer's direction. * * * [A]rguments that
not paying a referral fee to an employee will result in an employee
acting independently of the employer's interests [are] simply not
based on reality.
The Real Estate Services Providers Council (RESPRO), an advocate of
the 1992 final RESPA rule, stated its continuing support of a
regulatory environment that would permit unfettered ``one-stop
shopping'' for real estate services. RESPRO favored both management
compensation and front-line employee compensation based upon profits or
on the amount of referred business the manager/employee was responsible
for producing. HUD's proposed rule suggesting the withdrawal of the
exemption in the 1992 final rule has, RESPRO commented, stifled
companies from developing one-stop shopping programs in the most cost-
efficient manner. The new proposed rule ``would significantly decrease
cost efficiencies within diversified companies by preventing them from
utilizing their own management to carry out the company's one-stop
shopping goals.''
HUD's apparent objective in regulating referrals, RESPRO argued,
was to eliminate the possibility of adverse steering. However, HUD's
principal concern appears to be focused on perceived abuses in the real
estate sales industry, and the examples of abuses cited by HUD (and by
commenters responding to the earlier request for comments) involved
real estate brokers and salespersons. RESPRO argued that the 1994
proposed rule's prohibition on employer-employee referral payments goes
far beyond any rule necessary to reduce adverse steering, and that the
rule deprives diversified companies of the efficiencies they need to
lower costs to consumers and would place diversified companies at a
competitive disadvantage, relative to independent competitor companies.
Comments from the National Association of Federal Credit Unions
(NAFCU) also opposed the elimination of the RESPA exemption for
employer-employee referral fees.
Another commenter who opposed the elimination of the exemption and
stated its support for the 1992 RESPA regulation was the National
Association of Neighborhoods (NAN). NAN's comments expressed concern
that the proposed rule's changes would reduce competition and consumer
choice by limiting the ability of one class of providers--diversified
companies--to offer homebuyers services on a cost-efficient basis. NAN
also expressed concern about the effect of the revisions on the
Community Reinvestment Act, noting the Federal Reserve Board's earlier
comments that restrictions on employee referral-based compensation
might be ``detrimental to future innovations and developments in
community lending.''
A mortgage finance consultant from Virginia cited recent
legislative proposals in Pennsylvania that would restrict the
percentage of business referrals permitted in a realtor-mortgage banker
controlled business arrangement. The commenter noted that Congress had
rejected similar proposals in the 1983 amendments to RESPA:
In my experience, all of the attempts to limit CBAs have been
motivated by industry, not to protect consumers or to provide lower
fees or better service, but to keep another industry from entering
the business. I would urge HUD to ensure that congressional intent
is followed by allowing CBAs to exist in the states unfettered by
the kinds of restrictions that were rejected in the 1983 CBA
amendments to RESPA.
Many supporters of controlled business arrangements reiterated
their earlier contentions that ``one-stop
[[Page 29243]]
shopping'' leads to greater efficiency in the settlement process and to
cost-savings for borrowers. Several of these commenters objected
strongly to the proposed withdrawal of the employer-employee exemption,
and urged that the Department reconsider and retain the existing
employer-employee exemption.
The National Association of Realtors (NAR) supported HUD's
clarification of the meaning of the November 2, 1992 rule, as set forth
in the preamble of the July 21, 1994 proposed rule, which indicated
that real estate agents were normally ``independent contractors'' and
therefore not employees within the meaning of the rule. Such agents,
therefore, could not receive referral-based compensation. NAR counsel,
however, requested clarification that an employer may legitimately
compensate its own employees ``for the generation of its own
business.'' Another commenter (Commercial Credit Corporation) wanted a
clarification in the final rule that RESPA did not apply to the
compensation arrangements for the generation of settlement service
business by either an employee or an agent of a settlement service
provider, in a particular multi-layered business structure, who
originated settlement services business exclusively for that settlement
service provider.12
---------------------------------------------------------------------------
\12\ The commenter described a circumstance in which a mortgage
broker entered into an exclusive agency agreement with a lender to
deliver mortgage loan applications to the lender. The mortgage
broker used its exclusive agents (who were not otherwise engaged in
performing settlement services) to generate these loans. The
commenter represented that the consumer was at all times aware of
the exclusive relationship between the agent and the mortgage broker
and lender principals.
Payments by a mortgage lender to its exclusive agents reasonably
related to services actually performed, in the circumstances
described, fall under the exemption in Section 8(c)(1)(C) and 24 CFR
3500.14(g)(1)(iii). Thus, HUD concluded that the requested
clarification to address the issue raised by the commenter was not
necessary.
---------------------------------------------------------------------------
3. The Final Rule's Approach--Overview
After a complete review of all comments and points of view, the
Department withdraws the broad employer-employee exemption. HUD has
determined that a broad exemption, as contained in the 1992 rule,
unnecessarily allows persons who serve consumers and gain their trust
to receive referral fees, in contravention of the express intent of
Congress in enacting Section 8(a). However, to allow controlled
business arrangements to operate and provide beneficial services and
packages of services to consumers, the rule establishes three
exemptions for permissible payments by employers to bona fide
employees. Specifically, the exemptions permit employer payments to
their own bona fide employees for referrals of business if:
(a.) The employee is a managerial employee, and the payment is not
calculated as a multiple of the number or value of referrals.
(b.) The employee does not perform settlement services in any
transaction; prior to the referral the employee provides the person
being referred a written disclosure in the format of the Controlled
Business Arrangement Disclosure Statement, set forth in Appendix D to
this part; and the referral is to a settlement service provider which
has an affiliate relationship with the employer or in which the
employer has a direct or beneficial ownership interest of more than one
percent. For purposes of this exemption, the marketing of a settlement
service or product of an affiliated entity, including the collection
and conveyance of information or the taking of an application or order
for the services of an affiliated entity, does not constitute the
performance of a settlement service. Under the exemption, marketing of
a settlement service or product also may include incidental
communications with the consumer after the application or order, such
as providing the consumer with information about the status of an
application or order; marketing may not include serving as the ongoing
point of contact for coordinating the delivery and provision of
settlement services.
(c.) The payment is to that employer's own employees for generating
business for the employer itself--but not its affiliates. The
Department believes that it was clear that such payments were
permissible payments under RESPA. However, because some commenters
indicated uncertainty regarding this position, and it is HUD's intent
that such payments continue to be permissible, the rule clarifies the
issue with a new exemption providing that payments made to bona fide
employees for generating business for their employer are permissible
under Sec. 3500.14(g)(1)(vii). This exemption means that an employee
may accept payments for referrals to its own employer. In an affiliated
relationship, the employer is only the business entity for whom the
employee directly works.13
---------------------------------------------------------------------------
\13\ In addition, pursuant to 24 CFR 3500.14(g)(3), any person
who is in a position to refer settlement service business, such as
an attorney, mortgage lender, real estate broker or agent, or
developer or builder, may continue to receive payments for providing
additional settlement services as part of a real estate transaction,
if such payments are for services that are actual, necessary, and
distinct from the primary services provided by that person.
---------------------------------------------------------------------------
These new exemptions provide that payments must be to a bona fide
employee. Individuals may not be hired on a part-time basis to make
referrals because of their access to consumers as settlement service
providers. Sham employment arrangements, such as a title company paying
a one hour ``salary'' to a real estate agent who provides a referral,
and issuing a W-2 for ``services'' rendered to justify compensating a
referral, are, and will continue to be, violations of RESPA.
The Secretary has authority to create exemptions under Section
19(a) of RESPA for classes of transactions as may be necessary to
achieve the purposes of the Act. 12 U.S.C. 2617(a). In addition, under
Section 8(c)(5) of RESPA, the Secretary may create regulatory
exemptions for ``such other payments or classes of payments,'' after
consulting with various Federal agencies. 12 U.S.C. 2607(c)(5). The
three exemptions created under this final rule are issued pursuant to
the Secretary's clear authority to create reasonable exemptions to
further the purposes of the Act.
In creating these new exemptions, HUD is not directly regulating
wages to bona fide employees. Rather, HUD is creating an exemption for
certain payments within an employment context that otherwise would be
prohibited by Section 8(a). The Secretary believes that such payments
to bona fide employees are not designed as a subterfuge to facilitate
kickbacks among affiliated companies.
The exemptions for managerial employees and employees who do not
perform settlement services in any transaction are explored in detail
below.
4. Managerial Employees
a. The Public Comments. Several commenters supported allowing
compensation to managerial employees based on referrals and criticized
the formulation regarding managerial compensation in HUD's proposed
rule. NAR supported the idea of compensation for managerial employees
or others who are not sales agents or otherwise involved in the direct
provision of settlement services. At the same time, NAR asked that the
proposed definition of ``managerial employee'' clarify that mere
possession of a broker's license or a salesperson's license to sell
real estate would not affect an individual's status as a managerial
employee. Many States, NAR indicated, require managers in the real
estate
[[Page 29244]]
business to hold licenses as brokers or sellers.
NAR counsel, responding separately to the proposed rule on behalf
of the organization, further elaborated on the national organization's
position regarding referral payments. He distinguished ``primary
services'' from ``secondary services,'' and argued:
NAR recognizes that the historic and legitimate thrust of
Section 8(a) of RESPA has been to prohibit compensation for
referrals by persons who are ``in a position to refer settlement
business,'' understood as referring to real estate professionals
providing settlement services (``primary services'') to whom
consumers may look for advice regarding sources of other required
settlement services (``secondary services'') with the expectation
that such advice will be based on professional knowledge and
experience and not tainted by additional compensation payable by the
highest bidder for the referral.
He suggested that HUD prohibit referral-based payments for any
individual who has significant contact with consumers regarding the
provision of a settlement service, where a principal part of the
individual's income consists of compensation based on settlement
services performed for the person's employer or an affiliate. The
prohibition against sharing of compensation related to a ``secondary
service,'' NAR counsel argued, could apply to all services performed by
the secondary service provider and not just to specific referrals. He
asserted that HUD could more easily enforce his suggestion than HUD's
proposal, since HUD's rule evidently required proof of an actual
``referral'' by the initial service provider.
* * * [A] regulation based on identification of actual referrals
will likely prove unworkable, leading either to no enforcement or to
adoption of presumptions that might exceed HUD's authority.
Additionally, NAR counsel argued that the proposed rule's
``managerial exemption'' would unduly complicate the ability of a
diversified company to devise workable incentive compensation schemes
for managers. NAR counsel further suggested a change to the definition
of ``managerial employee'' to exclude situations wherein a managerial
employee may, from time to time, act as a direct service provider. (In
such circumstances, the NAR-suggested definition would not permit
referral-based compensation in addition to the sometime-manager's
commission.) NAR counsel added, in comments varying somewhat from the
stated NAR position:
In general, we do not believe that the permissibility of
compensation should turn on status as an ``employee'' vs.
``independent contractor,'' provided that the independent contractor
is one whose services are provided exclusively for a single
principal and who is, therefore, in the eyes of the consumer,
indistinguishable from an employee.
MBA stated its concern about the lack of clarity in the
``managerial employees'' exemption in the proposed rule, seeking to
narrow the category of persons eligible for payments for referrals:
We believe it is imperative to have more detail in the
definition, so that the lending and real estate broker industries
will know exactly where the line is between `managerial employees'
and those that have `routine contact with the public.' For example,
if a person manages a branch office and consequently has supervisory
control over all of the staff that deal directly with the public, in
which category does that person fall? We strongly urge that such a
person [not be] eligible for the exemption because of his or her
involvement with the public implicit in the supervisory role * * *.
* * * [U]sing real estate offices as examples, office managers
and real estate brokers can exercise considerable influence over the
activities of the independent agents through manipulation of the
terms and conditions of their work * * *.
MBA asked that the term ``managerial'' be further defined to
include only individuals working at ``higher corporate levels'' where
there would be no opportunity to steer consumers. It was urged that the
definition be amended to clarify that only employees who do not work in
offices where consumers regularly visit could qualify for the
managerial exemption. The National Association of Mortgage Brokers
(NAMB) also asked that HUD revise the rule to elaborate on the
definition of ``employees'' to make clear that the term excludes
independent contractors and real estate agents.
RESPRO favored both management compensation and front line employee
compensation based upon profits or on the amount of referred business
the manager/employee was responsible for producing. RESPRO claimed that
the proposed rule's restrictions on compensation for managerial
personnel were so vague that they would, effectively, prohibit all
management compensation in one-stop shopping programs. One of HUD's
Fact/Comment Illustrations in the proposed rule indicated that
``Nothing in the RESPA rule prohibits bonuses or other compensation
based, in part, on the generation of business by A (a lender) to B and
C (a title company and escrow company) being paid to managerial
employees who are not routinely in contact with customers.'' However,
RESPRO claimed, the text of the proposed rule is not consistent with
the statement in the quoted Fact/Comment illustration.
The American Bankers Association (ABA) objected to the managers'
compensation provision of the proposed rule as ``too narrow,'' and
advocated that all employees of banking institutions should be able to
receive compensation or bonuses based on their referral of business
within the bank or to affiliates. Even if HUD were to retain only the
managerial exemption, the rule needs modification, ABA said, to clarify
the circumstances under which an employer could legitimately compensate
a manager.
In contrast, many of the attorneys commenting on the rule
(virtually all of whom supported the withdrawal of the employer-
employee exemption) were highly critical of the proposal to allow the
payment of referral-related bonuses and compensation to managerial
employees in controlled businesses, under conditions set out in the
proposed rule. The managerial exemption was regarded as an ``enormous
loophole'' in the new rule that would substantially overwhelm the
benefits these commenters expected from the proposed elimination of the
exemption for fees to line employees. Typical of attorney comments
received was one from an Alabama practitioner who said he ``applauded''
HUD's partial change of position ``to eliminate the objectionable
`employee bonus/kickback scheme'.'' However, the commenter said, ``by
creating the manager bonus loophole, you have simply encouraged and
promoted indirect schemes to circumvent basic consumer protection.''
The attorney ``implored'' HUD to ``stop playing politics with the basic
rights of consumers that the Real Estate Settlement Procedures Act was
designed to safeguard.'' Similar views were expressed by a Memphis
attorney:
If HUD allows bonuses to be paid to real estate managers even
though the bonuses are not strictly calculated on the basis of the
referral business, but merely takes it into account as a factor, the
managers and the agents will find a way to tie the bonuses directly
to the amount of business generated. HUD will have ``opened the
door'' to the abusive practices of kickbacks, tie-ins, fee
splittings, controlled business practices, and conflicts of interest
that existed prior to RESPA and which RESPA has largely eliminated.
Once the door is opened, everyone will stampede through it.
The American Bar Association's General Practice Section and
Standing Committee on Lawyers' Title Guaranty Funds echoed the
``loophole'' complaint of other practitioners:
[[Page 29245]]
Prohibiting ``one-to-one'' Basis Referral Fees will not
eliminate the payment of referral fees* * *. Allowing [managerial]
payments* * * would be a dramatic departure from the Act's
congressional intent and basically would render the previously
mentioned withdrawal of the employer-employee exemption impotent.
The combined comments of the Attorneys General of eleven States
opposed the proposed new ``managerial'' exemption.
HUD cannot allow compensation systems, even for managerial
employees, which depend, even in part, on the level of employee
referrals to affiliated companies* * *. [Managerial referral
compensation] will still create strong incentives within the company
to make as many referrals to affiliated companies as possible,
regardless of whether those referrals are in the consumers' best
interest or not.
A large number of other real estate professionals also submitted
objections to the proposed modified managerial exemption. These
commenters, along with most of the lawyer-commenters, believed that
controlled business arrangements constituted unfair competition, or
that they invariably would lead to increased costs for consumers.
Whether the payment is to an employee who is in contact with the
consumer for a business referral generated by that employee to the
employer or to an affiliate business entity, or whether the referral-
related payment is to a managerial employee, the objectors believed
that the effect would be the same: A determination would be made to
refer business based on the dollar benefit of the referral, rather than
on considerations of what would be most advantageous to the consumer.
Similar views were expressed by a New Jersey real estate broker who
said that he was ``strongly in favor of any changes in RESPA which
would ban payments for referrals from mortgage lenders, title insurers,
escrow agents and other real estate settlement service providers.''
``[I]t would seem very obvious,'' the realtor wrote, ``that payment of
referral fees would result in the agent selecting the service
provider.''
The Coalition to Retain Independent Services in Settlements
(CRISIS), an organization of independent settlement service providers,
responded to the proposed rule's referral provisions arguing for a
total ban on referral fees and referral-based compensation factors to
employees and managers. Consumer Federation of America also called for
a total ban on referral-based compensation involving affiliate
entities, as did the National Association of Mortgage Brokers (NAMB).
b. The Final Rule's Approach. The rule revises the proposed rule's
formulation and defines a ``managerial employee'' as one of a limited
class of employees who do not routinely deal with the public, but who
function in a management or executive capacity. It makes permissible
certain bonuses and payments to these managerial employees. Active real
estate agents, who are independent contractors, cannot be managerial
employees, although a managerial employee can hold a real estate
brokerage or agency license. HUD agrees with NAR counsel that managers'
``mere status as licensed brokers or salespersons should not exclude
them from being `managerial employees' if their principal functions''
are the types of managerial functions indicated in the definition,
rather than face-to-face dealings with consumers.
The rule provides that managerial employees in controlled business
arrangements may be paid bonuses based on performance criteria,
including profitability, capture rate or other thresholds, but the
bonus may not be directly calculated as a multiple of the number or
value of settlement transactions referred to a business entity in an
affiliate relationship. Thus, for example, the final rule does not
prohibit a managerial employee from receiving an annual bonus based on
an affiliate business entity capturing a percentage of the business
from the managerial employee's unit (e.g., a $1,000 bonus for an
affiliated lender's 10% capture rate of real estate brokerage customers
and a $2,500 bonus for a 20% capture rate). Managerial employees may
not, however, receive a bonus or other compensation calculated as a
multiple of the number or value of referrals of settlement service
business to a business entity in an affiliate relationship. Thus, a
compensation system that awarded a managerial employee $20 for every
referral continues to be prohibited, as would a compensation system
that awarded a managerial employee $100 for every 5 referrals.
In the rule, the phrase ``does not routinely'' is used to establish
a ``de minimis'' standard for consumer contact. HUD intends the phrase
``does not routinely'' to mean that managerial employees who
occasionally deal with consumers, which is almost inevitable in small
offices, are not precluded from receiving year-end bonuses because of
this minimal contact. Similarly, HUD intends this phrase to allow a
managerial employee who performs and is compensated for occasional
settlement services (not more than three transactions a year) to be
eligible for this exemption. This standard will effectively limit the
class of managerial employees who may receive these types of bonuses to
those ``whose contacts with consumers are only casual or peripheral, at
most, and who do not occupy the special positions of trust, arising
from their relationship to consumers as well as the arcane nature of
certain of the services required, that are developed by real estate
agents or the comparable providers of other services,'' as suggested by
NAR.
HUD has chosen to use its exemption authority under Section
8(c)(5), having consulted with other Federal agencies as required by
that provision, as well as the authority under Section 19(a) of RESPA
to permit these payments which would otherwise be prohibited by the
statute. As noted in the proposed rule (59 FR at 37365), Congress has
clearly determined that RESPA does not prohibit controlled business
arrangements, with certain conditions. The final rule's exemption
permitting managerial employees to receive payments of a bonus based on
criteria relating to performance conforms with Congress's intent to
permit controlled business arrangements to operate.
This exemption is appropriate because managers do not routinely
deal directly with consumers. Therefore, the manager is not in a
position of trust with the consumer to directly influence the
consumer's choice of settlement service providers. By providing this
exemption, the regulation will not require HUD to interfere unduly with
the internal operations of controlled business arrangements. The
exemption reflects the Department's acknowledgement that it would be
difficult to enforce RESPA in circumstances which would require
detailed scrutiny of complex compensation arrangements for management
in affiliated settings.
The exemption draws a line, however, for payments to managers that
are transaction based. This regulation does not allow payments to
managerial employees which mimic referral fees. Thus, where a payment
of a bonus to a managerial employee is calculated as a multiple of the
number or value of referrals of settlement service business to an
entity in the controlled business arrangement, it would appear to be a
payment in violation of the Act and contrary to the intent of Section
8(a).
The foregoing provisions have been amplified by a revised
Illustration 12 that is being added to Appendix B.
[[Page 29246]]
5. Employees Who Do Not Perform Settlement Services in Any Transaction
a. The Public Comments. Several commenters advocated, either
directly or indirectly, that the rule allow businesses to pay bonuses
for referrals to business entities in affiliate relationships to those
employees who do not perform settlement services. Many of these
comments focused on the way in which a host of Federal and State
regulations affect the way particular industries do business and are
structured. These comments urged HUD to allow compensation systems
which are sensitive to these structures.
ABA criticized HUD's proposed rule as insensitive to the structure
of banks, noting that, under the proposed rule, if the loan were made
by the bank itself, employees could be compensated for generating that
business, but if the loan were made by a subsidiary mortgage company,
such compensation would be a prohibited referral fee.
Individuals seeking a residential mortgage loan who enter a bank
and inquire as to the availability of such a loan do so voluntarily
with the goal of receiving information and possibly applying for and
obtaining such a loan. Whether or not the bank is structured * * *
to process such loans within the bank, the bank holding company or a
subsidiary or affiliate of each makes absolutely no difference to
the consumer and in no way affects his or her decision * * * whether
or not to do business with the bank * * *. Providing information in
order to expedite the customer's objective is appropriate and
beneficial to all parties. The structure of the mortgage lending
operation within the bank, its affiliate, or within the bank holding
company is inconsequential and shouldn't trigger any RESPA activity.
Other banker-commenters echoed the ABA's concern that the proposed
rule's referral-related modification was a poor fit for the varied
structures of banks and their integrated or affiliated real estate
service entities. A Minnesota bank holding company was among several
banking organizations arguing that there was a fundamental difference
between a referral by a bank employee to the bank's mortgage lending
affiliate, and the type of referral that might involve another party to
a real estate transaction, e.g., from a real estate agent to a mortgage
lender:
If an individual contacts a bank to inquire about a mortgage
loan * * * it is because the individual perceives the bank as a
lender that would offer that type of loan. The customer is not going
to the bank because he or she is seeking an objective, unbiased
referral to another lender. The customer * * * expects that whatever
bank they talk to will promote its own products. If that bank does
offer [mortgage loans] they would simply proceed to give information
to the potential customer * * * If, however, a bank holding company
[has formed] a separate subsidiary to handle * * * mortgage
lending[,] the proposed rules add additional burdens to that bank by
limiting its ability to design a compensation system for managers
that promotes the affiliate relationship and by requiring an
additional layer of disclosure.
* * * [E]xcessive requirements place the bank with a separate
mortgage lending subsidiary at a disadvantage compared to banks that
* * * offer such products within the bank itself.
ABA also asked that HUD reconsider this aspect of the rule in light
of the strong framework of existing bank regulation, State and Federal:
Unless appropriately modified, this proposed regulation
penalizes banks, their affiliates, bank holding companies * * *
solely because of their corporate structures. These structures have
been specifically authorized by statute, implemented by state or
federal bank regulatory authorities and constantly monitored and
examined for safety and soundness and compliance purposes.
ABA asserted that the HUD regulation effectively applies only to
banks and other banking institutions:
It is only these institutions which will be examined on a
periodic basis by bank examiners for compliance with this
regulation. HUD does not maintain its own compliance examiners for
non-bank settlement service providers. Other settlement service
providers do not and will not face this intensive examination
process.
ABA recommended that bank examiners not be required to examine for
this aspect of RESPA compliance--unless HUD intends to provide similar
supervision and enforcement for settlement service providers other than
banks.
Finally, ABA's comments indicated that banks are encouraging
employees to focus attention on compliance with the Community
Reinvestment Act (which encourages residential lending activity in the
banks' immediate service areas and neighborhoods). Many banks, ABA
claimed, find it advantageous to structure lending programs to provide
financial incentives to their employees to promote Community
Reinvestment Act objectives. The proposed rule would eliminate these
incentives arbitrarily, ABA stated.
A comment from the Securities Industry Association (SIA) similarly
objected to the proposed change in the referral fee rule. Some SIA
members, the comment said, are part of diversified services firms, with
mortgage lending affiliates. SIA believed that referrals made by
securities firms' representatives should be distinguished from those
made by employees of entities whose business is to perform settlement
services. The commenter argued that the potential harm to consumers
that HUD is attempting to deal with as ``inherent'' in referrals made
by persons performing settlement services is not present when the
referring individual is a registered securities representative. SIA
requested reconsideration, or an express exemption from the rule
applicable to employees of securities firms.
Virtually all commenters who objected strongly to the proposed
withdrawal of the existing employer-employee exemption, also approved
of the proposed rule's retention of an exemption, albeit in a modified
form. For example, RESPRO recommended that the (old) employee
compensation exemption be retained, but modified to exclude any real
estate agent, sales associate, or other person who assists consumers
with the listing or purchase of a home, and who has regular and
meaningful contact with consumers. This, RESPRO argued, would achieve
the HUD policy objective of discouraging adverse steering by real
estate agents, without interfering with the cost efficiencies of
diversified companies.
Several commenters also specifically advocated that the rule allow
businesses to pay bonuses for referrals to business entities in
affiliate relationships, to those employees who are financial service
representatives (FSRs), i.e., persons employed in affiliate businesses
to cross-market products. RESPRO argued that HUD's proposed rule would
place diversified companies at a competitive disadvantage to their
independent competitors by preventing them from compensating
salespersons who offer more than one of the company's products or
services, in the same manner as their independent competitors. Whereas
independent mortgage, title, and homeowners insurance companies follow
the traditional practice of encouraging a salesperson's productivity by
paying him or her on a commission basis, HUD's proposed rule would
result in diversified companies either having to hire less productive
salespersons (persons who could not be compensated based on commissions
which encourage productivity), or to pay three separate employees
(instead of one) to offer three separate services (so they can properly
motivate the FSR). RESPRO urged that HUD's final rule allow a broad
array of compensation to management and employees for developing and
implementing one-stop shopping, including: (1) the hiring and
compensating of a financial services manager, i.e., a branch manager
who is
[[Page 29247]]
responsible for supervising the performance of the real estate agent,
title agent, mortgage loan officer, and other persons performing
settlement services; and (2) the hiring and compensating on a
commission basis of a ``customer services representative'' or
``financial services representative'' who is not a real estate agent,
but ``who markets more than one settlement service (not real estate
brokerage)'' either in or outside of a real estate office.
NAR counsel urged that HUD place no restrictions on the
compensation of employees whose function is to promote sales of
``secondary services'' (i.e., other settlement services) provided by
affiliates at the point of sale of ``primary services.'' NAR counsel
commented, ``Notwithstanding that these individuals have direct contact
with consumers, we do not believe that they are in positions to develop
the special relationships of trust and expectation that are developed
by the `primary service' providers.''
b. The Final Rule's Approach. In response to these comments, the
final rule allows a limited exemption for an employer's payment to bona
fide employees who do not perform any settlement services,14 so
long as prior to the referral, the consumer is provided with a written
disclosure in the format of Appendix D. This exemption will cover at
least two situations frequently mentioned in the comments. First, this
exemption will allow employers to pay their own bona fide employees who
are not involved in the provision of settlement services, such as
securities sales persons or bank tellers, for referrals of settlement
service business to business entities in affiliate relationships. This
approach achieves substantially the same result recommended by counsel
to the NAR.
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\14\ Section 3(3) of RESPA (12 U.S.C. 2602(3)) and 24 CFR
Sec. 3500.2 define the term ``settlement services''. However, for
purposes of this exemption, the marketing of a settlement service or
product of an affiliated entity, including the collection and
conveyance of information or the taking of an application or order
for the services of an affiliated entity, does not constitute the
performance of a settlement service. Under the exemption, marketing
of a settlement service or product also may include incidental
communications with the consumer after the application or order,
such as providing the consumer with information about the status of
an application or order; marketing may not include serving as the
ongoing point of contact for coordinating the delivery and provision
of settlement services.
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Second, this exemption will allow employers to pay their own bona
fide employees, whose primary function is to market the services of the
affiliates of the employer. Employees who perform settlement services
remain subject to Section 8's prohibitions. However, as with a
managerial employee who holds a real estate license, a securities sales
person or bank teller who holds a mortgage broker license would not be
precluded from qualifying for the exemption, if the securities sales
person or bank teller is not actually involved in the provision of
settlement services.
The exemption created here establishes a test: if an employer's
payment is to an employee who does not perform settlement services in
any transaction, the exemption applies and payments are not subject to
Section 8 scrutiny so long as the disclosure is made.
A primary purpose of RESPA is to prevent consumers from being
unwittingly steered (in exchange for referral payments) by one
settlement service provider to other particular settlement service
providers. Although the statute, on its face, covers all referrals of
settlement service business, regardless of who makes the referral,
Congress did not express
FR Doc. 96-14329 Office of the Assistant Secretary for HousingFederal Housing Commissioner; Amendments to Regulation X, the Real Estate Settlement Procedures Act: Withdrawal of Employer-Employee and Computer Loan Origination Systems (CLOs) Exemptions
as high a level of concern about the referral
activities of those who do not perform settlement services. The
Department believes that the structure of affiliated businesses,
particularly in the financial services industry, wherein services are
often divided among different affiliates, is frequently a response to
State and Federal laws, such as the Bank Holding Company Act, rather
than an attempt to circumvent RESPA. The Department believes that the
industry should not be unnecessarily disadvantaged in competition by
its mandated or chosen business structure. Thus, HUD has chosen to use
its exemption authority under Section 8(c)(5) and Section 19(a) of
RESPA to permit these payments otherwise prohibited by the statute.
This exemption only covers payments made by the employer, not by
the party to whom the settlement service business is referred. It also
only applies to payments for referrals to affiliate business entities.
Further consideration should be given to a broader exemption for
payments to those who do not perform settlement services received
directly from either: (1) An affiliated party receiving the referral;
or (2) an unaffiliated party receiving the referral. However, these
issues were not raised by this rulemaking and the record is
insufficient to determine the impact of such changes.
A similar proposal is included in legislation currently under
consideration in the United States Senate. This legislation would allow
anyone who does not receive another fee in the particular transaction
to receive a referral fee from any source. The stated purpose of the
proposal is to exempt from RESPA coverage ``co-branding'' and
``affinity marketing,'' as such payments are known in the industry. The
Department believes that this proposal also could be accomplished by
regulation, using HUD's exemption authority under Section 8(c)(5) and
Section 19(a) of RESPA. However, both approaches--an exemption for all
payments to those not performing settlement services or an exemption
for all payments for those not receiving another fee in the
transaction--require further scrutiny. While it is desirable to
facilitate business generation where there is little danger of the
adverse steering that RESPA was designed to prevent, it is important to
ensure that loopholes are not created through which such adverse
steering can slip. HUD intends to undertake further rulemaking on this
subject and to seek public comments.
The Department also recognizes the market trend, described
particularly in RESPRO's comments, that many companies are choosing to
hire one or more individuals whose primary function is to generate
business for his or her employer and affiliated companies. Such
individuals are sometimes referred to as marketers or customer or
financial service representatives.
In response to these realities, the Department has created an
exemption sufficiently broad to allow an employer's payments to its
bona fide employees whose primary function is to generate business for
entities within an affiliated relationship with that employer. The
Department has restricted this exemption to payments to those who do
not perform settlement services in any transaction including, for
example, those settlement services of a real estate agent, loan
processor, settlement agent, attorney, or mortgage broker. For purposes
of this exemption, the marketing of a settlement service or product,
including the collection and conveyance of information or the taking of
an application or order for the services of an affiliate does not
constitute the performance of a settlement service. Under the
exemption, marketing of a settlement service or product also may
include incidental communications with the consumer after the
application or order, such as providing the consumer with information
about the status of an application or order; marketing may not include
serving as the ongoing point of contact for coordinating the delivery
and provision of settlement services.
As discussed above, the Department's review of the legislative
history revealed that steering of unsophisticated consumers from one
settlement service
[[Page 29248]]
provider to other settlement service providers was a substantial
congressional concern. A settlement service provider frequently is
trusted by the consumer and appears to the consumer to be an expert in
the settlement process and to have the consumer's interests in mind. If
a person performing settlement services is also receiving compensation
for referring business to another settlement service provider, there is
a potential conflict of interest. The consumer's trust in the person
performing settlement services may cause the consumer to lose any
natural wariness he or she might otherwise have of following the advice
of a salesperson who derives income from sales performance. The
consumer might ignore the conflict of interest because of trust that
has accrued from the provision of another settlement service. A person
who is not performing a settlement service, but is merely marketing the
affiliated companies, is less likely to attain trusted-advisor status
concerning the transaction. The consumer is more likely to be aware of
and weigh carefully the incentives of a person who is not performing a
settlement service but is generating business for that person's own
employer and its affiliates. The application of the rule's prohibition
to all settlement service providers, whether involved in the specific
settlement or not, prevents two providers from swapping referrals.
The Department is also requiring that disclosure of the affiliate
relationship be provided to the consumer when the referral is made, so
that the consumer will be alerted to the affiliate relationship, be
informed of the potential business interest of the employee making the
referral, and be able to make an educated decision about whether to use
the recommended provider or another. Finally, the Department is
requiring that, for the exemption to apply, the referral of settlement
service business be to a settlement service provider that has an
affiliate relationship with the employer or in which the employer has a
direct or beneficial ownership interest of more than one percent. This
requirement is consistent with congressional intent to allow controlled
business arrangements and is responsive to comments indicating that the
circumstances described in the exemption are those in which an
exemption would be most beneficial. Where these requirements are met,
the Department believes the consumer is adequately protected. The
Department, therefore, has used its exemption authority under Section
8(c)(5) and Section 19(a) of RESPA to permit these payments otherwise
prohibited by the statute.
The foregoing provisions have been amplified by revised
Illustrations 11 and 12 which are being added by this rule to Appendix
B.
C. Issue 2: Computer Loan Origination Systems (CLOS)
1. Background
The 1992 final rule specifically exempted from RESPA's coverage any
borrower payment for computer loan origination systems or CLOs. The
exemption was intended to prevent RESPA's restrictions against unearned
fees from unduly inhibiting the development of technology which could
permit consumers to shop, apply for or obtain mortgage loans
electronically. A CLO system was not defined in the 1992 rule.
2. The Proposed Rule, CLO Demonstration and CLO Working Groups
In response to the earlier comments, the proposed rule undertook to
establish minimum standards for a system falling within the exemption.
HUD proposed to designate such CLO systems as ``qualified CLOs.''
Payments by consumers to such systems would not then be ``scrutinized
under RESPA.'' A ``qualified'' system would:
(a.) Provide openings for 20 or more lenders offering various loan
products;
(b.) Utilize selection factors for lenders that are fair and
impartial and are designed to contribute to the efficiency and quality
of the system;
(c.) Provide borrowers information in a lender-neutral manner;
(d.) Provide borrowers a CLO disclosure form before CLO services
are performed;
(e.) Charge all borrowers using the system the same CLO access
fee(s) for the same service or the same components of service; and
(f.) Be allowed to charge lenders for access only if charges are
set forth in a written schedule of charges, charges for the same
services and components of services are the same for all lenders on the
system, and charges for the same services are reasonably related to the
costs of maintenance and operation of the qualified CLO system.
The proposed rule asked for advice on whether to create a similar
exemption for payments by lenders to ``qualified lender'' CLOs, or
whether to leave such systems to be governed by the general rules of
RESPA regarding kickbacks, unearned fees and referral fees.
As an additional vehicle for obtaining public input, on September
30, 1994, as part of the rulemaking process, the Department conducted
an open house for operators of CLO systems to demonstrate their systems
to HUD and to the public. Twenty-one CLO operators accepted the
invitation and participated in this all-day demonstration in
Washington, D.C. At the demonstration, the capabilities of the systems,
the number of lenders displayed, the arrangements for payment, among
other characteristics, differed widely.
3. The Public Comments
The public comments received on the proposed rule reflected a wide
array of criticisms that suggested continuing problems with the rule's
approach, or that indicated that the CLO definition HUD had arrived at
would not work under particular circumstances. Additionally, a few
commenters (including RESPRO, NAR, and separate comments by NAR
counsel) not only questioned the particulars of HUD's CLO proposal, but
also suggested that the Department lacked adequate authority under
Section 8(b) of RESPA to establish ``qualified'' or ``non-qualified''
CLO systems by regulation, as proposed.
NAR and several individual commenters advocated that the rule
should distinguish computer systems that merely provided basic
information about prospective lenders (e.g., a comparison of current
interest rate quotations for particular mortgages) and those systems
that actually may be said to ``originate'' loans by means of
qualification (or at least, pre-qualification) of borrowers.15
---------------------------------------------------------------------------
\15\ See further discussion later in this Issue 2 section, under
heading (g), ``Other CLO Issues Raised by Commenters''.
---------------------------------------------------------------------------
Many commenters objected to the proposed rule's requirement that a
borrower's payment for CLO services be made ``outside of and before
closing,'' arguing that this requirement would dampen or completely
destroy the market for CLO services, and that determining the
appropriate timing of the borrower's payment would create ambiguities
and resulting compliance difficulties. The combined comments of the
State attorneys general objected to the proposed rule's concept of
``qualified'' and ``non-qualified'' CLOs and suggested, instead, that
HUD permit only qualified CLOs to operate at all.
The several most-frequently raised CLO issues are summarized below.
a. The Legal Issue. RESPRO, NAR, and others raised the issue of
HUD's authority to establish minimum standards (i.e., a ``safe harbor''
[[Page 29249]]
exemption) and to subject non-qualifying CLO systems to scrutiny.
Noting that the proposed rule cited Section 8(b) of RESPA as a basis of
HUD's authority to regulate in this area and to prohibit a CLO operator
from accepting a payment from a borrower for a sham or duplicative
charge, these commenters argued that Section 8(b) of RESPA was
inoperative as authority for regulating CLO payments unless the CLO
operator shared fees with a third party.
According to the commenters, Section 8(b) governs only a ``portion,
split, or percentage'' of any charge made or received. If the CLO
operator is the only party charging or receiving a fee for CLO-related
services, the commenters argued, then Section 8(b) cannot be the
authority for the proposed borrower payment exemption ``safe harbor''
or for regulating non-qualifying CLOs. The commenters cited as
authority for this position certain judicial precedents.
HUD is aware of these cases, which never involved HUD as a party,
but finds their reasoning not to be persuasive or their holdings not to
be determinative of the issue. HUD believes that Section 8(b) of the
statute and the legislative history make it clear that no person is
allowed to receive ``any portion'' of charges for settlement services,
except for services actually performed. The provisions of Section 8(b)
could apply in a number of situations: (1) where one settlement service
provider receives an unearned fee from another provider; (2) where one
settlement service provider charges the consumer for third-party
services and retains an unearned fee from the payment received; or (3)
where one settlement service provider accepts a portion of a charge
(including 100% of the charge) for other than services actually
performed.
The interpretation urged, that a single settlement service provider
can charge unearned or excessive fees so long as the fees are not
shared with another, is an unnecessarily restrictive interpretation of
a statute designed to reduce unnecessary costs to consumers. The
Secretary, charged by statute with interpreting RESPA, interprets
Section 8(b) to mean that two persons are not required for the
provision to be violated. HUD, therefore, had adequate authority to
promulgate the rule it proposed, although it has chosen not to do so.
b. Impact on Mortgage Brokers. On the merits of the CLO proposal,
the Mortgage Bankers Association and many other commenters were alarmed
about possibly unintended effects of the CLO provisions on mortgage
brokers. First, MBA feared that merely by using a computer in its
activities, a mortgage broker could be deemed a CLO operator, since
mortgage brokers typically perform many or all of the functions set out
in the ``CLO system'' definition contained in Sec. 3500.2 of the
proposed rule. MBA anticipated that mortgage brokers might therefore
find themselves faced with a new disclosure requirement (relating to
CLO systems) that HUD probably did not intend. Revision of the
definition was urged to clarify this point.
c. Time of Payment for CLO Services. RESPRO, NAR, and many other
commenters strenuously objected to the requirement in the proposed rule
that for a system to qualify, payment for CLO services be ``outside of
and before'' loan closing.
d. Twenty-Lender Requirement. RESPRO and a large number of
individual commenters objected to the proposed rule's requirement that
CLO systems provide access to at least 20 lenders. RESPRO asserted that
its members, as well as CLO operators, uniformly believed that 20
lenders would constitute ``information overload'' and would
discriminate against small and local CLO operators. Other commenters
reflected that 20 lenders, each offering, perhaps, multiple variations
of mortgage loan packages, would overtax a CLO system and increase its
operating costs, to no useful purpose. Consumer Federation of America
was among the very few commenters who suggested that access by 20
lenders would be inadequate.
e. Lender-Pay Systems. The Attorneys' General comment objected to
the fact that the rule did not prohibit lenders from paying for CLO
services, viewing lender-paid services as ``harboring the same
potential for consumer abuse as direct kickbacks.'' MBA also opposed
permitting lender-paid fees, arguing that they constitute hidden costs
to the consumer. Consumer Federation of America strongly objected to
lender payments, saying that they would place consumers at ``great risk
of being steered into noncompetitive products.'' Conversely, comments
from the National Association of Federal Credit Unions (NAFCU) urged
HUD not only to create a parallel exemption for payments by lenders for
qualified CLO systems, but suggested that HUD not intervene in setting
lender-CLO operator fee schedules. NAFCU believed that negotiated fees
for CLO services to lenders would promote competition.
f. ``Information'' vs. ``Origination''. NAR and numerous other
commenters urged that a sharp distinction be made in the rule between
computer loan information systems (dubbed by NAR and others as
``CLIs'') and computer loan origination systems (``true'' CLOs), with
which a computer link-up can be made with lenders and a genuine loan-
application-approval process originated. Another commenter similarly
explained that vast differences existed in the functions and
sophistication of ``loan origination technology,'' ranging from
relatively simple information transmittal systems to ``electronic
decision makers'' that utilize artificial intelligence. These latter
systems, the commenter claimed, were essentially computer underwriting
systems. The commenter went on to recommend that HUD narrow its CLO
definition to require that qualified systems not only collect data, but
evaluate it.
g. Other CLO Issues Raised by Commenters. A nationwide finance
organization believed that the CLO system definition should not require
the transmission of information concerning a prospective property. CLO
systems offer the same benefits to consumers in the pre-qualification
stage, the commenter asserted.
Comments on the issue of CLO-related disclosures varied greatly.
Commenters sympathetic to the regulatory scheme proposed for CLOs were
also supportive of the form of disclosure, although some additional
disclosures were occasionally suggested. Commenters otherwise critical
of HUD's definition, the proposed CLO regulatory scheme, or other
aspects of the proposal tended to object as well to the form of
disclosure proposed. Generally, objections to the CLO disclosure format
were mild, except the American Bankers Association and a few other
commenters specifically objected to the ``acknowledgement box''
requirement for the same reasons that consumer-acknowledgement
procedures were objected to in connection with the controlled business
arrangement disclosure statement.16
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\16\ See discussion of CBA disclosure statement format under the
heading ``Issue 4'' elsewhere in this preamble.
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4. Working Group Meetings
After review of all of the comments and the information gleaned
from the technology demonstration, HUD believed that it did not have
sufficient information on CLOs and how they were actually functioning
in the provision of services to consumers. Accordingly, HUD convened
the first of two CLO working group meetings on August 11, 1995, in
Washington, D.C. Participants included CLO vendors, related industry
associations, State regulators, consumer groups, and
[[Page 29250]]
individual advocates. The purpose was to get their individual input on
CLO issues.
The working group examined a number of CLO trends and CLO systems
and identified the types and characteristics of CLOs currently
operating. Presentations were made regarding several operating systems,
as well as the Federal National Mortgage Association's (Fannie Mae's)
Desktop Underwriter and the Federal Home Loan Mortgage Corporation's
(Freddie Mac's) Loan Prospector. Views expressed by one or more members
of the group included:
CLOs are merely a technology for automating the loan
process and not necessarily an independent settlement service.
There should not be a special exemption for CLO services.
A separate set of disclosures for CLOs and CLIs should not
be created, but consumers should be given understandable and meaningful
disclosures.
HUD should not attempt to set rates.
HUD should define the level of service that must be
performed in the origination process in order to receive compensation.
Many participants argued that HUD should not attempt to regulate,
define, or set standards for an evolving technology. Many argued that
greater clarity about how the RESPA regulations applied to loan
originations would be preferable to a separate exemption or ``safe
harbor,'' for which HUD set required characteristics by regulation. At
the conclusion of the first meeting, the group agreed to meet again and
discuss further the development of CLO technology.
HUD held a second working group meeting on September 26, 1995. At
this meeting, many also argued again that the RESPA regulations should
apply equally to all participants in the market, regardless of their
use of technology, and that the applicable test should be whether the
fees paid were for services actually performed. Many in the group
believed that HUD should provide additional guidance about how this
basic RESPA test applies in the CLO context. Some participants
criticized a distinction between services paid for by lenders and
services paid for by borrowers, arguing that the borrower was the final
source of funds for all services. State regulators also discussed the
licensing and other requirements applicable to CLOs in many
jurisdictions.
5. The Final Rule's Approach
After further internal review and discussion, the Department
determined to abandon the approach taken in the proposed rule, withdraw
the CLO exemption that had been contained in 24 CFR
3500.14(g)(1)(viii),17 and replace it with guidance analyzing the
application of RESPA and the RESPA regulations to common CLO issues.
The final rule also withdraws Appendix E, the CLO disclosure.
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\17\ Prior to HUD's regulatory streamlining, this provision was
codified at 24 CFR Sec. 3500.14(g)(2)(iii).
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Simultaneously with the publication of this final rule, the
Department is issuing a Statement of Policy. That Statement of Policy,
issued under Sec. 3500.4(a)(1)(ii), is being published in today's
Federal Register and constitutes a ``rule, regulation, or
interpretation'' within the meaning of Section 8.
D. Issue 4: CBA Disclosure Form
1. The Public Comments
Proposed changes in the controlled business disclosure form also
attracted significant attention from commenters. Eleven Attorneys
General commended the Department for accepting most of the suggestions
made by State Attorneys General in the earlier round of public comment
on RESPA regulations. However, the Attorneys General questioned whether
the addition of a borrower acknowledgement box on the form is helpful
and suggested it may actually prove harmful:
* * * While it may appear that such a box induces the consumer
to read the disclosures, in fact, it may be just one more document
in a blizzard of such forms which the consumer signs. It is likely
that lenders will find this acknowledgement more useful than
consumers and will attempt to use the acknowledgement in defending
any suits by consumers who feel they have been misled.
A few commenters affirmatively supported the revised disclosure
statement requirement as appropriate and useful.
Other commenters, however, were more critical of the content of the
revised disclosure statement. Especially singled out for criticism was
the required statement ``YOU MAY BE ABLE TO GET THESE SERVICES AT A
LOWER RATE BY SHOPPING WITH OTHER SETTLEMENT SERVICE PROVIDERS, AND
THIS IS SOMETHING YOU SHOULD CONSIDER DOING.''
A multi-service company in Massachusetts called the quoted sentence
a ``negative statement'' that would discourage consumers from using an
affiliated service. ``If HUD is serious about allowing diversified
service providers to compete, this statement should be eliminated.''
(Emphasis in original.) Another commenter, a Missouri attorney,
objected in particular to the last phrase, ``* * * and this is
something you should consider doing.''
* * * This phrase clearly denotes that there are better services
available, and that the service which will be provided by the
referred settlement service would be inadequate * * *. To suggest *
* * that buyers would be better off looking elsewhere, is far beyond
protection of the consumer and actually is hinting to the consumer
that there is something inherently wrong with the controlled
business arrangement * * *. (Emphasis in original.)
An Iowa realty company urged that the statement be made more
``provider neutral,'' and that all mortgage service providers be called
upon to provide similarly worded disclosures regarding the value of
comparison shopping.
A Kansas lender complained that ``No other industry in this country
is required to urge its customers to seek services elsewhere* * *.''
A Chicago title guaranty company expressed sympathy for the
objectives of the disclosure statement, but agreed that the proposed
rule's version implied that substandard service was being provided. The
following alternative statement was offered:
There are many providers of settlement services providing
quality products at competitive rates. You are encouraged to shop
around to ensure that you are receiving the best quality product at
the best rate available for the same or similar services.
NAR's comments echoed the concerns of the above-quoted individual
commenters by asking for a ``provider neutral'' statement and that all
mortgage settlement service providers be called upon to provide
similarly worded statements, ``thus preventing multiple service * * *
firms from being placed at a relative disadvantage vis-a-vis other
mortgage service providers.''
Several banker-commenters again pressed the point that the required
disclosure statement was inappropriate for the circumstances of banks
and bank holding companies. Because these organizations commonly
conduct their residential mortgage lending activities through mortgage
company affiliates, ``* * * the consumer that contacts the bank * * *
expects to be referred to the bank's mortgage lending operations,
whether that consists of a department of the bank or an affiliate.''
The American Bankers Association objected to the elaborate
disclosure statement in the context of the kind of incidental and
uncompensated referrals
[[Page 29251]]
involved in the bank/affiliate mortgage company operation. ``It is
sufficient consumer protection,'' ABA argued, ``for banks to indicate
that there might be services provided at a lower rate and not to add a
statement that such shopping is recommended.''
ABA and a few individual commenters also protested the requirement
that the disclosure be acknowledged in writing. A title guaranty firm
made the point that documents are frequently mailed to consumers to be
signed and returned, and that it is difficult to secure the return of
such documents, possibly raising unnecessary doubts concerning the
validity of the disclosure actually given. ABA raised several
questions:
* * * [W]hat is the status of a bank's compliance with the
acknowledgment and signature requirement if only the applicant and
not the co-applicant signs the acknowledgment?
What efforts does the bank have to expend in order to obtain the
co-applicant's signature?
Should not the applicant's acknowledgement be sufficient for
compliance purposes?
The process of obtaining these signatures, ABA concluded, ``creates
compliance burdens for banks while providing negligible benefits to
consumers.''
2. The Final Rule's Approach
After review of all comments, the Department retains the
requirement of the applicants' acknowledgement. In addition to focusing
the attention of the applicant on the document, the acknowledgement
also protects the lender from charges that it had failed to inform the
prospective borrower of the controlled business arrangement. In
response to comments, only one signature is now required.
The Department has not adopted the NAR's suggestion that HUD
require all settlement service providers to provide a statement
encouraging consumers to shop around. The statute requires such a
statement in the context of controlled businesses, but has no such
requirement for any other situation. This rule only requires the
disclosure in the context of controlled business arrangements.
Also, the Department reformulates the discussion of the
desirability of borrowers shopping for settlement services. In response
to criticism that the proposed language intimated that the services
offered by the disclosing servicer might be substandard or overpriced,
the Department adopts more neutral wording that continues to inform
consumers of their freedom to seek the most advantageous rates or
services in a competitive market. The Department remains committed to
the policy that ample disclosure, a preeminent principle of the RESPA
statute, is a valuable means of informing consumers and promoting
competition in the settlement services industry.
The new formulation for the CBA disclosure is set forth in Appendix
D. It now reads:
You are NOT required to use [provider] as a condition for
[settlement of your loan on] [or] [purchase, sale, or refinance of]
the subject property. THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE
PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP
AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE
BEST RATE FOR THESE SERVICES.
E. Other Matters Raised by Commenters
1. The Public Comments
In addition to the specific comments received in response to the
Department's request, some commenters raised concerns that some
employers were engaging in practices of retaliation or discrimination
against employees and agents for not referring business to affiliate
entities. Other commenters complained that settlement service providers
were being excluded from, or locked-out of, places of business where
they might find potential customers. They also alleged that high-priced
real estate office space arrangements with particular lenders,
frequently coupled with lock-out arrangements, raised RESPA concerns.
2. The Final Rule's Approach
The Department determined that these issues were distinct from
those raised by the proposed rule. Moreover, they do not require
rulemaking, but rather an interpretation, applied to specific
circumstances, of the statute and the implementing regulations.
Therefore, HUD is issuing a separate Statement of Policy on the issues
of retaliation, lock-outs, and appropriate office rents to provide the
guidance sought by so many commenters. That Statement of Policy is
being published in today's Federal Register, simultaneously with the
publication of this final rule.
Other Matters
Environmental Impact
A finding of no significant impact with respect to the environment
has been made in accordance with HUD regulations in 24 CFR part 50 that
implement section 102(2)(C) of the National Environmental Policy Act of
1969 (42 U.S.C. 4332). The finding is available for public inspection
during regular business hours in the Office of General Counsel, the
Rules Docket Clerk, room 10276, 451 Seventh Street, SW, Washington, DC
20410.
Executive Order 12866
This final rule was reviewed by the Office of Management and Budget
under Executive Order 12866, Regulatory Planning and Review. Any
changes made to the rule as a result of that review are clearly
identified in the docket file, which is available for public inspection
at the Office of the Rules Docket Clerk, Office of General Counsel,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, D.C. 20410-0500. An Economic Analysis (EA)
performed on this proposed rule is also available for review at the
same address.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities, other than
those impacts specifically required to be applied universally by the
RESPA statute. An Economic Analysis prepared in connection with this
rule considers the impact on small entities.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this final rule will not have substantial direct effects
on States or their political subdivisions, or the relationship between
the Federal government and the States, or on the distribution of power
and responsibilities among the various levels of government. As a
result, the rule is not subject to review under the Order. Promulgation
of this rule expands coverage of the applicable regulatory requirements
pursuant to statutory direction.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this final rule does not
have potential for significant impact on family formation, maintenance,
and general well-being, and, thus, is not subject to review under the
order. No significant change in existing HUD policies or programs will
result from promulgation of this rule, as those policies and programs
relate to family concerns.
[[Page 29252]]
List of Subjects in 24 CFR Part 3500
Consumer protection, Condominiums, Housing, Mortgages, Mortgage
servicing, Reporting and recordkeeping requirements.
Accordingly, for the reasons set out in the preamble, part 3500 of
title 24 of the Code of Federal Regulations is amended as follows.
PART 3500--REAL ESTATE SETTLEMENT PROCEDURES ACT
1. The authority citation for shall continue to read as follows:
Authority: 12 U.S.C. 2601 et seq.
2. Section 3500.2(b) is amended by adding, in alphabetical order, a
definition of ``managerial employee'', to read as follows:
Sec. 3500.2 Definitions.
* * * * *
(b) * * *
Managerial employee means an employee of a settlement service
provider who does not routinely deal directly with consumers, and who
either hires, directs, assigns, promotes, or rewards other employees or
independent contractors, or is in a position to formulate, determine,
or influence the policies of the employer. Neither the term
``managerial employee'' nor the term ``employee'' includes independent
contractors, but a managerial employee may hold a real estate brokerage
or agency license.
* * * * *
3. Section 3500.8(c)(2) is amended in the fourth sentence by
removing the reference ``Appendix F'' and adding in its place the
reference ``Appendix E''.
4. Section 3500.14 is amended by revising the last sentence of
paragraph (b), the heading of paragraph (g), and paragraph (g)(1), to
read as follows:
Sec. 3500.14 Prohibition against kickbacks and unearned fees.
* * * * *
(b) * * * A business entity (whether or not in an affiliate
relationship) may not pay any other business entity or the employees of
any other business entity for the referral of settlement service
business.
* * * * *
(g) Exemptions for fees, salaries, compensation, or other payments.
(1) The following are permissible:
(i) A payment to an attorney at law for services actually rendered;
(ii) A payment by a title company to its duly appointed agent for
services actually performed in the issuance of a policy of title
insurance;
(iii) A payment by a lender to its duly appointed agent or
contractor for services actually performed in the origination,
processing, or funding of a loan;
(iv) A payment to any person of a bona fide salary or compensation
or other payment for goods or facilities actually furnished or for
services actually performed;
(v) A payment pursuant to cooperative brokerage and referral
arrangements or agreements between real estate agents and real estate
brokers. (The statutory exemption restated in this paragraph refers
only to fee divisions within real estate brokerage arrangements when
all parties are acting in a real estate brokerage capacity, and has no
applicability to any fee arrangements between real estate brokers and
mortgage brokers or between mortgage brokers.)
(vi) Normal promotional and educational activities that are not
conditioned on the referral of business and do not involve the
defraying of expenses that otherwise would be incurred by persons in a
position to refer settlement services or business incident thereto;
(vii) A payment by an employer to its own bona fide employee for
generating business for that employer;
(viii) In a controlled business arrangement, a payment by an
employer of a bonus to a managerial employee based on criteria relating
to performance (such as profitability, capture rate, or other
thresholds) of a business entity in the controlled business
arrangement. However, the amount of such bonus may not be calculated as
a multiple of the number or value of referrals of settlement service
business to a business entity in a controlled business arrangement; and
(ix)(A) A payment by an employer to its bona fide employee for the
referral of settlement service business to a settlement service
provider that has an affiliate relationship with the employer or in
which the employer has a direct or beneficial ownership interest of
more than 1 percent, if the following conditions are met:
(1) The employee does not perform settlement services in any
transaction; and
(2) Before the referral, the employee provides to the person being
referred a written disclosure in the format of the Controlled Business
Arrangement Disclosure Statement, set forth in Appendix D to this part.
(B) For purposes of this paragraph (g)(1)(ix), the marketing of a
settlement service or product of an affiliated entity, including the
collection and conveyance of information or the taking of an
application or order for an affiliated entity, does not constitute the
performance of a settlement service. Under this paragraph (g)(1)(ix),
marketing of a settlement service or product may include incidental
communications with the consumer after the application or order, such
as providing the consumer with information about the status of an
application or order; marketing shall not include serving as the
ongoing point of contact for coordinating the delivery and provision of
settlement services.
* * * * *
5. Section 3500.15 is amended by revising the introductory text of
paragraph (b)(1), to read as follows:
Sec. 3500.15 Controlled business arrangements.
* * * * *
(b) * * *
(1) Prior to the referral, the person making a referral has
provided to each person whose business is referred a written
disclosure, in the format of the Controlled Business Arrangement
Disclosure Statement set forth in Appendix D of this part. This
disclosure shall specify the nature of the relationship (explaining the
ownership and financial interest) between the person performing
settlement services (or business incident thereto) and the person
making the referral, and shall describe the estimated charge or range
of charges (using the same terminology, as far as practical, as Section
L of the HUD-1 or HUD-1A settlement statement) generally made by the
provider of settlement services. The disclosure must be provided on a
separate piece of paper no later than the time of each referral or, if
the lender requires the use of a particular provider, the time of loan
application, except that:
* * * * *
Sec. 350017 [Amended]
6. Section 3500.17 is amended as follows:
a. In paragraph (b), in the definitions of ``Aggregate (or)
composite analysis'' and ``Single-item analysis'', by removing the
reference ``Appendix F'' in the last sentence of each definition and
adding in its place the reference ``Appendix E''.
b. In paragraph (c)(1)(i), in the second sentence, by removing the
reference ``Appendix F'' and adding in its place the reference
``Appendix E''.
c. In paragraph (d)(1)(ii), in the last sentence, by removing the
reference ``Appendix F'' and adding in its place the reference
``Appendix E''.
7. Appendix B is amended by revising Illustration 11, redesignating
Illustrations 12 and 13 as Illustrations
[[Page 29253]]
13 and 14 respectively, and adding a new Illustration 12, to read as
follows:
Appendix B to Part 3500--Illustrations of Requirements of RESPA
* * * * *
11. Facts: A, a mortgage lender, is affiliated with B, a title
company, and C, an escrow company, and offers consumers a package of
mortgage, title, and escrow services at a discount from the prices
at which such services would be sold if purchased separately. A, B,
and C are subsidiaries of H, a holding company, which also controls
a retail stock brokerage firm, D. None of A, B, or C requires
consumers to purchase the services of its sister companies, and each
company sells such services separately and as part of the package. A
also pays an employee T, a full-time bank teller who does not
perform settlement services, a bonus for each loan, title insurance
binder, or closing that T generates for A, B, or C. A pays T these
bonuses out of A's own funds and receives no reimbursements for
these bonuses from B, C, or H. At the time that T refers customers
to B and C, T provides the customers with a disclosure using the
controlled business arrangement disclosure format. Also, Z, a
stockbroker employee of D, occasionally refers her customers to A,
B, or C; gives a statement in the controlled business disclosure
format; and receives a payment from D for each referral.
Comments: Selling a package of settlement services at a discount
is not prohibited by RESPA, consistent with the definition of
``required use'' in 24 CFR 3500.2. Also, A is always allowed to
compensate its own employees for business generated for A's company.
Here, A may also compensate T, an employee who does not perform
settlement services in this or any transaction, for referring
business to a business entity in an affiliate relationship with A.
Z, who does not perform settlement services in this or any
transaction, can also be compensated by D, but not by anyone else.
Employees who perform settlement services cannot be compensated for
referrals to other settlement service providers. None of the
entities in an affiliated relationship with each other may pay for
referrals received from an affiliate's employees. Sections
3500.15(b)(3)(i)(A) and (B) set forth the permissible exchanges of
funds between controlled business entities. In all circumstances
described a statement in the controlled business disclosure format
must be provided to a potential consumer at or before the time that
the referral is made.
12. Facts: A, a real estate broker, is affiliated with B, a
mortgage lender, and C, a title agency. A employs F to advise and
assist any customers of A who have executed sales contracts
regarding mortgage loans and title insurance. F collects and
transmits (by computer, fax, mail, or other means) loan applications
or other information to B and C for processing. A pays F a small
salary and a bonus for every loan closed with B or title insurance
issued with C. F furnishes the controlled business disclosure to
consumers at the time of each referral. F receives no other
compensation from the real estate or mortgage transaction and
performs no settlement services in any transaction. At the end of
each of A's fiscal years, M, a managerial employee of A, receives a
$1,000 bonus if 20% of the consumers who purchase a home through A
close a loan on the home with B and have the title issued by C.
During the year, M acted as a real estate agent for his neighbor and
received a real estate sales commission for selling his neighbor's
home.
Comments: Under Sec. 3500.14(g)(1), employers may pay their own
bona fide employees for generating business for their employer
(Sec. 3500.14(g)(1)(vii)). Employers may also pay their own bona
fide employees for generating business for their affiliate business
entities (Sec. 3500.14(g)(1)(ix)), as long as the employees do not
perform settlement services in any transaction and disclosure is
made. This permits a company to employ a person whose primary
function is to market the employer's or its affiliate's settlement
services (frequently referred to as a Financial Services
Representative, or ``FSR''). An FSR may not perform any settlement
services including, for example, those services of a real estate
agent, loan processor, settlement agent, attorney, or mortgage
broker. In accordance with the terms of the exemption at
Sec. 3500.14(g)(1)(ix), the marketing of a settlement service or
product of an affiliated entity, including the collection and
conveyance of information or the taking of an application or order
for the services of an affiliated entity, does not constitute the
performance of a settlement service. Under the exemption, marketing
of a settlement service or product also may include incidental
communications with the consumer after the application or order,
such as providing the consumer with information about the status of
an application or order; marketing may not include serving as the
ongoing point of contact for coordinating the delivery and provision
of settlement services.
Thus, in the circumstances described, F and M may receive the
additional compensation without violating RESPA.
Also, employers may pay managerial employees compensation in the
form of bonuses based on a percentage of transactions completed by
an affiliated company (frequently called a ``capture rate''), as
long as the payment is not directly calculated as a multiple of the
number or value of the referrals. 24 CFR 3500.14(g)(1)(viii). A
managerial employee who receives compensation for performing
settlement services in three or fewer transactions in any calendar
year ``does not routinely'' deal directly with the consumer and is
not precluded from receiving managerial compensation.
* * * * *
8. Appendix D is revised to read as follows:
BILLING CODE 4210-27-P
[[Page 29254]]
[GRAPHIC] [TIFF OMITTED] TR07JN96.001
BILLING CODE 4210-27-C
[[Page 29255]]
9. Appendix E is removed and Appendix F is redesignated as Appendix
E.
Dated: May 31, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-14329 Filed 6-6-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-14241 Vehicle Identification Number Requirements
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29031-29036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14241]
=======================================================================
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 541, 565, 567, 571
[Docket No. 95-85; Notice 2]
RIN 2127-AF69
Vehicle Identification Number Requirements
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this final rule, NHTSA combines its vehicle identification
number (VIN) requirements in a single regulation, Part 565. Previously,
the VIN requirements were specified in two separate regulations,
Federal Motor Vehicle Safety Standard No. 115 and Part 565. This action
is part of the President's Regulatory Reinvention Initiative and seeks
to make NHTSA's VIN requirements easier to understand and to apply. In
accordance with Federal metrication policy, NHTSA also converts English
measurements specified in Part 565 to metric measurements. NHTSA makes
no substantive changes in any regulatory requirements.
DATES: Effective Date: This final rule is effective July 8, 1996.
Petitions for Reconsideration: Any petitions for reconsideration of
this final rule must be received by NHTSA no later than July 22, 1996.
[[Page 29032]]
ADDRESSES: Any petitions for reconsideration of this final rule should
refer to the docket and notice number set forth in the heading of this
notice and be submitted to: Administrator, National Highway Traffic
Safety Administration, 400 Seventh Street, SW., Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT: Dr. Leon Delarm, Office of Vehicle
Safety Standards, National Highway Traffic Safety Administration, 400
Seventh Street, SW., Washington, DC 20590. Telephone number 202-366-
4920.
SUPPLEMENTARY INFORMATION:
Background and Regulatory Reinvention Initiative
Pursuant to the March 4, 1995 directive from the President to the
heads of departments and agencies, ``Regulatory Reinvention
Initiative,'' NHTSA reviewed all its regulations and directives. During
this review, the agency identified not only those rules or portions of
rules that might be deleted or rescinded but also rules that could be
consolidated to avoid duplication or redrafted to make them easier to
read. NHTSA's vehicle identification number requirements were
identified as a candidate for amendment to make the requirements easier
to understand and to apply.
Notice of Proposed Rulemaking
In a notice of proposed rulemaking (NPRM) published October 25,
1995 (60 FR 54658), the agency proposed to transfer the text of Federal
Motor Vehicle Safety Standard No. 115 (49 CFR 571.115) Vehicle
identification number--basic requirements to Part 565 Vehicle
identification number--content requirements. A vehicle identification
number (VIN) is a seventeen character series of Arabic numbers and
Roman letters which is assigned to a vehicle for identification
purposes. Standard No. 115 specifies general physical requirements for
a VIN plate or label and its installation and Part 565 specifies VIN
content and format.
In the NPRM, NHTSA stated its tentative conclusion that
consolidation of the VIN requirements into one regulation would make it
easier for motor vehicle manufacturers to understand and to apply those
requirements. Many small manufacturers of motor vehicles (including
trailers) apparently find the necessity of consulting two separate VIN
regulations (i.e., Standard No. 115 and Part 565) cumbersome and
confusing. Thus, NHTSA proposed to consolidate all VIN requirements
into one regulation. NHTSA stated it did not intend to make any
substantive changes to its VIN requirements as a result of the proposed
consolidation.
Since VIN requirements are referenced in other NHTSA regulations,
such as Part 541 Federal Motor Vehicle Theft Prevention Standard and
Part 567 Certification, NHTSA also proposed to make conforming changes
to those references.
NHTSA also proposed to convert part 565 measurements from the
English system of measurement to the metric system. The metric
conversions were proposed so NHTSA could continue to implement the
Federal policy that the metric system of measurement is the preferred
system of weights and measures for United States trade and commerce.
Specifically, NHTSA proposed that English unit measurements of gross
vehicle weight ratings (GVWRs) in Table II of part 565 be exactly
converted to the metric system. Thus, the agency proposed that a GVWR
of 10,000 pounds be converted to 4536 kilograms (kg.), the exact
converted figure, instead of 4500 kg, the equivalent converted figure.
To accommodate those persons unfamiliar with the metric system, NHTSA
proposed that part 565 present the English and metric measurements
indefinitely.
Public Comments on the NPRM and NHTSA's Responses
In response to the NPRM, NHTSA received comments from Advocates for
Highway and Auto Safety, Chrysler, Flxible Corporation, Ford, National
Automobile Dealers Association (NADA), Navistar, General Motors and
Toyota. Advocates, Chrysler, Ford, General Motors and NADA agreed with
NHTSA's proposal to consolidate all VIN requirements in Part 565, and
to provide measurements in both English and metric units.
Several commenters noted typographical errors. Ford, General
Motors, and Navistar each pointed out the same typographical errors in
the proposed text of sections 565.6(a) and 565.6(b). NHTSA agrees with
the recommended corrections and makes them in the final rule. Toyota
stated its belief that there was a discrepancy between proposed section
565.7(b) and proposed section 565.7(d) as to deadlines for
manufacturers to provide VIN information to NHTSA. After reviewing Part
565, NHTSA notes that the reference to ``paragraph (b)'' in proposed
section 565.7(d) was a typographical error, and removes the reference
in the final rule.
Flxible Corporation expressed concern that metrication of the
measurements in the VIN requirements (but retaining English
measurements for the present) may result in both English and metric
units being displayed on VIN tags, necessitating larger tags. There
appears to have been a misunderstanding about the proposal. In
commenting, Flxible may have been assuming that this rulemaking would
somehow have affected its obligation under 49 CFR Part 567,
Certification, to state a vehicle's GVWR on its certification label.
Nothing that NHTSA proposed for Part 565 would amend Part 567 or
otherwise result in manufacturers providing information in addition to
the seventeen digits specified as the VIN. NHTSA notes that its
proposal to metricate Part 565 would only amend Table II. Table II
specifies GVWR classes for motor vehicles. Previously, the Table II
GVWR classes were only described according to English measurements. The
NPRM proposed that the weight classes be described in the regulation
according to both metric and English measurements. While a vehicle's
GVWR class, as determined under Table II, must be encoded in its VIN,
the class is not required by Part 565 to be directly placed on the
vehicle. The GVWR class is not currently required by Part 565 to be
placed on the vehicle in English units and will not be required as a
result of this rulemaking to be placed on the vehicle in both units.
Final Rule
NHTSA is adopting its proposal without change, except that it has
corrected the previously discussed typographical errors noted by Ford,
General Motors, Navistar and Toyota.
Effective Date
In the NPRM, NHTSA tentatively decided that there was good cause
shown for concluding that an effective date earlier than 180 days after
issuance would be in the public interest. The agency proposed that, if
adopted, the effective date for the final rule be 30 days after its
publication in the Federal Register. NHTSA received no comments on this
issue. Accordingly, the agency has decided that there is good cause
shown for concluding that an effective date earlier than 180 days after
issuance is in the public interest. The final rule will take effect 30
days after its publication in the Federal Register.
Rulemaking Analyses and Notices
1. Executive Order 12866 and DOT Regulatory Policies and Procedures
This final rule was not reviewed under E. O. 12866 (Regulatory
Planning and Review). NHTSA has analyzed the
[[Page 29033]]
impact of this rulemaking action and determined that it is not
``significant'' within the meaning of the Department of
Transportation's regulatory policies and procedures. The rule does not
impose any costs or yield any savings, but consolidates the agency's
requirements for manufacturers to assign vehicle identification numbers
(VINs) to motor vehicles. The changes make it easier for manufacturers
to understand and apply the VIN requirements. The agency makes no
substantive changes as a result of the consolidation. Since there are
no impacts, preparation of a full regulatory evaluation is not
warranted.
2. Regulatory Flexibility Act
The agency has considered the effects of this regulatory action
under the Regulatory Flexibility Act. I hereby certify that the final
rule will not have a significant economic impact on a substantial
number of small entities. As explained above, the rule does not impose
any new costs or provide any savings. It will make it easier for motor
vehicle manufacturers, many of which are small businesses, to
understand and apply the agency's requirements for vehicle
identification numbers. For these reasons, small businesses, small
governmental organizations, and small organizations which purchase
motor vehicles or rely on VINs for other recordkeeping or
administrative matters, will not be affected by the rule. Accordingly,
a final regulatory flexibility analysis has not been prepared.
3. Paperwork Reduction Act
The information collection requirements in this rule have been
submitted to and approved by the Office of Management and Budget (OMB)
pursuant to the requirements of the Paperwork Reduction Act (44 U.S.C.
3501 et seq.). This collection of information has been assigned OMB
Control Number 2127-0510 (``Consolidated VIN Requirements and Motor
Vehicle Theft Prevention Standard'') and has been approved for use
through June 30, 1996. NHTSA has undertaken measures for OMB approval
to extend this collection of information.
4. Executive Order 12612 (Federalism)
This final rule has been analyzed in accordance with the principles
and criteria contained in Executive Order 12612. The agency has
determined that the rule does not have sufficient Federalism
implications to warrant preparation of a Federalism Assessment. No
State laws will be affected.
5. National Environmental Policy Act
The agency has considered the environmental implications of this
final rule in accordance with the National Environmental Policy Act of
1969 and determined that the final rule will not have any significant
impact on the quality of the human environment.
6. Executive Order 12778 (Civil Justice Reform)
This final rule will not have any retroactive effect. Under 49
U.S.C. 30103, whenever a Federal motor vehicle safety standard is in
effect, a State may not adopt or maintain a safety standard applicable
to the same aspect of performance which is not identical to the Federal
standard, except to the extent that State requirement imposes a higher
level of performance and applies only to vehicles procured for the
State's use. 49 U.S.C. 30161 sets forth a procedure for judicial review
of final rules establishing, amending or revoking Federal motor vehicle
safety standards. This section does not require submission of a
petition for reconsideration or other administrative procedures before
parties may file suit in court.
List of Subjects
49 CFR Part 541
Crime, Labeling, Motor vehicles, Reporting and recordkeeping
requirements.
49 CFR Part 565
Motor vehicle safety, Reporting and recordkeeping requirements.
49 CFR Part 567
Labeling, Motor vehicle safety, Reporting and recordkeeping
requirements.
49 CFR Part 571
Motor vehicle safety, Reporting and recordkeeping requirements,
Tires.
In consideration of the foregoing, NHTSA is amending 49 CFR parts
541, 565, 567, and 571 as set forth below.
PART 541--[AMENDED]
1. The authority citation for part 541 continues to read as
follows:
Authority: 49 U.S.C. 33101, 33102, 33103, 33105; delegation of
authority at 49 CFR 1.50.
2. In Sec. 541.4, paragraph (b)(7) is revised to read as follows:
Sec. 541.4 Definitions.
* * * * *
(b) Other definitions. * * *
(7) VIN means the vehicle identification number required by part
565 of this chapter.
3. Part 565 is revised to read as follows:
PART 565--VEHICLE IDENTIFICATION NUMBER REQUIREMENTS
Sec.
565.1 Purpose and scope.
565.2 Applicability.
565.3 Definitions.
565.4 General requirements.
565.5 Motor vehicles imported into the United States.
565.6 Content requirements.
565.7 Reporting requirements.
Authority: 49 U.S.C. 322, 30111, 30115, 30117, 30141, 30146,
30166, and 30168; delegation of authority at 49 CFR 1.50.
Sec. 565.1 Purpose and scope.
This part specifies the format, content and physical requirements
for a vehicle identification number (VIN) system and its installation
to simplify vehicle identification information retrieval and to
increase the accuracy and efficiency of vehicle recall campaigns.
Sec. 565.2 Applicability.
This part applies to passenger cars, multipurpose passenger
vehicles, trucks, buses, trailers (including trailer kits), incomplete
vehicles, and motorcycles. Vehicles imported into the United States
under 49 CFR 591.5(f), other than by the corporation responsible for
the assembly of that vehicle or a subsidiary of such a corporation, are
excluded from requirements of Sec. 565.4(b), Sec. 565.4(c),
Sec. 565.4(g), Sec. 565.4(h), Sec. 565.5 and Sec. 565.6.
Sec. 565.3 Definitions.
(a) Federal Motor Vehicle Safety Standards Definitions. Unless
otherwise indicated, all terms used in this part that are defined in 49
CFR 571.3 are used as defined in 49 CFR 571.3.
(b) Body type means the general configuration or shape of a vehicle
distinguished by such characteristics as the number of doors or
windows, cargo-carrying features and the roofline (e.g., sedan,
fastback, hatchback).
(c) Check digit means a single number or the letter X used to
verify the accuracy of the transcription of the vehicle identification
number.
(d) Engine type means a power source with defined characteristics
such as fuel utilized, number of cylinders, displacement, and net brake
horsepower. The specific manufacturer and make shall be represented if
the engine powers a passenger car or a multipurpose passenger vehicle,
or truck with a gross vehicle weight rating of 4536 kg. (10,000 lbs.)
or less.
(e) Incomplete vehicle means an assemblage consisting, as a
minimum, of
[[Page 29034]]
frame and chassis structure, power train, steering system, suspension
system and braking system, to the extent that those systems are to be
part of the completed vehicle, that requires further manufacturing
operations, other than the addition of readily attachable components,
such as mirrors or tire and rim assemblies, or minor finishing
operations such as painting, to become a completed vehicle.
(f) Line means a name that a manufacturer applies to a family of
vehicles within a make which have a degree of commonality in
construction, such as body, chassis or cab type.
(g) Make means a name that a manufacturer applies to a group of
vehicles or engines.
(h) Manufacturer means a person--
(1) Manufacturing or assembling motor vehicles or motor vehicle
equipment; or
(2) Importing motor vehicles or motor vehicle equipment for resale.
(i) Model means a name that a manufacturer applies to a family of
vehicles of the same type, make, line, series and body type.
(j) Model Year means the year used to designate a discrete vehicle
model, irrespective of the calendar year in which the vehicle was
actually produced, so long as the actual period is less than two
calendar years.
(k) Plant of manufacture means the plant where the manufacturer
affixes the VIN.
(l) Series means a name that a manufacturer applies to a
subdivision of a ``line'' denoting price, size or weight identification
and that is used by the manufacturer for marketing purposes.
(m) Trailer kit means a trailer that is fabricated and delivered in
complete but unassembled form and that is designed to be assembled
without special machinery or tools.
(n) Type means a class of vehicle distinguished by common traits,
including design and purpose. Passenger cars, multipurpose passenger
vehicles, trucks, buses, trailers, incomplete vehicles and motorcycles
are separate types.
(o) VIN means a series of Arabic numbers and Roman letters that is
assigned to a motor vehicle for identification purposes.
Sec. 565.4 General requirements.
(a) Each vehicle manufactured in one stage shall have a VIN that is
assigned by the manufacturer. Each vehicle manufactured in more than
one stage shall have a VIN assigned by the incomplete vehicle
manufacturer. Vehicle alterers, as specified in 49 CFR 567.7, shall
utilize the VIN assigned by the original manufacturer of the vehicle.
(b) Each VIN shall consist of seventeen (17) characters.
(c) A check digit shall be part of each VIN. The check digit shall
appear in position nine (9) of the VIN, on the vehicle and on any
transfer documents containing the VIN prepared by the manufacturer to
be given to the first owner for purposes other than resale.
(d) The VINs of any two vehicles manufactured within a 30-year
period shall not be identical.
(e) The VIN of each vehicle shall appear clearly and indelibly upon
either a part of the vehicle, other than the glazing, that is not
designed to be removed except for repair or upon a separate plate or
label that is permanently affixed to such a part.
(f) The VIN for passenger cars, multipurpose passenger vehicles and
trucks of 4536 kg or less GVWR shall be located inside the passenger
compartment. It shall be readable, without moving any part of the
vehicle, through the vehicle glazing under daylight lighting conditions
by an observer having 20/20 vision (Snellen) whose eye-point is located
outside the vehicle adjacent to the left windshield pillar. Each
character in the VIN subject to this paragraph shall have a minimum
height of 4 mm.
(g) Each character in each VIN shall be one of the letters in the
set: [ABCDEFGHJKLMNPRSTUVWXYZ] or a numeral in the set: [0123456789]
assigned according to the method given in Sec. 565.5.
(h) All spaces provided for in the VIN must be occupied by a
character specified in paragraph (g) of this section.
(i) The type face utilized for each VIN shall consist of capital,
sanserif characters.
Sec. 565.5 Motor vehicles imported into the United States.
(a) Importers shall utilize the VIN assigned by the original
manufacturer of the motor vehicle.
(b) A passenger car certified by a Registered Importer under 49 CFR
part 592 shall have a plate or label that contains the following
statement, in characters with a minimum height of 4 mm, with the
identification number assigned by the original manufacturer provided in
the blank: SUBSTITUTE FOR U.S. VIN: ____________ SEE PART 565. The
plate or label shall conform to Sec. 565.4 (h) and (i). The plate or
label shall be permanently affixed inside the passenger compartment.
The plate or label shall be readable, without moving any part of the
vehicle, through the vehicle glazing under daylight lighting conditions
by an observer having 20/20 vision (Snellen) whose eye-point is located
outside the vehicle adjacent to the left windshield pillar. It shall be
located in such a manner as not to cover, obscure, or overlay any part
of any identification number affixed by the original manufacturer.
Passenger cars conforming to Canadian Motor Vehicle Safety Standard 115
are exempt from this paragraph.
Sec. 565.6 Content requirements.
The VIN shall consist of four sections of characters which shall be
grouped accordingly:
(a) The first section shall consist of three characters that occupy
positions one through three (1-3) in the VIN. This section shall
uniquely identify the manufacturer, make and type of the motor vehicle
if its manufacturer produces 500 or more motor vehicles of its type
annually. If the manufacturer produces less than 500 motor vehicles of
its type annually, these characters along with the third, fourth and
fifth characters of the fourth section shall uniquely identify the
manufacturer, make and type of the motor vehicle. These characters are
assigned in accordance with Sec. 565.7(a).
(b) The second section shall consist of five characters, which
occupy positions four through eight (4-8) in the VIN. This section
shall uniquely identify the attributes of the vehicle as specified in
Table I. For passenger cars, and for multipurpose passenger vehicles
and trucks with a gross vehicle weight rating of 4536 kg. (10,000 lbs.)
or less, the first and second characters shall be alphabetic and the
third and fourth characters shall be numeric. The fifth character may
be either alphabetic or numeric. The characters utilized and their
placement within the section may be determined by the manufacturer, but
the specified attributes must be decipherable with information supplied
by the manufacturer in accordance with Sec. 565.7(c). In submitting the
required information to NHTSA relating to gross vehicle weight rating,
the designations in Table II shall be used. The use of these
designations within the VIN itself is not required. Tables I and II
follow:
Table I--Type of Vehicle and Information Decipherable
Passenger car: Line, series, body type, engine type and restraint
system type.
Multipurpose passenger vehicle: Line, series, body type, engine type,
gross vehicle weight rating.
Truck: Model or line, series, chassis, cab type, engine type, brake
system and gross vehicle weight rating.
[[Page 29035]]
Bus: Model or line, series, body type, engine type, and brake system
Trailer, including trailer kits and incomplete trailer: Type of
trailer, body type, length and axle configuration.
Motorcycle: Type of motorcycle, line, engine type, and net brake
horsepower.
Incomplete Vehicle other than a trailer: Model or line, series, cab
type, engine type and brake system.
Note to Table I: Engine net brake horsepower when encoded in the
VIN shall differ by no more than 10 percent from the actual net brake
horsepower; shall in the case of motorcycle with an actual net brake
horsepower of 2 or less, be not more than 2; and shall be greater than
2 in the case of a motorcycle with an actual brake horsepower greater
than 2.
Table II--Gross Vehicle Weight Rating Classes
Class A--Not greater than 1360 kg. (3,000 lbs.)
Class B--Greater than 1360 kg. to 1814 kg. (3,001-4,000 lbs.)
Class C--Greater than 1814 kg. to 2268 kg. (4,001-5,000 lbs.)
Class D--Greater than 2268 kg. to 2722 kg. (5,001-6,000 lbs.)
Class E--Greater than 2722 kg. to 3175 kg. (6,001-7,000 lbs.)
Class F--Greater than 3175 kg. to 3629 kg. (7,001-8,000 lbs.)
Class G--Greater than 3629 kg. to 4082 kg. (8,001-9,000 lbs.)
Class H--Greater than 4082 kg. to 4536 kg. (9,001-10,000 lbs.)
Class 3--Greater than 4536 kg. to 6350 kg. (10,001-14,000 lbs.)
Class 4--Greater than 6350 kg. to 7257 kg. (14,001-16,000 lbs.)
Class 5--Greater than 7257 kg. to 8845 kg. (16,001-19,500 lbs.)
Class 6--Greater than 8845 kg. to 11793 kg. (19,501-26,000 lbs.)
Class 7--Greater than 11793 kg. to 14968 kg.(26,001-33,000 lbs.)
Class 8--Greater than 14968 kg. (33,001 lbs. and over)
(c) The third section shall consist of one character, which
occupies position nine (9) in the VIN. This section shall be the check
digit whose purpose is to provide a means for verifying the accuracy of
any VIN transcription. After all other characters in VIN have been
determined by the manufacturer, the check digit shall be calculated by
carrying out the mathematical computation specified in paragraphs (c)
(1) through (4) of this section.
(1) Assign to each number in the VIN its actual mathematical value
and assign to each letter the value specified for it in Table III, as
follows:
Table III--Assigned Values
A = 1
B = 2
C = 3
D = 4
E = 5
F = 6
G = 7
H = 8
J = 1
K = 2
L = 3
M = 4
N = 5
P = 7
R = 9
S = 2
T = 3
U = 4
V = 5
W = 6
X = 7
Y = 8
Z = 9
(2) Multiply the assigned value for each character in the VIN by
the position weight factor specified in Table IV, as follows:
Table IV--VIN Position and Weight Factor
1st ................8
2d .................7
3d..................6
4th ................5
5th ................4
6th ................3
7th ................2
8th................10
9th.......(check digit)
10th .................. 9
11th....................8
12th....................7
13th....................6
14th....................5
15th....................4
16th....................3
17th....................2
(3) Add the resulting products and divide the total by 11.
(4) The numerical remainder is the check digit. If the remainder is
10 the letter ``X'' shall be used to designate the check digit. The
correct numeric remainder, zero through nine (0-9) or the letter ``X,''
shall appear in VIN position nine (9).
(5) A sample check digit calculation is shown in Table V as
follows:
Table V.--Calculation of a Check Digit
VIN Position................................ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Sample VIN.................................. 1 G 4 A H 5 9 H ..
. 5 G 1 1 8 3 4 1
Assigned Value.............................. 1 7 4 1 8 5 9 8 ..
. 5 7 1 1 8 3 4 1
Weight Factor............................... 8 7 6 5 4 3 2 10 0 9 8 7 6 5 4 3 2
Multiply Assigned value times weight factor. 8 49 24 5 32 15 18 80 0 45 56 7 6 40 12 12 2
Add products: 8+49+24+5+32+15+18+80+0+45+56+7+6+40+12+12+2 = 411
Divide by 11: 411/11 = 37 4/11
The remainder is 4; this is the check digit to be inserted in position nine (9) of the VIN
(d) The fourth section shall consist of eight characters, which
occupy positions ten through seventeen (10-17) of the VIN. The last
five (5) characters of this section shall be numeric for passenger cars
and for multipurpose passenger vehicles and trucks with a gross vehicle
weight rating of 4536 kg. (10,000 lbs.) or less, and the last four (4)
characters shall be numeric for all other vehicles.
(1) The first character of the fourth section shall represent the
vehicle model year. The year shall be designated as indicated in Table
VI as follows:
Table VI.--Year Codes for VIN
------------------------------------------------------------------------
Year Code
------------------------------------------------------------------------
1980...................................................... A
1981...................................................... B
1982...................................................... C
1983...................................................... D
1984...................................................... E
1985...................................................... F
1986...................................................... G
1987...................................................... H
1988...................................................... J
1989...................................................... K
1990...................................................... L
1991...................................................... M
1992...................................................... N
1993...................................................... P
1994...................................................... R
1995...................................................... S
1996...................................................... T
1997...................................................... V
1998...................................................... W
1999...................................................... X
2000...................................................... Y
2001...................................................... 1
2002...................................................... 2
2003...................................................... 3
2004...................................................... 4
[[Page 29036]]
2005...................................................... 5
2006...................................................... 6
2007...................................................... 7
2008...................................................... 8
2009...................................................... 9
2010...................................................... A
2011...................................................... B
2012...................................................... C
2013...................................................... D
------------------------------------------------------------------------
(2) The second character of the fourth section shall represent the
plant of manufacture.
(3) The third through the eighth characters of the fourth section
shall represent the number sequentially assigned by the manufacturer in
the production process if the manufacturer produces 500 or more
vehicles of its type annually. If the manufacturer produces less than
500 motor vehicles of its type annually, the third, fourth and fifth
characters of the fourth section, combined with the three characters of
the first section, shall uniquely identify the manufacturer, make and
type of the motor vehicle and the sixth, seventh, and eighth characters
of the fourth section shall represent the number sequentially assigned
by the manufacturer in the production process.
Sec. 565.7 Reporting requirements.
The information collection requirements contained in this part have
been approved by the Office of Management and Budget under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.) and
have been assigned OMB Control Number 2127-0510.
(a) The National Highway Traffic Safety Administration (NHTSA) has
contracted with the Society of Automotive Engineers (SAE) to coordinate
the assignment of manufacturer identifiers. Manufacturer identifiers
will be supplied by SAE at no charge. All requests for assignments of
manufacturer identifiers should be forwarded directly to: Society of
Automotive Engineers, 400 Commonwealth Avenue, Warrendale, Pennsylvania
15096, Attention: WMI Coordinator. Any requests for identifiers
submitted to NHTSA will be forwarded to SAE. Manufacturers may request
a specific identifier or may request only assignment of an
identifier(s). SAE will review requests for specific identifiers to
determine that they do not conflict with an identifier already assigned
or block of identifiers already reserved. SAE will confirm the
assignments in writing to the requester. Once confirmed by SAE, the
identifier need not be resubmitted to NHTSA.
(b) Manufacturers of vehicles subject to this part shall submit,
either directly or through an agent, the unique identifier for each
make and type of vehicle it manufactures at least 60 days before
affixing the first VIN using the identifier. Manufacturers whose unique
identifier appears in the fourth section of the VIN shall also submit
the three characters of the first section that constitutes a part of
their identifier.
(c) Manufacturers of vehicles subject to the requirements of this
part shall submit to NHTSA the information necessary to decipher the
characters contained in its VINs. Amendments to this information shall
be submitted to the agency for VINs containing an amended coding. The
agency will not routinely provide written approvals of these
submissions, but will contact the manufacturer should any corrections
to these submissions be necessary.
(d) The information required under paragraph (c) of this section
shall be submitted at least 60 days prior to offering for sale the
first vehicle identified by a VIN containing that information, or if
information concerning vehicle characteristics sufficient to specify
the VIN code is unavailable to the manufacturer by that date, then
within one week after that information first becomes available. The
information shall be addressed to: Administrator, National Highway
Traffic Safety Administration, 400 Seventh Street, SW., Washington, DC
20590, Attention: VIN Coordinator.
PART 567--[AMENDED]
4. The authority citation for part 567 is revised to read as
follows:
Authority: 49 U.S.C. 322, 30111, 30115, 30117, 30166, 32502,
32504, 33101-33014, and 33109; delegation of authority at 49 CFR
1.50.
5. In Sec. 567.4, paragraphs (k) introductory text and (l) are
revised to read as follows:
Sec. 567.4 Requirements for manufacturers of motor vehicles.
* * * * *
(k) In the case of passenger cars admitted to the United States
under 49 CFR part 592 to which the label required by this section has
not been affixed by the original producer or assembler of the passenger
car, a label meeting the requirements of this paragraph shall be
affixed by the importer before the vehicle is imported into the United
States, if the car is from a line listed in Appendix A of 49 CFR Part
541. This label shall be in addition to, and not in place of, the label
required by paragraphs (a) through (j), inclusive, of this section.
* * * * *
(l)(1) In the case of a passenger car imported into the United
States under 49 CFR 591.5(f) which does not have an identification
number that complies with 49 CFR 565.4 (b), (c), and (g) at the time of
importation, the Registered Importer shall permanently affix a label to
the vehicle in such a manner that, unless the label is riveted, it
cannot be removed without being destroyed or defaced. The label shall
be in addition to the label required by paragraph (a) of this section,
and shall be affixed to the vehicle in a location specified in
paragraph (c) of this section.
(2) The label shall contain the following statement, in the English
language, lettered in block capitals and numerals not less than 4 mm
high, with the location on the vehicle of the original manufacturer's
identification number provided in the blank: ORIGINAL MANUFACTURER'S
IDENTIFICATION NUMBER SUBSTITUTING FOR U.S. VIN IS LOCATED
____________.
PART 571--[AMENDED]
6. The authority citation for part 571 continues to read as
follows:
Authority: 49 U.S.C. 322, 30111, 30115, 30117, and 30166;
delegation of authority at 49 CFR 1.50.
Sec. 571.115 [Removed and Reserved]
7. Section 571.115 is removed, and reserved.
Issued on: May 31, 1996.
Ricardo Martinez,
Administrator.
[FR Doc. 96-14241 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-59-P
Complete official Federal Register PDF
FR Doc. 96-14220 Airworthiness Directives; Textron Lycoming Model TIO-540-S1AD Reciprocating Engines
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29003-29006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14220]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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========================================================================
Federal Register / Vol. 61, No. 111 / Friday, June 7, 1996 / Rules
and Regulations
[[Page 29003]]
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 91-ANE-29; Amendment 39-9470; AD 91-21-01 R1]
RIN 2120-AA64
Airworthiness Directives; Textron Lycoming Model TIO-540-S1AD
Reciprocating Engines
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: This amendment revises an existing airworthiness directive
(AD), applicable to Textron Lycoming Model TIO-540-S1AD reciprocating
engines, that currently requires the upgrade of the engine exhaust
system to a new design configuration; and also establishes inspection
intervals for engines incorporating the new design configuration, for
engines incorporating the design configuration required by a previous
AD, and for engines not yet incorporating either design configuration.
This amendment clarifies that an exhaust system disassembly is not
necessary when inspecting the exhaust system after the installation of
the new design One-piece Exhaust Riser Kit, and Manifold Retaining Kit.
This amendment is prompted by reports from operators requesting
clarification of two paragraphs in the compliance section. The actions
specified by this AD are intended to prevent cracking or distortion of
engine exhaust system flanges, V-band coupling, and pipes, which could
result in engine compartment fire and smoke entering the cabin with
possible loss to the aircraft.
DATES: Effective June 27, 1996.
The incorporation by reference of certain publications listed in
the regulations was approved by the Director of the Federal Register as
of November 4, 1991.
Comments for inclusion in the Rules Docket must be received on or
before August 6, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), New England Region, Office of the Assistant Chief
Counsel, Attention: Rules Docket No. 91-ANE-29, 12 New England
Executive Park, Burlington, MA 01803-5299. Comments may also be
submitted to the Rules Docket by using the following Internet address:
``[email protected]''.
The service information referenced in this AD may be obtained from
Textron Lycoming/Subsidiary of Textron Inc., Williamsport, PA 17701;
(717) 327-7278, fax (717) 327-7022. This information may be examined at
the FAA, New England Region, Office of the Assistant Chief Counsel, 12
New England Executive Park, Burlington, MA; or at the Office of the
Federal Register, 800 North Capitol Street, NW., suite 700, Washington,
DC.
FOR FURTHER INFORMATION CONTACT: Richard Fiesel, Aerospace Engineer,
New York Aircraft Certification Office, FAA, Engine and Propeller
Directorate, 10 Fifth St., 3rd Floor, Valley Stream, MY 11581-1200;
telephone (516) 256-7504, fax (516) 568-2716.
SUPPLEMENTARY INFORMATION: On September 18, 1991, the Federal Aviation
Administration (FAA) issued airworthiness directive (AD) 91-21-01,
Amendment 39-8048 (56 FR 51646, October 15, 1991), to require the
modification of all affected Textron Lycoming Model TIO-540-S1AD
reciprocating engines by upgrading the engine exhaust system; and
repetitive inspections of the exhaust system for engines incorporating
the new design configuration, for engines incorporating the design
configuration required by the existing AD, and for engines not yet
incorporating either design configuration. That action was prompted by
reports of failures of exhaust systems due to exhaust pipes that were
misaligned and misassembled, or both. That condition, if not corrected,
could result in cracking or distortion of engine exhaust system
flanges, V-band coupling, and pipes, which could result in engine
compartment fire and smoke entering the cabin with possible loss to the
aircraft.
Since the issuance of that AD, the FAA has received reports from
operators requesting clarification of two paragraphs in the compliance
section. Operators have incorrectly interpreted these compliance
paragraphs, (b)(2)(i) and (b)(2)(ii), as requiring disassembly of the
exhaust system after installation of the new design One-piece exhaust
Riser and Manifold Retaining Kits. This revised AD adds
paragraph.(b)(2)(iii) to clarify that disassembly and re-inspection are
not required after compliance with paragraph (b)(2)(i) of this AD.
The FAA has reviewed and approved the technical contents of Textron
Lycoming Service Bulletin (SB) No. 484, dated January 30, 1989, that
describes the inspection, alignment, and modification of the original
exhaust assembly, and Textron Lycoming No. SB 499A, dated June 14,
1991, that describes the installation of the redesigned one-piece
exhaust pipe configuration.
Since an unsafe condition has been identified that is likely to
exist or develop on other engines of this same type design, this AD
revises AD 91-21-01 to clarify that an exhaust system disassembly is
not necessary when inspecting the exhaust system after the installation
of the new design One-piece Exhaust Riser Kit, and Manifold Retaining
Kit. The actions are required to be accomplished in accordance with the
SB's described previously.
Since a situation exists that requires the immediate adoption of
this regulation, it is found that notice and opportunity for prior
public comment hereon are impracticable, and that good cause exists for
making this amendment effective in less than 30 days.
Comments Invited
Although this action is in the form of a final rule that involves
requirements affecting flight safety and, thus, was not preceded by
notice and an opportunity for public comment, comments are invited on
this rule. Interested persons are invited to comment on this rule by
submitting such written data, views, or arguments as they may desire.
Communications should identify the Rules Docket number and be submitted
in triplicate to the address specified under the caption ADDRESSES. All
communications received on or before
[[Page 29004]]
the closing date for comments will be considered, and this rule may be
amended in light of the comments received. Factual information that
supports the commenter's ideas and suggestions is extremely helpful in
evaluating the effectiveness of the AD action and determining whether
additional rulemaking action would be needed.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the rule that might
suggest a need to modify the rule. All comments submitted will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report that
summarizes each FAA-public contact concerned with the substance of this
AD will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this notice must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket Number 91-ANE-29.'' The postcard will be date stamped and
returned to the commenter.
The regulations adopted herein 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
The FAA has determined that this regulation is an emergency
regulation that must be issued immediately to correct an unsafe
condition in aircraft, and is not a ``significant regulatory action''
under Executive Order 12866. It has been determined further that this
action involves an emergency regulation under DOT Regulatory Policies
and Procedures (44 FR 11034, February 26, 1979). If it is determined
that this emergency regulation otherwise would be significant under DOT
Regulatory Policies and Procedures, a final regulatory evaluation will
be prepared and placed in the Rules Docket. A copy of it, if filed, may
be obtained from the Rules Docket at the location provided under the
caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40101, 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by removing Amendment 39-8048 (56 FR
51646, October 15, 1991) and by adding a new airworthiness directive,
Amendment 39-9470, to read as follows:
91-21-01 R1 Textron Lycoming: Amendment 39-9470. Docket 91-ANE-29.
Revises AD 91-21-01, Amendment 39-8048.
Applicability: Textron Lycoming Model TIO-540-S1AD reciprocating
engines installed on but not limited to Piper PA-32 series aircraft.
Note 1: This airworthiness directive (AD) applies to each engine
identified in the preceding applicability provision, regardless of
whether it has been modified, altered, or repaired in the area
subject to the requirements of this AD. For engines that have been
modified, altered, or repaired so that the performance of the
requirements of this AD is affected, the owner/operator must use the
authority provided in paragraph (c) to request approval from the
Federal Aviation Administration (FAA). This approval may address
either no action, if the current configuration eliminates the unsafe
condition, or different actions necessary to address the unsafe
condition described in this AD. Such a request should include an
assessment of the effect of the changed configuration on the unsafe
condition addressed by this AD. In no case does the presence of any
modification, alteration, or repair remove any engine from the
applicability of this AD.
Compliance: Required as indicated, unless accomplished
previously.
To prevent cracking or distortion of engine exhaust system
flanges, V-band coupling, and pipes, which could result in engine
compartment fire and smoke entering the cabin with possible loss to
the aircraft, accomplish the following:
(a) For engines which have not complied with AD 89-12-04,
paragraph (d), or Textron Lycoming Service Bulletin (SB) No. 484,
Part II, dated January 30, 1989, on the effective date of this AD,
accomplish the following:
(1) Within 25 hours time in service (TIS) after the effective
date of this AD, install Crossover Exhaust Pipe Kit (05K21125) in
accordance with Textron Lycoming SB No. 484, Part II, dated January
30, 1989, and also install new design One-piece Exhaust Riser Kit
(05K21503) and Manifold Retainer Kit (05K19650-S) in accordance with
Textron Lycoming SB No. 499A, dated June 14, 1991.
Note 2: Instructions and notes relating to marking the slip
joints, rotating the exhaust pipes for alignment, and maintaining
clearances at critical locations during the above installation are
contained in Textron Lycoming SB No. 499A, dated June 14, 1991.
(2) Thereafter, at intervals not to exceed 100 hours TIS,
accomplish the following:
(i) Inspect the exhaust system for heat damage, distortion,
cracks or excessive wear in accordance with Textron Lycoming SB No.
484, Part II, dated January 30, 1989.
(ii) Inspect the exhaust system for clearance dimensions, proper
fastener torque and slip joint engagement in accordance with
paragraphs 10, 11, and 12 of Textron Lycoming SB No. 499A, dated
June 14, 1991.
(iii) Repair or replace damaged parts with serviceable parts
prior to further flight.
(b) For engines that have complied with all portions of AD 89-
12-04, or Textron Lycoming SB No. 484, dated January 30, 1989, on
the effective date of this AD, accomplish the following:
(1) Within 25 hours TIS after the effective date of this AD, and
thereafter, at intervals not to exceed 25 hours TIS until the new
design One-piece Exhaust Riser Kit (05K21503) has been installed in
accordance with paragraph (b)(2)(i) of this AD, accomplish the
following;
(i) Inspect all exhaust system joints, flanges, couplings and
brackets for heat damage, distortion, cracks or excessive wear, in
accordance with Textron Lycoming SB No. 484, dated January 30, 1989.
(ii) Inspect the exhaust system for proper slip joint engagement
by measuring distances between pipe end points in accordance with
Appendix 1 of this AD.
(iii) If damage is observed in the exhaust system or
measurements exceed allowable dimensions, repair or replace parts
with serviceable parts, as necessary, prior to further flight.
(iv) Reassemble and align exhaust system in accordance with
Textron Lycoming SB No. 484, dated January 30, 1989, and Appendix 1
of this AD.
(2) Within 75 hours TIS after the effective date of this AD,
accomplish the following:
(i) Install new design One-piece Exhaust Riser Kit (05K21503)
and manifold retainer kit (05K19650-S) in accordance with Textron
Lycoming SB No. 499A, dated June 14, 1991.
(ii) Thereafter, at intervals not to exceed 100 TIS, perform
exhaust system inspections specified in paragraph (a)(2)(i) and
(a)(2)(ii) of this AD. Operators need determine the minimum
engagement of only exhaust pipes LW-16102 and LW-16103 by referring
to Appendix 1 of this AD.
(iii) The repetitive 25 hours TIS inspections required by
paragraph (b)(1) of this AD are not required after installation of
the new design One-piece Exhaust Riser Kit (05K21503) and the
Manifold Retainer Kit (05K19650-S) in accordance with paragraph
(b)(2)(i) of this AD.
(c) An alternative method of compliance or adjustment of the
initial compliance time that provides an acceptable level of safety
may be used if approved by the Manager,
[[Page 29005]]
New York Aircraft Certification Office. The request should be
forwarded through an appropriate FAA Maintenance Inspector, who may
add comments and then send it to the Manager, New York Aircraft
Certification Office.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from.
(d) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the aircraft to a location where
the inspection may be performed.
(e) The actions required by this AD shall be done in accordance
with the following Textron Lycoming SB's:
------------------------------------------------------------------------
Document No. Pages Date
------------------------------------------------------------------------
No. 484........................... 1-4 January 30, 1989.
Total pages: 4.
No. 499........................... 1-4 June 14, 1991.
Total pages: 4.
------------------------------------------------------------------------
This incorporation by reference was approved by the Director of
the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR
part 51 as of November 4, 1991. Copies may be obtained from Textron
Lycoming/Subsidiary of Textron Inc., Williamsport, PA 17701;
telephone (717) 327-7278, fax (717) 327-7022. Copies may be
inspected at the FAA, New England Region, Office of the Assistant
Chief Counsel, 12 New England Executive Park, Burlington, MA; or at
the Office of the Federal Register, 800 North Capitol Street, NW.,
suite 700, Washington, DC.
(f) This amendment becomes effective on June 27, 1996.
Issued in Burlington, Massachusetts, on May 29, 1996.
Jay J. Pardee,
Manager, Engine and Propeller Directorate, Aircraft Certification
Service.
BILLING CODE 4910-13-U
[[Page 29006]]
APPENDIX 1
[GRAPHIC] [TIFF OMITTED] TR07JN96.000
[FR Doc. 96-14220 Filed 6-6-96; 8:45 am]
BILLING CODE 4910-13-C
Complete official Federal Register PDF
FR Doc. 96-14205 Information Law; Miscellaneous
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Page 29023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14205]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 1
RIN 2900-AI23
Information Law; Miscellaneous
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends Department of Veterans Affairs (VA)
regulations concerning information law by eliminating provisions that
essentially restate statutory language from the Freedom of Information
Act and the Privacy Act.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: Lorrie Johnson, Jeff Corzatt, Staff
Attorneys, Office of General Counsel, Department of Veterans Affairs,
810 Vermont Avenue, NW, Washington, DC 20420, (202) 273-6380.
SUPPLEMENTARY INFORMATION: This final rule consists of nonsubstantive
changes and, therefore, is not subject to the notice comment and
effective date provisions of 5 U.S.C. 553.
The Secretary hereby certifies that this final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. This final rule merely consists of nonsubstantive changes.
There is no Catalog of Federal Domestic Assistance Number for the
programs affected by this regulation.
List of Subjects in 38 CFR Part 1
Administrative practice and procedures, Archives and records,
Cemeteries, Claims, Courts, Flags, Freedom of information, Government
contracts, Government employees, Government property, Infants and
children, Inventions and patents, Investigations, Parking, Penalties,
Postal Service, Privacy, Reporting and recordkeeping requirements,
Seals and insignia, Security measures, Wages.
Approved: May 30, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set forth in the preamble, 38 CFR part 1 is amended
as follows:
PART 1--GENERAL PROVISIONS
1. The authority citation for part 1 continues to read as follows:
Authority: 38 U.S.C. 501(a), unless otherwise noted.
Secs. 1.558, 1.559, 1.578, 1.581, 1.583, 1.584, [Removed]
2. Sections 1.558, 1.559, 1.578, 1.581, 1.583, and 1.584 are
removed.
[FR Doc. 96-14205 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14204 Investigation Regulations
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29023-29024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14204]
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 1
RIN 2900-AI25
Investigation Regulations
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
[[Page 29024]]
SUMMARY: This document amends Department of Veterans Affairs (VA)
regulations by removing the investigation provisions set forth at 38
CFR 1.450 through 1.455. These provisions are obsolete. The
investigation authorities under the Inspector General Act of 1978, as
amended (5 U.S.C. Appendix 3), have superseded these provisions.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: Joseph Vallowe, Office of Inspector
General (50C), Department of Veterans Affairs, 810 Vermont Avenue, NW,
Washington, DC 20420, (202) 565-8623.
SUPPLEMENTARY INFORMATION: This final rule consists of nonsubstantive
changes and, therefore, is not subject to the notice comment and
effective date provisions of 5 U.S.C. 553.
The Secretary hereby certifies that this final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612. This final rule merely consists of nonsubstantive changes.
There is no Catalog of Federal Domestic Assistance Number for the
programs affected by this regulation.
List of Subjects in 38 CFR Part 1
Administrative practice and procedures, Archives and records,
Cemeteries, Claims, Courts, Flags, Freedom of information, Government
contracts, Government employees, Government property, Infants and
children, Inventions and patents, Investigations, Parking, Penalties,
Postal Service, Privacy, Reporting and recordkeeping requirements,
Seals and insignia, Security measures, Wages.
Approved: May 30, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
For the reasons set forth in the preamble, 38 CFR part 1 is amended
as follows:
PART 1--GENERAL PROVISIONS
1. The authority citation for part 1 continues to read as follows:
Authority: 38 U.S.C. 501(a), unless otherwise noted.
Secs. 1.450 through 1.455 [Removed]
2. Sections 1.450 through 1.455 and the undesignated heading
``Investigation'' are removed.
[FR Doc. 96-14204 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14202 Post-Vietnam Era Veterans' Educational Assistance: Miscellaneous
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29028-29030]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14202]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 21
RIN 2900-AH64
Post-Vietnam Era Veterans' Educational Assistance: Miscellaneous
AGENCIES: Department of Defense and Department of Veterans Affairs.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the regulations concerning the Post-
Vietnam Era Veterans' Educational Assistance Program (VEAP). It removes
provisions that are obsolete, duplicative, or otherwise unnecessary. It
also makes changes for purposes of clarification.
EFFECTIVE DATE: June 7, 1996.
FOR FURTHER INFORMATION CONTACT: June C. Schaeffer, Assistant Director
for Policy and Program Administration, Education Service, Veterans
Benefits Administration, Department of Veterans Affairs, 202-273-7187.
SUPPLEMENTARY INFORMATION: The regulations governing VEAP are set forth
in 38 CFR Part 21, Subpart G (see 38 CFR 21.5001 through 21.5300). This
document amends these regulations as discussed below.
Section 21.5001 is revised to specify delegations of authority to
various employees to make decisions concerning claims for benefits
under VEAP. Previously these delegations were included by incorporation
by reference.
Section 21.5020 is revised by referring readers to applicable
statutory provisions instead of restating the statutory provisions.
Section 21.5021 is amended to correct a typographical error.
Section 21.5022 is amended to update information concerning the
relationship between VEAP benefits and other benefit programs.
Section 21.5040 contained a paragraph that required each person who
was eligible for educational assistance under both the Vietnam Era GI
Bill and VEAP to elect under which program he or she wished to receive
benefits. These provisions are removed. Since the Vietnam Era GI Bill
has expired, no one is eligible under both programs. However, if such
an election was made in the past, it remains irrevocable by statute
(see 38 U.S.C. 3221(f)).
Section 21.5058 is amended by removing a reference to Sec. 21.4703,
since Sec. 21.4703 was removed by another Federal Register document.
Also, the reference to Sec. 21.4703 is replaced by a reference to the
corresponding statutory provision.
Section 21.5060 contained material concerning disenrollment from
VEAP by individuals who instead chose to participate in the Vietnam Era
GI Bill. Since individuals can no longer do that, the material is
removed.
Section 21.5064 contained provisions concerning an officer
adjustment benefit. Eligibility can no longer be established for this
benefit. Therefore, this material is obsolete and is removed.
Section 21.5074 contained provisions for reducing the monthly
payment made to a VEAP participant who has excessive absences during
that month. Due to a statutory change, these provisions applied only to
absences occurring prior to December 18, 1989. Consequently, this
section is obsolete and is removed.
Section 21.5100 is amended by replacing obsolete authority
citations with current citations.
Section 21.5103 is amended by removing obsolete rules concerning
when travel connected with counseling will be reimbursed by the
Department of Veterans Affairs (VA), and replacing those rules with a
reference to the sections of the U.S. Code that govern these
reimbursements.
Section 21.5130 contained statements as to which of several
regulations governing payments of educational assistance VA will apply
to the payments of educational assistance under VEAP. This section is
revised to eliminate references to sections and paragraphs that no
longer exist.
Section 21.5132 is amended by removing provisions that are no
longer necessary because they applied only to payments that have
already been made.
[[Page 29029]]
Section 21.5141 contained the rules for determining the amount of
tutorial assistance for which a VEAP participant may be eligible. The
method for making this determination is the same as the method used in
determining tutorial assistance for several of the other educational
assistance programs VA administers, such as the Montgomery GI Bill--
Active Duty program. Hence, instead of repeating the detailed
instructions in Sec. 21.5141, the same instructions in Sec. 21.4236 are
incorporated by reference.
Section 21.5145 is removed because it is no longer necessary. VA
recently revised Sec. 21.4145 so that it applies to VA's work-study
programs in all the education programs VA administers. There is no need
for a separate regulation restating work-study provisions for VEAP
participants.
In Sec. 21.5200, paragraph (f) contained material concerning
absences which, as noted above, no longer is applicable. Hence, this
material is obsolete and is removed.
Section 21.5300, and a reference in Sec. 21.5292 to Sec. 21.5300,
are removed because Sec. 21.5300 merely concerned the applicability of
sections that were removed by another Federal Register document.
This document also makes changes to some of the sections referred
to above for clarification.
This document removes provisions that are obsolete, duplicative, or
without substantive effect and makes changes for clarification. This
document makes no substantive changes. Accordingly, there is a basis
for dispensing with prior notice and comment and delayed effective date
provisions of 5 U.S.C. 552 and 553.
The Secretary of Veterans Affairs and the Secretary of Defense
hereby certify that this final rule will not have a significant
economic impact on a substantial number of small entities as they are
defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This final
rule makes no substantive changes. Pursuant to 5 U.S.C. 605(b), this
final rule, therefore, is exempt from the initial and final regulatory
flexibility analyses requirements of Secs. 603 and 604.
The Catalog of Federal Domestic Assistance number for the program
affected by these regulations is 64.120.
List of Subjects in 38 CFR Part 21
Administrative practice and procedure, Armed forces, Civil rights,
Claims, Colleges and universities, Conflict of interests, Defense
Department, Education, Employment, Grant programs--education, Grant
programs--veterans, Health care, Loan programs--education, Loan
programs--veterans, Manpower training programs, Reporting and
recordkeeping requirements, Schools, Travel and transportation
expenses, Veterans, Vocational education, Vocational rehabilitation.
Approved: May 22, 1996.
Jesse Brown,
Secretary of Veterans Affairs.
Samuel E. Ebbesen,
Lieutenant General, USA, Deputy Assistant Secretary (Military Personnel
Policy), Department of Defense.
For the reasons set out in the preamble, 38 CFR part 21 (subpart G)
is amended as set forth below.
PART 21--VOCATIONAL REHABILITATION AND EDUCATION
Subpart G--Post-Vietnam Era Veterans' Educational Assistance Under
38 U.S.C. Chapter 32
1. The authority citation for 38 CFR part 21, subpart G is revised
to read as follows:
Authority: 38 U.S.C. 501(a), ch. 32, unless otherwise noted.
2. Section 21.5001 is revised to read as follows:
Sec. 21.5001 Administration of benefits: 38 U.S.C. Chapter 32.
(a) Delegation of authority. Except as otherwise provided,
authority is delegated to the Under Secretary for Benefits and to
supervisory or administrative personnel within the jurisdiction of the
Education Service, Veterans Benefits Administration, designated by him
or her to make findings and decisions under 38 U.S.C. Chapter 32 and
the applicable regulations, precedents, and instructions, as to the
program authorized by subpart G of this part.
(Authority: 38 U.S.C. 512(a))
(b) Administrative provisions. In administering benefits payable
under 38 U.S.C. Chapter 32, VA will apply the following sections:
(1) Section 21.4002--Finality of decisions;
(2) Section 21.4003 (except paragraphs (d) and (e))--Revision of
decisions;
(3) Section 21.4005--Conflicting interests;
(4) Section 21.4006--False or misleading statements;
(5) Section 21.4007--Forfeiture;
(6) Section 21.4008--Prevention of overpayments; and
(7) Section 21.4009--Overpayments; waiver or recovery.
(Authority: 38 U.S.C. 3241(a), 3680, 3683, 3685, 3690, 6103)
3. Section 21.5020 is revised to read as follows:
Sec. 21.5020 Post-Vietnam era veterans' educational assistance.
Title 38 U.S.C. Chapter 32 provides for a participatory program for
educational assistance benefits to eligible veterans and
servicepersons. The intent of the Congress for this program is stated
in 38 U.S.C. 3201.
(Authority: 38 U.S.C. 3201)
4. In Sec. 21.5021, the authority citation following paragraph
(b)(5) is amended by removing ``320'' and adding, in its place,
``3202)'' and the authority citation following paragraph (c) is amended
by removing ``101'' and adding, in its place, ``101(20)''.
5. In Sec. 21.5022, paragraphs (a), (b)(1)(i), (b)(1)(ii),
(b)(1)(iii), and (b)(1)(iv) are revised, and paragraphs (b)(1)(v),
(b)(1)(vi), and (b)(1)(vii) are added, to read as follows:
Sec. 21.5022 Eligibility under more than one program.
(a) Concurrent benefits under more than one program. An individual
may not receive educational assistance under 38 U.S.C. Chapter 32
concurrently with benefits under any of the following provisions of
law:
(1) 38 U.S.C. Chapter 31;
(2) 38 U.S.C. Chapter 35;
(3) 10 U.S.C. Chapter 107;
(4) 10 U.S.C. Chapter 1606;
(5) Section 903 of the Department of Defense Authorization Act,
1981 (10 U.S.C. 2141 note); or
(6) The Omnibus Diplomatic Security and Antiterrorism Act of 1986.
(Authority: 38 U.S.C. 3681(b))
(b) Total eligibility under more than one program.
(1) * * *
(i) 38 U.S.C. Chapter 30;
(ii) 38 U.S.C. Chapter 35;
(iii) 10 U.S.C. Chapter 107;
(iv) 10 U.S.C. Chapter 1606;
(v) Section 903 of the Department of Defense Authorization Act,
1981 (10 U.S.C. 2141, note);
(vi) The Hostage Relief Act of 1980 (5 U.S.C. 5561 note); or
(vii) The Omnibus Diplomatic Security and Antiterrorism Act of
1986.
* * * * *
6. In Sec. 21.5040, paragraph (g) is removed and paragraph (h) is
redesignated as paragraph (g).
7. In Sec. 21.5058, paragraph (b) is amended by removing
``Sec. 21.4703 of this part'' and adding, in its place, ``sec. 207,
Pub. L. 101-366, 104 Stat. 442,''.
[[Page 29030]]
8. In Sec. 21.5060, paragraph (a)(2) is revised to read as follows:
Sec. 21.5060 Disenrollment.
(a) Voluntary disenrollment. * * *
(2) At any time within the initial 12 months of participation, an
individual may elect to disenroll for reasons of personal hardship
only.
(Authority: 38 U.S.C. 3221(a), (b))
* * * * *
9. In Sec. 21.5064, paragraphs (b)(1) and (b)(2) are revised to
read as follows:
Sec. 21.5064 Refund upon disenrollment.
* * * * *
(b) Effective date of refund. * * *
(1) If an individual voluntarily disenrolls from the program before
discharge or release from active duty, VA will refund the individual's
unused contributions:
(i) On the date of the participant's discharge or release from
active duty; or
(ii) Within 60 days of VA's receipt of notice of the individual's
discharge or disenrollment; or
(iii) As soon as possible after VA's receipt of notice indicating
that an earlier refund is needed due to hardship or for other good
reasons.
(Authority: 38 U.S.C. 3223(b), 3232)
(2) If an individual voluntarily disenrolls from the program after
discharge or release from active duty under other than dishonorable
conditions, his or her contributions shall be refunded within 60 days
of receipt by VA of an application for a refund from the individual.
(Authority: 38 U.S.C. 3202(1)(A), 3223(c), 3232(b))
* * * * *
Sec. 21.5074 [Removed]
10. Section 21.5074 is removed.
Sec. 21.5100 [Amended]
11. In Sec. 21.5100, the authority citation following paragraph (b)
is amended by removing ``3463; Pub. L. 96-466, Pub. L. 99-576'', and
adding, in its place, ``3697A(a)''; the authority citation following
paragraph (c) is amended by removing ``3463; Pub. L. 99-466, Pub. L.
99-576'' and adding, in its place, ``3241, 3697A (a) and (b)''; and the
authority citation following paragraph (d) is amended by removing
``3697A'' and adding, in its place, ``3697A(c)''.
12. Section 21.5103 is revised to read as follows:
Sec. 21.5103 Travel expenses.
(a) General. VA shall determine and pay the necessary expense of
travel to and from the place of counseling for a veteran who is
required to receive counseling as provided under 38 U.S.C. 111 (a),
(d), (e), and (g).
(Authority: 38 U.S.C. 111(a), (d), (e), and (g))
(b) Restriction. VA will not pay the necessary cost of travel to
and from the place of counseling when counseling is not required, but
is provided as a result of a voluntary request by the veteran.
(Authority: 38 U.S.C. 111)
13. In Sec. 21.5130, paragraph (a) is amended by removing ``(except
paragraph (e))''; the authority citations following paragraphs (a) and
(b) are removed; paragraph (d) is amended by removing ``paragraphs (b),
(c), (d), (o), and (v)'' and adding, in its place, ``paragraph (b)'';
the authority citation following paragraph (d) is removed; paragraph
(e) is amended by removing ``paragraphs (a), (b), and (c)'' and adding,
in its place, ``paragraph (b)''; paragraph (f) is removed; paragraphs
(g) and (h) are redesignated as paragraphs (f) and (g), respectively;
the authority citations following newly redesignated paragraphs (f) and
(g) are amended by removing ``3241'' and adding, in its place,
``3241(a)''; and the introductory text is revised to read as follows:
Sec. 21.5130 Payments; educational assistance allowance.
VA will apply the following sections in administering benefits
payable under 38 U.S.C. Chapter 32:
* * * * *
14. In Sec. 21.5132, paragraph (b)(2) is removed; and paragraph
(b)(3) is redesignated as paragraph (b)(2) and is revised to read as
follows:
Sec. 21.5132 Criteria used in determining benefit payments.
* * * * *
(b) Contributions. * * *
(2) The amount the Secretary of Defense has contributed to the fund
for the individual.
(Authority: 38 U.S.C. 3231)
15. Section 21.5141 is revised to read as follows:
Sec. 21.5141 Tutorial assistance.
An individual who is otherwise eligible to receive benefits under
the Post-Vietnam Era Veterans' Educational Assistance Program may
receive supplemental monetary assistance to provide tutorial services.
In determining whether VA will pay the individual this assistance, VA
will apply the provisions of Sec. 21.4236.
(Authority: 38 U.S.C. 3234, 3492)
Sec. 21.5145 [Removed]
16. Section 21.5145 is removed.
Sec. 21.5200 [Amended]
17. In Sec. 21.5200, paragraph (f) is removed and reserved.
Sec. 21.5292 [Amended]
18. In Sec. 21.5292, paragraph (e)(2) is amended by removing
``21.5300'' and adding, in its place, ``21.5270''.
19. The undesignated center heading preceding Sec. 21.5300 is
removed.
Sec. 21.5300 [Removed]
20. Section 21.5300 is removed.
[FR Doc. 96-14202 Filed 6-6-96; 8:45 am]
BILLING CODE 8320-01-P
Complete official Federal Register PDF
FR Doc. 96-14097 Leases; Grazing Administration
[Federal Register Volume 61, Number 111 (Friday, June 7, 1996)]
[Rules and Regulations]
[Pages 29030-29031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14097]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Parts 2120, 4100, 4600
[WO-160-1820-02-24 1A]
RIN 1004-AC66
Leases; Grazing Administration
AGENCY: Bureau of Land Management, Interior.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This administrative final rule transfers the regulations at 43
CFR Subpart 2120 in their entirety to a new 43 CFR Part 4600 which is
under Subchapter D, Range Management. The regulations at former part
2120 were included under 43 CFR Group 2100, Acquisitions. The
regulations at the former Part 2120 implement provisions of the Pierce
Act (43 U.S.C. 315m-1 to 315m-4 inclusive) to provide for the lease of
State, county or privately owned land located in grazing districts. The
purpose of this transfer is to consolidate all range management
regulations for public convenience in one area of Title 43. This
administrative final rule also adds a reference to new Part 4600 in
Subpart 4130 and corrects a cross reference citation in former part
2120.
EFFECTIVE DATE: July 8, 1996.
FOR FURTHER INFORMATION CONTACT: Frank Bruno, Regulatory Management,
(202) 452-0352.
SUPPLEMENTARY INFORMATION: This section of the regulations explains
that the Bureau of Land Management (BLM) may seek to lease land from
the owners of State, county, or privately owned lands located within
grazing districts that are chiefly valuable for grazing and are
necessary to promote the orderly use, improvement and development of
grazing districts. This section of the regulations has been in 43 CFR
Group 2100, entitled Acquisitions, because this
[[Page 29031]]
element of the range management program concerns acquisition through
the lease of State, county or privately owned land within a grazing
district. As a result, these regulations were grouped with unrelated
acquisitions such as gifts and exchanges. The new 43 CFR Part 4600 will
be contained in Subchapter D, entitled Range Management. Since all
regulations concerning range management are in Subchapter D,
transferring the regulations formerly at 43 CFR Part 2120 to Subchapter
D will consolidate all range regulations in one place thus making it
more convenient. A cross-reference to new Subpart 4600 has been added
in 43 CFR 4130.2 and a cross-reference corrected 43 CFR 2121.5.
Procedural Matters
The BLM has determined for good cause that notice and public
procedure pursuant to the Administrative Procedure Act (5 U.S.C.
553(b)(3)(B)) are unnecessary for this rulemaking. Notice and public
participation are unnecessary because the rulemaking merely transfers
existing regulations to a new Part of Title 43 of the Code of Federal
Regulations, adds a cross-reference, and corrects a cross reference. No
substantive change has been made to the regulations except to
redesignate numbering, provide a cross reference to new Part 4600 in
Part 4100, and correct a cross reference in newly designated Section
4160.5.
The principal author of this final rule is Frank Bruno, Regulatory
Management Team, BLM.
This rule is an administrative action and not subject to the Office
of Management and Budget review under Executive Order 12866.
It is hereby determined that this final rule does not constitute a
major Federal action significantly affecting the quality of the human
environment, and that no detailed statement pursuant to Section
102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C.
4332(2)(C)) is required. The BLM has determined that this final rule,
which is a purely administrative action, is categorically excluded from
further environmental review pursuant to 516 Departmental Manual (DM),
Chapter 2, Appendix 1, Item 1.10, and that the proposal would not
significantly affect the 10 criteria for exceptions listed in 516 DM 2,
Appendix 2. Pursuant to the Council on Environmental Quality
regulations (40 CFR 1508.4) and environmental policies and procedures
of the Department of the Interior, ``categorical exclusions'' means a
category of actions that the Department has determined ordinarily do
not individually or cumulatively have a significant effect on the human
environment.
The rule will not have a significant impact on a substantial number
of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) because it merely transfers a regulation to another Part of Title
43 of the Code of Federal Regulations and makes no substantive change.
This rule does not contain information collection requirements that
require approval by the Office of Management and Budget under 44 U.S.C.
3501 et seq.
List of Subjects in 43 CFR Part 4600
Grazing lands.
Dated: May 29, 1996.
Bob Armstrong,
Assistant Secretary of the Interior.
PART 2120--[REDESIGNATED AS PART 4600]
I
1. Part 2120 is redesignated as 43 CFR Part 4600 in new Group
4600--Leases as shown in the following redesignation table:
Redesignation Table
------------------------------------------------------------------------
Old 43 CFR part 2120 New 43 CFR part 4600
------------------------------------------------------------------------
Subpart 2120.............................. Subpart 4600.
2120.0-2.................................. 4600.0-2.
2120.0-3.................................. 4600.0-3.
Subpart 2121.............................. Subpart 4610.
2121.1.................................... 4610.1.
2121.1-1.................................. 4610.1-1.
2121.1-2.................................. 4610.1-2.
2121.2.................................... 4610.2.
2121.2-1.................................. 4610.2-1.
2121.2-2.................................. 4610.2-2.
2121.2-3.................................. 4610.2-3.
2121.3.................................... 4610.3.
2121.4.................................... 4610.4.
2121.4-1.................................. 4610.4-1.
2121.4-2.................................. 4610.4-2.
2121.4-3.................................. 4610.4-3.
2121.5.................................... 4610.5.
------------------------------------------------------------------------
2. The authority for the redesignated Part 4600 continues to read
as follows:
Authority: 48 Stat. 1270; 43 U.S.C. 315a.
Subpart 4130--Authorizing Grazing Use
3. Section 4130.2 is amended by adding paragraph (j) to read as
follows:
4130.2 Grazing permits or leases.
* * * * *
(j) Provisions explaining how grazing permits or authorizations may
be granted for grazing use on state, county or private land leased by
the Bureau of Land Management under ``The Pierce Act'' and located
within grazing districts are explained in 43 CFR part 4600.
PART 4600--LEASES OF GRAZING LAND--PIERCE ACT
4. The title of the newly designated part 4600, formerly part 2120,
is revised to read as set forth above.
Subpart 4600--General
5. The title of the newly designated subpart 4600, formerly subpart
2120, revised to read as set forth above.
Sec. 4610.5 Improvements by the United States on leased lands.
6. Newly designated section 4610.5, formerly section 2121.5, is
amended by removing ``part 4110 of this chapter'' and replacing it with
``subpart 4120 of Subchapter D.''
[FR Doc. 96-14097 Filed 6-6-96; 8:45 am]
BILLING CODE 4310-84-P
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