§4631 — Title 12 Banks and Banking | U.S. Code

Summary

The Director can send a notice of charges to a regulated entity or a person tied to it if the Director believes they are doing, have done, or are about to do unsafe or unsound things in running the entity or the Office of Finance, or are breaking a law, rule, order, or any written condition tied to an application or agreement. The Director may not use this power to enforce housing goals under subpart 2 of part B of subchapter I, or to enforce section 4566 or 4567, subsection (m) or (n) of section 1723a, subsection (e) or (f) of section 1456, or paragraph (5) of section 1430(j). If the entity’s latest exam showed a less-than-satisfactory rating for asset quality, management, earnings, or liquidity and it is not fixed, the Director may treat that as an unsafe or unsound practice. The notice must explain the facts and set a time and place for a hearing. If the party does not appear or send a representative, they are treated as consenting to a stop order. If the Director proves the charges or the party consents, the Director can order the party to stop the practice and to fix the harm. The Director can require restitution or reimbursement if there was unjust enrichment or reckless disregard for the law, require the entity to seek reimbursement or guarantees, limit its growth, force sale of loans or assets, cancel contracts, require qualified officers (possibly needing Director approval), or take other appropriate actions. The Director can also limit activities or functions of the entity or its officers. An order becomes effective 30 days after it is served unless a consent order says otherwise, and it stays in force unless changed or set aside as the rules allow.

Title 12, §4631

Banks and Banking — Source: USLM XML via OLRC

(a)(1)If, in the opinion of the Director, a regulated entity or any entity-affiliated party is engaging or has engaged, or the Director has reasonable cause to believe that the regulated entity or any entity-affiliated party is about to engage, in an unsafe or unsound practice in conducting the business of the regulated entity or the Office of Finance, or is violating or has violated, or the Director has reasonable cause to believe is about to violate, a law, rule, regulation, or order, or any condition imposed in writing by the Director in connection with the granting of any application or other request by the regulated entity or the Office of Finance or any written agreement entered into with the Director, the Director may issue and serve upon the regulated entity or entity-affiliated party a notice of charges in respect thereof.

(2)The Director may not, pursuant to this section, enforce compliance with any housing goal established under subpart 2 of part B of subchapter I of this chapter, with section 4566 or 4567 of this title, with subsection (m) or (n) of section 1723a of this title, with subsection (e) or (f) of section 1456 of this title, or with paragraph (5) of section 1430(j) of this title.

(b)If a regulated entity receives, in its most recent report of examination, a less-than-satisfactory rating for asset quality, management, earnings, or liquidity, the Director may (if the deficiency is not corrected) deem the regulated entity to be engaging in an unsafe or unsound practice for purposes of subsection (a).

(c)(1)Each notice of charges under this section shall contain a statement of the facts constituting the alleged practice or violation and shall fix a time and place at which a hearing will be held to determine on the record whether an order to cease and desist from such practice or violation should issue, unless the party served with a notice of charges shall appear at the hearing personally or by a duly authorized representative, the party shall be deemed to have consented to the issuance of the cease and desist order.

(2)If the Director finds on the record made at such hearing that any practice or violation specified in the notice of charges has been established (or the regulated entity or entity-affiliated party consents pursuant to section 4633(a)(4) of this title), the Director may issue and serve upon the regulated entity, executive officer, director, or entity-affiliated party an order requiring such party to cease and desist from any such practice or violation and to take affirmative action to correct or remedy the conditions resulting from any such practice or violation.

(d)The authority under this section and section 4632 of this title to issue any order requiring a regulated entity, executive officer, director, or entity-affiliated party to take affirmative action to correct or remedy any condition resulting from any practice or violation with respect to which such order is issued includes the authority to require a regulated entity or entity-affiliated party—

(1)make 11 So in original. Probably should be “to make”. restitution to, or provide reimbursement, indemnification, or guarantee against loss, if—

(A)such entity or party or finance facility was unjustly enriched in connection with such practice or violation; or

(B)the violation or practice involved a reckless disregard for the law or any applicable regulations or prior order of the Director;

(2)to require a regulated entity to seek restitution, or to obtain reimbursement, indemnification, or guarantee against loss;

(3)to restrict the growth of the regulated entity;

(4)to require the regulated entity to dispose of any loan or asset involved;

(5)to require the regulated entity to rescind agreements or contracts;

(6)to require the regulated entity to employ qualified officers or employees (who may be subject to approval by the Director at the direction of the Director); and

(7)to require the regulated entity to take such other action as the Director determines appropriate.

(e)The authority to issue an order under this section or section 4632 of this title includes the authority to place limitations on the activities or functions of the regulated entity or entity-affiliated party or any executive officer or director of the regulated entity or entity-affiliated party.

(f)An order under this section shall become effective upon the expiration of the 30-day period beginning on the service of the order upon the regulated entity, finance facility,,22 So in original. executive officer, director, or entity-affiliated party concerned (except in the case of an order issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable as provided in the order, except to the extent that the order is stayed, modified, terminated, or set aside by action of the Director or otherwise, as provided in this subchapter.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsec. (a)(2), was in the original “this title”, meaning title XIII of Pub. L. 102–550, Oct. 28, 1992, 106 Stat. 3941, which is classified principally to this chapter. For complete classification of title XIII to the Code, see

Short Title

note set out under section 4501 of this title and Tables.

Amendments

2008—Subsecs. (a), (b). Pub. L. 110–289, § 1151(1), added subsecs. (a) and (b) and struck out former subsecs. (a) and (b) which related to grounds for issuance against adequately capitalized enterprises and grounds for issuance against undercapitalized, significantly undercapitalized, and critically undercapitalized enterprises, respectively. Subsec. (c)(1). Pub. L. 110–289, § 1151(2)(A), (3)(C), substituted “practice” for “conduct” in two places and inserted “, unless the party served with a notice of charges shall appear at the hearing personally or by a duly authorized representative, the party shall be deemed to have consented to the issuance of the cease and desist order” before period at end. Subsec. (c)(2). Pub. L. 110–289, § 1151(2)(B), (3)(A), (C), inserted “or entity-affiliated party” before “consents” and substituted “director, or entity-affiliated party” for “or director”, “the regulated entity” for “the enterprise” in two places, and “practice” for “conduct” wherever appearing. Subsec. (d). Pub. L. 110–289, § 1151(3)(B), (C), (4)(A), in introductory provisions, substituted “a regulated entity” for “an enterprise”, “director, or entity-affiliated party” for “or director”, and “practice” for “conduct”, and inserted “to require a regulated entity or entity-affiliated party” after “includes the authority”. Subsec. (d)(1). Pub. L. 110–289, § 1151(4)(B)(i), (ii), in introductory provisions, struck out “to require an executive officer or a director to” before “make restitution” and substituted “loss, if” for “loss to the enterprise to the extent that such person”. Subsec. (d)(1)(A). Pub. L. 110–289, § 1151(3)(C), (4)(B)(iii), inserted “such entity or party or finance facility” before “was unjustly” and substituted “practice” for “conduct”. Subsec. (d)(1)(B). Pub. L. 110–289, § 1151(4)(B)(iv), added subpar. (B) and struck out former subpar. (B) which read as follows: “engaged in conduct or a violation that would subject such person to a civil penalty pursuant to section 4636(b)(3) of this title;”. Subsec. (d)(2). Pub. L. 110–289, § 1151(3)(B), substituted “a regulated entity” for “an enterprise”. Subsec. (d)(3). Pub. L. 110–289, § 1151(3)(A), substituted “the regulated entity” for “the enterprise”. Subsec. (d)(4). Pub. L. 110–289, § 1151(3)(A), (4)(C), substituted “the regulated entity” for “the enterprise” and inserted “loan or” before “asset”. Subsec. (d)(5) to (7). Pub. L. 110–289, § 1151(3)(A), substituted “the regulated entity” for “the enterprise”. Subsec. (e). Pub. L. 110–289, § 1151(3)(A), (5), substituted “the regulated entity” for “the enterprise” in two places and inserted “or entity-affiliated party” before “or any executive” and before period at end. Subsec. (f). Pub. L. 110–289, § 1151(6), substituted “regulated entity, finance facility,” for “enterprise” and “director, or entity-affiliated party” for “or director”.

§4631 Cease-and-desist proceedings