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Financial Services Law Insights and Observations

FDIC adds flood insurance penalty information to enforcement manual

Federal Issues FDIC Enforcement Flood Insurance

Federal Issues

On June 18, the FDIC announced an update to its “Formal and Informal Enforcement Actions Manual,” regarding the assessment of mandatory civil money penalties for certain pattern and practice violations of the National Flood Insurance Act (Act). The Act requires the FDIC to assess a penalty of up to $2,000 (adjusted annually for inflation) for each violation per loan against an insured depository institution. The FDIC will use the following two-step process to calculate the mandatory penalties for violations: (i) determine the base penalty, which takes into account the type and repeat nature of the violations; and (ii) apply the Institution Asset Size Factor, which takes into account the institution’s asset size based on the last Call Report. The manual also describes the difference between “Tier 1” violations and “Tier 2” violations and the base penalty for each.

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