Rules and Regulations. Final rule

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BILLING CODE 9111-14-P DEPARTMENT OF VETERANS AFFAIRS 38 CFR Part 3 RIN 2900-AM48 Forfeiture; Correction AGENCY: Department of Veterans Affairs. ACTION: Final rule. SUMMARY: The Department of Veterans Affairs

(VA)is amending its regulations concerning forfeiture of benefit payments and improved pension payments. A review of VA's adjudication regulations revealed a need for clarification and minor typographical errors. This document makes changes to provide clarification and eliminate the errors. The effect of these actions is to clarify the respective regulations. DATES: *Effective Date:* September 5, 2006. FOR FURTHER INFORMATION CONTACT: Trude Steele, Consultant, Compensation and Pension Service, Policy and Regulations Staff, Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420,

(202)273-7210. SUPPLEMENTARY INFORMATION: At the Regional Office level, except in the VA Regional Office, Manila, Philippines, VA regulation 38 CFR 3.905(a) authorizes the Regional Counsel to determine whether the evidence warrants formal consideration as to forfeiture. In the Manila Regional Office, the Veterans Service Center Manager is authorized to make this determination. Currently, 38 CFR 3.669(a), which was published with a typographical error, states that benefit payments will be suspended effective the date of last payment upon “receipt of notice from a Regional Counsel the Veterans Service Center Manager [sic] in the Manila Regional Office * * *.” To clarify § 3.669(a) and to ensure consistency with § 3.905(a), this document amends § 3.669(a) to specify that, although benefit payments are generally suspended upon receipt of notice from a Regional Counsel, in cases under the jurisdiction of the Manila Regional Office, payments are suspended upon receipt of notice from the Veterans Service Center Manager. This document also corrects a typographical error by replacing the words “less the” with “less than” in 38 CFR 3.30(b), Improved Pension—Quarterly. VA is amending this regulation for clarity and accuracy. Administrative Procedure Act This final rule consists of nonsubstantive changes. Accordingly, there is a basis for dispensing with prior notice and comment and the delayed effective date provisions of 5 U.S.C. 553. Paperwork Reduction Act This document contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3521). Regulatory Flexibility Act Because no notice of proposed rulemaking is required in connection with the adoption of this final rule, no regulatory flexibility analysis is required under the Regulatory Flexibility Act (5 U.S.C. 601-612). Even so, 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. Executive Order 12866—Regulatory Planning and Review Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Order classifies a rule as a significant regulatory action requiring review by the Office of Management and Budget if it meets any one of a number of specified conditions, including: Having an annual effect on the economy of $100 million or more, creating a serious inconsistency or interfering with an action of another agency, materially altering the budgetary impact of entitlements or the rights of entitlement recipients, or raising novel legal or policy issues. VA has examined the economic, legal, and policy implications of this final rule and has concluded that it is not a significant regulatory action under Executive Order 12866. Unfunded Mandates The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any year. This final rule would have no such effect on State, local, and tribal governments, or on the private sector. Catalog of Federal Domestic Assistance Numbers and Titles The Catalog of Federal Domestic Assistance program numbers and titles for this proposal are 64.104, Pension for Non-Service-Connected Disability for Veterans; 64.105, Pension to Veterans Surviving Spouses, and Children; 64.109, Veterans Compensation For Service-Connected Disability; and 64.110, Veterans Dependency And Indemnity Compensation For Service-Connected Death. List of Subjects in 38 CFR Part 3 Administrative practice and procedure, Claims, Disability benefits, Health care, Pensions, Radioactive materials, Veterans, Vietnam. Approved: August 25, 2006. Gordon H. Mansfield, Deputy Secretary of Veterans Affairs. For the reasons set forth in the preamble, 38 CFR part 3 is amended as follows: PART 3—ADJUDICATION Subpart A—Pension, Compensation, and Dependency and Indemnity Compensation 1. The authority citation for part 3, subpart A, continues to read as follows: Authority: 38 U.S.C. 501(a), unless otherwise noted. § 3.30 [Amended] 2. Section 3.30(b) is amended by removing “less the” and adding, in its place, “less than”. 3. Section 3.669(a) is revised to read as follows: § 3.669 Forfeiture.

(a)*General.* Upon receipt of notice from a Regional Counsel (or in cases under the jurisdiction of the Manila Regional Office, the Veterans Service Center Manager) that a case is being formally submitted for consideration of forfeiture of a payee's rights under § 3.905 of this part or that the payee has been indicted for subversive activities, payments will be suspended effective date of last payment. [FR Doc. E6-14660 Filed 9-1-06; 8:45 am] BILLING CODE 8320-01-P DEPARTMENT OF TRANSPORTATION National Highway Traffic Safety Administration 49 CFR Part 544 [Docket No.: NHTSA-2006-24175] RIN 2127-AJ88 Insurer Reporting Requirements; List of Insurers Required To File Reports AGENCY: National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT). ACTION: Final rule. SUMMARY: This final rule amends regulations on insurer reporting requirements. The appendices list those passenger motor vehicle insurers that are required to file reports on their motor vehicle theft loss experiences. An insurer included in any of these appendices must file three copies of its report for the 2003 calendar year before October 25, 2006. If the passenger motor vehicle insurers remain listed, they must submit reports by each subsequent October 25. DATES: This final rule becomes effective on November 6, 2006. Insurers listed in the appendices are required to submit reports before October 25, 2006. FOR FURTHER INFORMATION CONTACT: Rosalind Proctor, Office of International Vehicle, Fuel Economy and Consumer Standards, NHTSA, 400 Seventh Street, SW., Washington, DC 20590, by electronic mail to *rosalind.proctor@dot.gov.* Ms. Proctor's telephone number is

(202)366-0846. Her fax number is

(202)493-2290. SUPPLEMENTARY INFORMATION: I. Background Pursuant to 49 U.S.C. 33112, *Insurer reports and information,* NHTSA requires certain passenger motor vehicle insurers to file an annual report with the agency. Each insurer's report includes information about thefts and recoveries of motor vehicles, the rating rules used by the insurer to establish premiums for comprehensive coverage, the actions taken by the insurer to reduce such premiums, and the actions taken by the insurer to reduce or deter theft. Pursuant to 49 U.S.C. Section 33112(f), the following insurers are subject to the reporting requirements:

(1)Issuers of motor vehicle insurance policies whose total premiums account for 1 percent or more of the total premiums of motor vehicle insurance issued within the United States;

(2)Issuers of motor vehicle insurance policies whose premiums account for 10 percent or more of total premiums written within any one state; and

(3)Rental and leasing companies with a fleet of 20 or more vehicles not covered by theft insurance policies issued by insurers of motor vehicles, other than any governmental entity. Pursuant to its statutory exemption authority, the agency exempted certain passenger motor vehicle insurers from the reporting requirements. A. Small Insurers of Passenger Motor Vehicles Section 33112(f)(2) provides that the agency shall exempt small insurers of passenger motor vehicles if NHTSA finds that such exemptions will not significantly affect the validity or usefulness of the information in the reports, either nationally or on a state-by-state basis. The term “small insurer” is defined, in Section 33112(f)(1)(A) and (B), as an insurer whose premiums for motor vehicle insurance issued directly or through an affiliate, including pooling arrangements established under state law or regulation for the issuance of motor vehicle insurance, account for less than 1 percent of the total premiums for all forms of motor vehicle insurance issued by insurers within the United States. However, that section also stipulates that if an insurance company satisfies this definition of a “small insurer,” but accounts for 10 percent or more of the total premiums for all motor vehicle insurance issued in a particular state, the insurer must report about its operations in that state. In the final rule establishing the insurer reports requirement (52 FR 59; January 2, 1987), 49 CFR part 544, NHTSA exercised its exemption authority by listing in Appendix A each insurer that must report because it had at least 1 percent of the motor vehicle insurance premiums nationally. Listing the insurers subject to reporting, instead of each insurer exempted from reporting because it had less than 1 percent of the premiums nationally, is administratively simpler since the former group is much smaller than the latter. In Appendix B, NHTSA lists those insurers required to report for particular states because each insurer had a 10 percent or greater market share of motor vehicle premiums in those states. In the January 1987 final rule, the agency stated that it would update Appendices A and B annually. NHTSA updates the appendices based on data voluntarily provided by insurance companies to A.M. Best, which A.M. Best 1 publishes in its *State/Line Report* each spring. The agency uses the data to determine the insurers' market shares nationally and in each state. 1 A.M. Best Company is a well-recognized source of insurance company ratings and information. 49 U.S.C. 33112(i) authorizes NHTSA to consult with public and private organizations as necessary. B. Self-Insured Rental and Leasing Companies In addition, upon making certain determinations, NHTSA grants exemptions to self-insurers, *i.e.* , any person who has a fleet of 20 or more motor vehicles (other than any governmental entity) used for rental or lease whose vehicles are not covered by theft insurance policies issued by insurers of passenger motor vehicles, 49 U.S.C. 33112(b)(1) and (f). Under 49 U.S.C. 33112(e)(1) and (2), NHTSA may exempt a self-insurer from reporting, if the agency determines:

(1)The cost of preparing and furnishing such reports is excessive in relation to the size of the business of the insurer; and 33112(e)(1) and (2),

(2)The insurer's report will not significantly contribute to carrying out the purposes of Chapter 331. In a final rule published June 22, 1990 (55 FR 25606), the agency granted a class exemption to all companies that rent or lease fewer than 50,000 vehicles, because it believed that the largest companies' reports sufficiently represent the theft experience of rental and leasing companies. NHTSA concluded that smaller rental and leasing companies' reports do not significantly contribute to carrying out NHTSA's statutory obligations and that exempting such companies will relieve an unnecessary burden on them. As a result of the June 1990 final rule, the agency added Appendix C, consisting of an annually updated list of the self-insurers subject to part 544. Following the same approach as in Appendix A, NHTSA included, in Appendix C, each of the self-insurers subject to reporting instead of the self-insurers which are exempted. NHTSA updates Appendix C based primarily on information from *Automotive Fleet Magazine and Auto Rental News* . 2 2 Automotive Fleet Magazine and Auto Rental News are publications that provide information on the size of fleets and market share of rental and leasing companies. C. When a Listed Insurer Must File a Report Under part 544, as long as an insurer is listed, it must file reports on or before October 25 of each year. Thus, any insurer listed in the appendices must file a report before October 25, and by each succeeding October 25, absent an amendment removing the insurer's name from the appendices. II. Notice of Proposed Rulemaking 1. Insurers of Passenger Motor Vehicles On April 3, 2006, NHTSA published a notice of proposed rulemaking

(NPRM)to update the list of insurers in Appendices A, B, and, C required to file reports (71 FR 16541). Appendix A lists insurers that must report because each had 1 percent of the motor vehicle insurance premiums on a national basis. The list was last amended in a final rule published on July 25, 2005 (70 FR 42505). Based on the 2003 calendar year market share data from A.M. Best, NHTSA proposed to remove California State Auto Association from Appendix A. Each of the 18 insurers listed in Appendix A are required to file a report before October 25, 2006, setting forth the information required by Part 544 for each State in which it did business in the 2003 calendar year. As long as these 18 insurers remain listed, they are required to submit a report by each subsequent October 25 for the calendar year ending slightly less than 3 years before. Appendix B lists insurers required to report for particular States for calendar year 2003, because each insurer had a 10 percent or greater market share of motor vehicle premiums in those States. Based on the 2003 calendar year data for market shares from A.M. Best, we proposed to remove Nodak Mutual Group (North Dakota) and add Safety Group (Massachusetts) to Appendix B. The nine insurers listed in Appendix B are required to report on their calendar year 2003 activities in every State where they had a 10 percent or greater market share. These reports must be filed by October 25, 2006, and set forth the information required by part 544. As long as these nine insurers remain listed, they would be required to submit reports on or before each subsequent October 25 for the calendar year ending slightly less than 3 years before. 2. Rental and Leasing Companies Appendix C lists rental and leasing companies required to file reports. Based on information in *Automotive Fleet Magazine and Auto Rental News* for 2003, NHTSA proposed to remove Avis Rent-A-Car, Budget Rent-A-Car Corporation, Dollar Rent-A-Car Systems, Inc. and ANC Rental Corporation and add the Cendant Car Rental Group, 3 Dollar Thrifty Automotive Group 4 and Vanguard Car Rental USA. 5 Each of the 13 companies (including franchisees and licensees) listed in Appendix C are required to file reports for calendar year 2003 no later than October 25, 2006, and set forth the information required by part 544. As long as those 13 companies remain listed, they would be required to submit reports before each subsequent October 25 for the calendar year ending slightly less than 3 years before. 3 Cendant Car Rental acquired ownership of Avis and Budget Rent-a-Car in 2002. 4 Dollar Thrifty Automotive Group acquired ownership of Dollar Rent-a-Car Systems, Inc. and Thrifty, Inc., in 2001. 5 Vanguard Car Rental USA acquired ownership of ANC Rental Corporation in 2003. Public Comments on Final Determination Insurers of Passenger Motor Vehicles In response to the NPRM, the agency received one formal comment. In a letter dated April 27, 2006, Automotive Resources International/Automotive Rentals, Inc. (ARI), requested the agency to remove its name from the list of insurers required to meet the insurer reporting requirements. ARI informed the agency that it is not an insurer and does not allow self-insurance. ARI explained that it is a national long-term corporate fleet lessor/fleet management company, not affiliated in any way with an insurance company or carrier, and that its lessees are responsible for all insurance coverages on their leased vehicles. ARI further explained that while it is named as an additional insured/interest on its lessee's insurance policies, it does not keep records of these policies or become involved in theft claims because they are handled through the lessee's insurance company. Subsequent to the comment closing period, the agency was informed by five additional companies, the Donlen Corporation, GE Capital Fleet Services/GE Fleet Services, Lease Plan USA, Inc., PHH Vehicle Management Services/PHH Arval, and Wheels, Inc. that when they offer vehicles for lease, they also include as a condition of the lease agreement that the lessor provide its own motor vehicle insurance. Specifically, four of the five companies (Donlen Corporation, GE Capital Fleet Services/GE Fleet Services, Lease Plan USA, Inc., and Wheels, Inc.,) reported that they do not self-insure any of their vehicles. At NHTSA's request these companies submitted copies of their lease agreements showing that insurance was required as a condition of the lease. One company, PHH Vehicle Management Services/PHH Arval, reported that it does allow self-insurance but self-insures fewer than 50,000 vehicles in its fleet. Section 33112(b)(1) of Title 49 of the United States Code (U.S.C.) defines an insurer to include “a person (except a governmental authority) having a fleet of at least 20 motor vehicles that are used primarily for rental or lease and that are not covered by a theft insurance policy issued by an insurer of passenger motor vehicles”. 6 6 As previously noted, NHTSA has by regulation increased the exemption to 50,000 vehicles. Since all of these companies either require its lessees to provide the insurance for its vehicles, or do not self-insure 50,000 or more vehicles in its leasing fleet, none of them meet the criteria the agency uses to determine that an insurer should be included in Appendix C. Therefore, the agency determines that each of these six companies should be removed from Appendix C in the final rule. The agency received no comments in response to the NPRM for Appendices A and B. Accordingly, this final rule adopts the proposed changes to Appendix A and B. After reviewing the public comments and making the appropriate adjustment to Appendix C, NHTSA has determined that each of the 18 insurers listed in Appendix A, each of the nine insurers listed in Appendix B and each of 7 companies listed in Appendix C are required to submit an insurer report on its experience for calendar year 2003 as required by 49 CFR part 544. Submission of Theft Loss Report Passenger motor vehicle insurers listed in the appendices can forward their theft loss reports to the agency in several ways: a. *Mail:* Rosalind Proctor, Office of International Policy, Fuel Economy and Consumer Standards, NHTSA, NVS-131, 400 Seventh Street, SW., Washington, DC 20590; b. *E-Mail: rosalind.proctor@dot.gov;* or c. *Fax:*

(202)493-2290. Theft loss reports may also be submitted to the docket electronically by: d. Logging onto the Dockets Management System Web site at *http://dms.dot.gov.* Click on “ES Submit” or “Help” to obtain instructions for filing the document electronically. Regulatory Impacts 1. Costs and Other Impacts This notice has not been reviewed under Executive Order 12866, Regulatory Planning and Review. NHTSA has considered the impact of this final rule and determined that the action is not “significant” within the meaning of the Department of Transportation's regulatory policies and procedures. This final rule implements the agency's policy of ensuring that all insurance companies that are statutorily eligible for exemption from the insurer reporting requirements are in fact exempted from those requirements. Only those companies that are not statutorily eligible for an exemption are required to file reports. NHTSA does not believe that this rule, reflecting current data, affects the impacts described in the final regulatory evaluation prepared for the final rule establishing part 544 (52 FR 59; January 2, 1987). Accordingly, a separate regulatory evaluation has not been prepared for this rulemaking action. Using the Bureau of Labor Statistics Consumer Price Index for 2005 ( *see* *http://www.bls.gov/cpi* ), the cost estimates in the 1987 final regulatory evaluation were adjusted for inflation. The agency estimates that the cost of compliance is $97,650 for any insurer added to Appendix A, $39,060 for any insurer added to Appendix B, and $11,269 for any insurer added to Appendix C. In this final rule, the agency made no additional changes to Appendices A and B, and includes six fewer companies in Appendix C, as compared to the last list of insurers published in the April 3, 2006 NPRM. The agency estimates that the net effect of this final rule would be a cost savings of approximately $67,614 to insurers as a group. Interested persons may wish to examine the 1987 final regulatory evaluation. Copies of that evaluation were placed in Docket No. T86-01; Notice 2. Any interested person may obtain a copy of this evaluation by writing to NHTSA, Docket Section, Room 5109, 400 Seventh Street, SW., Washington, DC 20590, or by calling

(202)366-4949. 2. Paperwork Reduction Act The information collection requirements in this final rule were submitted 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 is assigned OMB Control Number 2127-0547 (“Insurer Reporting Requirements”) and approved for use through August 31, 2009, and the agency will seek to extend the approval afterwards. 3. Regulatory Flexibility Act The agency also considered the effects of this rulemaking under the Regulatory Flexibility Act

(RFA)(5 U.S.C. 601 *et seq.* ). I certify that this final rule will not have a significant economic impact on a substantial number of small entities. The rationale for the certification is that none of the companies listed on Appendices A, B, or C are construed to be a small entity within the definition of the RFA. “Small insurer” is defined, in part under 49 U.S.C. 33112, as any insurer whose premiums for all forms of motor vehicle insurance account for less than 1 percent of the total premiums for all forms of motor vehicle insurance issued by insurers within the United States, or any insurer whose premiums within any State, account for less than 10 percent of the total premiums for all forms of motor vehicle insurance issued by insurers within the State. This notice exempts all insurers meeting those criteria. Any insurer too large to meet those criteria is not a small entity. In addition, in this rulemaking, the agency exempts all “self insured rental and leasing companies” that have fleets of fewer than 50,000 vehicles. Any self-insured rental and leasing company too large to meet that criterion is not a small entity. 4. Federalism This action has been analyzed according to the principles and criteria contained in Executive Order 12612, and it has been determined that the final rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. 5. Environmental Impacts In accordance with the National Environmental Policy Act, NHTSA has considered the environmental impacts of this final rule and determined that it would not have a significant impact on the quality of the human environment. 6. Civil Justice Reform This final rule does not have any retroactive effect, and it does not preempt any State law, 49 U.S.C. 33117 provides that judicial review of this rule may be obtained pursuant to 49 U.S.C. 32909, and section 32909 does not require submission of a petition for reconsideration or other administrative proceedings before parties may file suit in court. 7. Regulation Identifier Number

(RIN)The Department of Transportation assigns a regulation identifier number

(RIN)to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading, at the beginning, of this document to find this action in the Unified Agenda. 8. Plain Language Executive Order 12866 requires each agency to write all rules in plain language. Application of the principles of plain language includes consideration of the following questions: • Have we organized the material to suit the public's needs? • Are the requirements in the proposal clearly stated? • Does the proposal contain technical language or jargon that is not clear? • Would a different format (grouping and order of sections, use of headings, paragraphing) make the rule easier to understand? • Would more (but shorter) sections be better? • Could we improve clarity by adding tables, lists, or diagrams? • What else could we do to make the proposal easier to understand? If you have any responses to these questions, you can forward them to me several ways: a. *Mail:* Rosalind Proctor, Office of International Policy, Fuel Economy and Consumer Standards, NHTSA, 400 Seventh Street, SW., Washington, DC 20590; b. *E-mail: rosalind.proctor@dot.gov;* or c. *Fax:*

(202)493-2290. List of Subjects in 49 CFR Part 544 Crime insurance, Insurance, Insurance companies, Motor vehicles, Reporting and recordkeeping requirements. In consideration of the foregoing, 49 CFR part 544 is amended as follows: PART 544—[AMENDED] 1. The authority citation for part 544 continues to read as follows: Authority: 49 U.S.C. 33112; delegation of authority at 49 CFR 1.50. 2. In § 544.5, paragraph (a), the second sentence is revised to read as follows: § 544.5 General requirements for reports.

(a)* * * This report shall contain the information required by § 544.6 of this part for the calendar year 3 years previous to the year in which the report is filed ( *e.g.* , the report due by October 25, 2006 will contain the required information for the 2003 calendar year). 3. Appendix A to part 544 is revised to read as follows: Appendix A—Insurers of Motor Vehicle Insurance Policies Subject to the Reporting Requirements in Each State in Which They Do Business Allstate Insurance Group American Family Insurance Group American International Group Auto-Owners Insurance Group CNA Insurance Companies Erie Insurance Group Berkshire Hathaway/GEICO Corporation Group Hartford Insurance Group Liberty Mutual Insurance Companies Metropolitan Life Auto & Home Group Mercury General Group Nationwide Group Progressive Group Safeco Insurance Companies State Farm Group Travelers PC Group USAA Group Farmers Insurance Group 4. Appendix B to part 544 is revised to read as follows: Appendix B—Issuers of Motor Vehicle Insurance Policies Subject to the Reporting Requirements Only in Designated States Alfa Insurance Group (Alabama) Arbella Mutual Insurance (Massachusetts) Auto Club (Michigan) Commerce Group, Inc. (Massachusetts) Kentucky Farm Bureau Group (Kentucky) New Jersey Manufacturers Group (New Jersey) Safety Group (Massachusetts) 1 1 Indicates a newly listed company, which must file a report beginning with the report due October 25, 2006. Southern Farm Bureau Group (Arkansas, Mississippi) Tennessee Farmers Companies (Tennessee) 5. Appendix C to part 544 is revised to read as follows: Appendix C—Motor Vehicle Rental and Leasing Companies (Including Licensees and Franchisees) Subject to the Reporting Requirements of Part 544 Cendant Car Rental Dollar Thrifty Automotive Group Enterprise Rent-A-Car Enterprise Fleet Services Hertz Rent-A-Car Division (subsidiary of The Hertz Corporation) U-Haul International, Inc. (Subsidiary of AMERCO) Vanguard Car Rental USA Issued on: August 29, 2006. Stephen R. Kratzke, Associate Administrator for Rulemaking. [FR Doc. E6-14633 Filed 9-1-06; 8:45 am] BILLING CODE 4910-59-P 71 171 Tuesday, September 5, 2006 Proposed Rules FEDERAL ELECTION COMMISSION 11 CFR Part 100 [Notice 2006-15] Exception for Certain “Grassroots Lobbying” Communications From the Definition of “Electioneering Communication” AGENCY: Federal Election Commission. ACTION: Notice of disposition of Petition for Rulemaking. SUMMARY: The Commission announces its disposition of a Petition for Rulemaking (“Petition”) filed on February 16, 2006, by the AFL-CIO, the Alliance for Justice, the Chamber of Commerce of the United States, the National Education Association, and OMB Watch. The Petition asks the Commission to revise its regulations by exempting from the definition of “electioneering communication” certain communications consisting of “grassroots lobbying.” The Commission has decided not to initiate a rulemaking in response to the Petition at this time. The Petition is available for inspection in the Commission's Public Records Office and on its Web site, *http://www.fec.gov/.* Further information is provided in the supplementary information that follows. FOR FURTHER INFORMATION CONTACT: Ms. Amy L. Rothstein, Acting Assistant General Counsel, or Mr. Ron B. Katwan, Attorney, 999 E Street, NW., Washington, DC 20463,

(202)694-1650 or

(800)424-9530. SUPPLMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002 (“BCRA”), Public Law 107-55, 116 Stat. 81 (2002), added provisions regarding “electioneering communications” to the Federal Election Campaign Act of 1971, as amended. *See* 2 U.S.C. 434(f)(3). Electioneering communications are television and radio communications that refer to a clearly identified candidate for Federal office, are publicly distributed within 60 days before a general election or 30 days before a primary election, and are targeted to the relevant electorate. *See* 2 U.S.C. 434(f)(3)(A)(i); 11 CFR 100.29(a). BCRA exempts certain communications from the definition of “electioneering communication,” 2 U.S.C. 434(f)(3)(B)(i) through (iii), and specifically authorizes the Commission to promulgate regulations exempting other communications as long as the exempted communications do not promote, support, attack or oppose (“PASO”) a Federal candidate, 2 U.S.C. 434(f)(3)(B)(iv), *citing* 2 U.S.C. 431(20)(A)(iii). Section 100.29(c) of the Commission's regulations contains the regulatory exemptions to the definition of “electioneering communication.” On February 16, 2006, the Commission received a Petition for Rulemaking (“Petition”) from the AFL-CIO, the Alliance for Justice, the Chamber of Commerce of the United States, the National Education Association, and OMB Watch (collectively, “Petitioners”). The Petitioners asked the Commission to revise 11 CFR 100.29(c) to exempt from the definition of “electioneering communication” certain “grassroots lobbying” communications that reflect all of the following six principles:

(1)“The ‘clearly identified federal candidate' is an incumbent public officeholder;”

(2)“The communication exclusively discusses a particular current legislative or executive branch matter;”

(3)“The communication either

(a)calls upon the candidate to take a particular position or action with respect to the matter in his or her incumbent capacity, or

(b)calls upon the general public to contact the candidate and urge the candidate to do so;”

(4)“If the communication discusses the candidate's position or record on the matter, it does so only by quoting the candidate's own public statements or reciting the candidate's official action, such as a vote, on the matter;”

(5)“The communication does not refer to an election, the candidate's candidacy, or a political party;” and

(6)“The communication does not refer to the candidate's character, qualifications or fitness for office.” On March 16, 2006, the Commission published a Notice of Availability (“NOA”) seeking comment on whether to initiate a rulemaking on this proposed exception to the definition of “electioneering communication.” *Notice of Availability on Rulemaking Petition: Exception for Certain “Grassroots Lobbying” Communications From the Definition of “Electioneering Communication,”* 71 FR 13557 (Mar. 16, 2006). The Commission received nine timely comments and two late comments in response to the NOA. In addition to these comments, the Commission received 180 form letter comments. Most of the commenters supported the Petition primarily on the grounds that the current electioneering communication rules limit the ability of organizations to run ads whose purpose is not to influence Federal elections, but to support or defeat legislation at the most critical time ( *i.e.* , when the legislation is before Congress, regardless of the election cycle). These commenters argued that such “grassroots lobbying” ads are entitled to First Amendment protection and should therefore be exempt from the electioneering communication rules. However, one group of commenters opposed the Petition, arguing that the Commission had already considered this question in the 2002 rulemaking that adopted the current electioneering communication rules and had concluded correctly that it lacked statutory authority to promulgate a “grassroots lobbying” exemption. 1 These commenters further asserted that “there are no changed circumstances that warrant reconsideration of that decision.” Copies of the comments are available on the Commission's Web site at *http://www.fec.gov/law/law_rulemakings.shtml#lobbying.* 1 The Commission considered several proposals for “grassroots lobbying” exemptions in the 2002 rulemaking but did not adopt any of them. *See Notice of Proposed Rulemaking on Electioneering Communications* , 67 FR 51131, 51136, 51145 (Aug. 7, 2002); *Final Rules on Electioneering Communications* , 67 FR 65190, 65201 (Oct. 23, 2002). On August 29, 2006, the Commission voted to decline to initiate a rulemaking at this time on the proposed exception for certain “grassroots lobbying” communications from the definition of “electioneering communication,” given the Commission's other administrative priorities. The Commission recognized, however, that it has the statutory authority to create exemptions to the electioneering communication rules (provided the exemptions do not permit PASO communications) and that it may consider initiating a rulemaking on this subject in the future. Initiating a rulemaking at this time would not be an efficient or effective use of the Commission's resources. *See* 11 CFR 200.5(e). The Commission is currently defending the constitutionality of BCRA's electioneering communication provisions against two as-applied challenges to the statute involving communications that the plaintiffs claim are “grassroots lobbying” communications. *See Wisconsin Right to Life* v. *FEC,* Civ. No. 04-1260 (D.D.C.); *Christian Civic League of Maine* v. *FEC,* Civ. No. 06-614 (D.D.C.). Even if the Commission were to grant the Petitioners' request to begin a rulemaking to create a “grassroots lobbying” exemption, the plaintiffs in these cases may well continue to pursue litigation or to initiate new litigation, particularly if the Commission were to craft an exemption narrower than that contemplated by the plaintiffs. Moreover, any eventual court decisions in these lawsuits may provide the Commission with guidance on whether and how the Commission should exercise its discretion in this area. Judicial guidance may well necessitate a reevaluation of any rules the Commission were to propose now. Therefore, in light of the pending as-applied challenges to the constitutionality of the electioneering communication provisions, the Commission believes that initiating a rulemaking at this time would not be an effective use of its resources or an appropriate way to proceed. Dated: August 29, 2006. Michael E. Toner, Chairman, Federal Election Commission. [FR Doc. E6-14638 Filed 9-1-06; 8:45 am] BILLING CODE 6715-01-P SMALL BUSINESS ADMINISTRATION 13 CFR Part 120 RIN 3245-AF49 Business Loan Program; Lender Examination and Review Fees AGENCY: U.S. Small Business Administration. ACTION: Proposed rule. SUMMARY: This proposed rule implements a recent amendment to the Small Business Act authorizing the Small Business Administration

(SBA)to assess fees to lenders participating in SBA's 7(a) loan guarantee program (Lenders) to cover the costs of examinations, reviews, and other Lender oversight activities. The proposed rule describes the methodology for fee assessment. Under the proposed rule, Lenders would pay the actual costs to SBA of the on-site examinations and reviews, and would be allocated off-site review/monitoring costs based on each Lender's proportionate share of loan dollars that SBA has guaranteed in the SBA portfolio. The proposed rule also describes the billing and payment processes. DATES: Comments must be received on or before October 5, 2006. ADDRESSES: You may submit comments, identified by [RIN number 3245-AF49], by any of the following methods: • Federal eRulemaking Portal: *http://www.regulations.gov.* Follow the instructions for submitting comments. • Agency Web Site: *proprule@sba.gov.* Follow the instructions for submitting comments. • E-mail: *lender.oversight@sba.gov.* • Fax:

(202)205-6831. • Mail: Bryan Hooper, Associate Administrator for Lender Oversight, Small Business Administration, 409 3rd Street, SW., 8th floor, Washington, DC 20416. • Hand Delivery/Courier: 409 3rd Street, SW., 8th floor, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: John White, Deputy Associate Administrator for Lender Oversight,

(202)205-6345, *john.white@sba.gov;* or Paul Bishop, Financial Analyst, Office of Lender Oversight,

(202)205-7516, *paul.bishop@sba.gov.* SUPPLEMENTARY INFORMATION: I. Background Section 7(a) of the Small Business Act, 15 U.S.C. 636(a), authorizes SBA to guarantee loans made by Lenders to eligible small businesses. Currently, there are over 5,000 Lenders authorized to make such SBA guaranteed loans. SBA conducts off-site reviews/monitoring and on-site exams/reviews of these Lenders to ensure they are processing loans in accordance with prescribed standards, and to minimize losses. Section 5(b)(14) of the Small Business Act (15 U.S.C. 634(b)(14)), authorizes SBA to require these Lenders to pay fees to cover “the costs of [the] examinations, reviews, and other Lender oversight activities.” Congress granted SBA this new fee authority under section 131 of Division K of Public Law 108-447, enacted December 8, 2004. Examination and review costs primarily consist of contractor charges for assistance with

(i)on-site examinations;

(ii)on-site reviews; and

(iii)off-site reviews/monitoring activities. SBA's contractors for on-site exams and reviews bill SBA separately for each examination/review as it is conducted. The contractor supporting off-site reviews/monitoring generally bills SBA on a quarterly basis to cover its contract price. A discussion of the proposal and a section-by-section analysis follows. II. Proposal A. Review and Examination SBA conducts the following examinations and reviews of Lenders:

(i)Off-site reviews/monitoring;

(ii)on-site examinations; and

(iii)on-site reviews. Under the proposed rule, the fee that SBA would charge a Lender would generally depend on the reviews/examinations that SBA conducts for that Lender. B. All Lenders All Lenders receive a quarterly off-site review. The off-site review is conducted using SBA's Loan and Lender Monitoring System (L/LMS). This L/LMS review is the primary method of monitoring all of SBA's approximately 5,200 Lenders. For lower volume Lenders, it also may be SBA's sole method of reviewing them. L/LMS is also used in conjunction with SBA's on-site exams/reviews, for purposes of planning and prioritization of exams/reviews. Under the proposed rule, SBA's cost of off-site review/monitoring (primarily the L/LMS contract cost) would be recovered through fees charged to all Lenders. The cost would be allocated according to each Lender's respective outstanding SBA guarantees (guaranteed dollars) relative to the total guaranteed dollars SBA has outstanding in its 7(a) loan portfolio. Both Lenders' outstanding SBA guarantees and the total guaranteed SBA dollars would be calculated using September 30 portfolio figures. Guaranteed dollars outstanding includes guarantees of both loans held by the Lender and loans sold into the secondary market, securitized, or for which a Lender has sold a participation interest. It also includes loans that have been purchased by SBA but have not yet been charged off. The annual cost of the L/LMS reviews under SBA's current contract is about $82 per $1 million in outstanding guarantees. SBA proposes to use this ratio in calculating the Lender's fee for off-site monitoring/reviews. Should SBA's costs under the contract change, the ratio would change accordingly. SBA does not plan at this time to recover its own costs related to the conduct of the off-site review, including the salary and expenses of SBA employees involved in the review. Under the current formula, approximately 3,400 Lenders that have less than $1 million in outstanding SBA loan guarantees would incur an average annual fee of less than $25. The approximately 1,100 Lenders with between $1 million and $4 million in outstanding SBA loan guarantees would incur an annual off-site review fee ranging from $82 to $327. The approximately 300 Lenders with between $4 million and $10 million in outstanding SBA loan guarantees would pay an estimated annual off-site review fee ranging from $330 to $816. Finally, the remaining 380 Lenders with outstanding SBA loan guarantees of greater than $10 million would pay a median of $1,848 per year for off-site reviews/monitoring. Each Lender's fee assessment will include a description of how the fee was calculated. This off-site review cost could, over time, serve to maintain on-site examination/review costs at a minimum by allowing SBA to focus its on-site reviews and examinations on those Lenders whose portfolios or operational performance present SBA with the most risk. SBA may waive or provide an exemption for the fees due from very small volume Lenders when the administrative costs of collecting the fee from a Lender are greater than the amount of the fee itself (i.e. when it is not cost effective to collect such fees). SBA is in the process of determining at which dollar amount it would not be cost effective for SBA to bill and collect. SBA is also in the process of estimating the total amount of fees in case SBA determines to implement the waiver/exemption. SBA is considering other methodologies for determining the appropriate basis for waiver/exemption. Should SBA decide to grant fee waivers/exemptions, such action will not affect the fee charged to other Lenders, and any shortfall will be made up with SBA's available appropriations. C. SBA Supervised Lenders In addition to quarterly off-site reviews, SBA also performs on-site safety and soundness examinations of SBA's Small Business Lending Companies (“SBLCs”) and large Non-Federally Regulated Lenders (“NFRLs”) (together “SBA Supervised Lenders”). Each SBLC is usually examined on a 12 to 24 month cycle. NFRLs may also be examined on a 12 to 24 month cycle, depending upon such factors as size, level of SBA lending activity, and results of previous examinations. Under the proposed rule, each SBA Supervised Lender's fees would, generally, include:

(i)The annual L/LMS charge and

(ii)the on-site examination cost (if an exam was performed that fiscal year). The examination fee component would be based primarily on actual hourly charges of, and travel expenses incurred by, the contractor (currently a Federal financial institution regulator). The safety and soundness examination that these Lenders receive is similar in scope to safety and soundness examinations conducted by other Federal regulators. However, the cost of an SBA examination is reasonable in relation to the assessments for examinations by other Federal regulators. For example, the Comptroller of the Currency's current annual assessment on a bank with $1 billion in assets is $219,580, and the Office of Thrift Supervision assesses the same size institution $204,096; whereas the annual cost for an SBA-Supervised Lender on a 24 month exam cycle with $1 billion in outstanding loan balances (with 71% of that portfolio guaranteed by SBA) would average $139,220. This amount is calculated as follows: The biennial safety and soundness examination for a Lender with $1 billion in assets under the current contract typically costs $162,000, for an average annual cost of $81,000. In addition, the L/LMS fee for the same sized SBLC would be $58,220, for a total annual cost to the Lender of $139,220. D. Non-SBA Supervised Lenders In addition to quarterly off-site reviews/monitoring, SBA plans to conduct, on a 12 to 24 month review cycle, on-site reviews of the 7(a) operations of Lenders with $10 million or more in outstanding SBA loan guarantees. On-site reviews will not be conducted for the SBLCs and NFRLs that receive on-site examinations. On-site reviews are performed with the assistance of a financial services firm under contract with SBA. Under the proposed rule, fees for the Lenders in this category would generally include:

(i)The annual L/LMS charge and

(ii)the on-site review fee (if a review was performed that fiscal year). On-site review costs of a Lender's 7(a) operations currently range from $20,000 to $24,000. Factors that may affect where a Lender falls in the estimated range include, but are not limited to, the complexity of a Lender's 7(a) operations, rating trends, guaranteed dollars outstanding, and results of previous examinations. The timing of on-site reviews may also depend upon SBA's ability to coordinate reviews of Lenders that will minimize travel expenses and achieve economies of scale, thus reducing Lenders' review fees. In addition to Lenders with $10 million or more in SBA in 7(a) loan guarantees, SBA may perform on-site reviews of Lenders with loan guarantees of as little as $4 million in situations where SBA's off-site monitoring indicate such a Lender is a very high risk to SBA. E. SBA's Other Lender Oversight Expenses Under the proposed rule, SBA has the authority to recover its other expenses in carrying out Lender oversight activities (for example, the salaries and travel expenses of SBA employees and equipment expenses that are related to carrying out Lender oversight activities). However, SBA does not plan at this time to charge Lenders for these costs. Should SBA decide to assess a fee for these expenses in the future, each Lender's fee would be calculated by multiplying the total annual cost of SBA's oversight operational expenses by the Lender's dollar share of the total outstanding SBA guarantees. SBA will notify Lenders if it proposes to recover expenses resulting from its other Lender oversight activities. F. Assessment Methodology SBA's proposed assessment formula is based primarily on allocating the actual cost of a particular Lender's examination and review to that Lender. This is feasible because SBA's on-site examination and review costs, unlike those of most of the other financial institution regulators, primarily consist of contractor assistance billed on a Lender-specific basis. For those costs that are not incurred on a Lender-by-Lender basis (for example, off-site monitoring/reviews), SBA proposes a risk-based formula based on a Lender's outstanding guaranteed dollars relative to that of SBA's outstanding guaranteed portfolio, as of September 30. The guaranteed dollar methodology ties a Lender's charge to that of SBA's risk of dollar loss. SBA considered allocating these costs based on the number of loans that a Lender has outstanding. The loan number-based methodology, however, fails to consider varying guarantee percentages in SBA's loan programs (for example SBA Express at 50% versus regular 7(a) lending at 75% or more) and diversity of loan sizes. It also fails to consider that SBA's dollar loss is directly related to the size of the loans rather than the number of loans; the loss from a large loan will greatly exceed the loss from a small loan. It, therefore, would result in a less equitable distribution of the costs. Finally, the loan-based methodology may be contrary to SBA's goal to assist as many of America's small businesses as are eligible for agency assistance. SBA also considered the fee assessment methodologies of the various federal financial institution regulators. The federal financial institution regulators' methodologies are generally complex. There are approximately three common factors incorporated into the allocation formulas. The factors are:

(i)An institution's assets;

(ii)an institution's exam rating; and

(iii)economies of scale. These factors were considered and incorporated into SBA's proposed fee assessment methodology to determine the proposed on-site review charge. The off-site monitoring/review cost allocation formula is also based on outstanding guaranteed dollars of the institution's SBA loan assets. Exam rating trends are indirectly incorporated into the methodology to the extent that better ratings could translate to less frequent on-site examinations and reviews. Overall, SBA's proposed cost allocation methodology would result in fees that are reasonable relative to federal financial institution regulator assessments. It provides for equitable distribution of SBA costs. Finally, it is consistent with legislative guidance to tie fees to the “size of the lender's portfolio being reviewed, and the time necessary to review the portfolios.” Sen. Rept. 108-124 pg. 12 (Aug. 26, 2003). III. Section-by-Section Analysis *Section 120.454—PLP Performance Review.* To eliminate redundancy, SBA proposes to strike the second sentence of this provision, which authorizes SBA to charge a PLP Lender fee to cover the costs of the PLP performance review. Subpart I—Lender Oversight. SBA would add a new subpart for lender oversight, which would initially consist of proposed section 120.1070 governing lender oversight fees. *Section 120.1070—Lender Oversight Fees.* SBA proposes to add this new section to part 120 of Title 13 CFR to implement the fee authority granted to SBA. *Section 120.1070(a)—Fee Components.* This provision sets forth the components that may be included in the total fee, including charges to cover the costs of:

(1)On-site safety and soundness examinations conducted for SBLCs and NFRLs;

(2)on-site reviews conducted for other Lenders;

(3)off-site reviews/monitoring conducted for all Lenders; and

(4)SBA's other Lender oversight expenses, as assessed. The fee would be based on SBA's costs. The amount of each Lender's fee for the on-site examination or review would include the actual expenses incurred for that Lender's on-site review or examination. In the case of off-site reviews/monitoring, SBA would allocate the charge based on the Lender's share of SBA guaranteed dollars outstanding. Finally, if SBA later decides to include charges for other lender oversight activities, those costs would be allocated similar to the formula for allocating off-site review/monitoring costs. *Section 120.1070(b)—Billing Process.* This provision describes the process for billing the Lenders for the fees. For the on-site examinations and reviews, SBA would bill the Lender following completion of the review. SBA would bill the Lender for the charges for the off-site reviews and SBA's other Lender oversight expenses (the latter if assessed) on an annual basis. The bill will include the approved payment method(s). The payment due date will be no less than 30 calendar days from the bill date. *Section 120.1070(c)—Delinquent Payment and Late-Payment Charges.* This provision provides that any payment that is not received by the due date specified in the bill would be considered delinquent. It also provides that SBA may charge interest, penalties and other charges on delinquent payments, as provided by applicable law, and that SBA may waive the interest charge if circumstances warrant. IV. Comments The form and content of the proposal should not be viewed as exhaustive. SBA seeks comments on all aspects of the proposal and suggestions as to any modifications. For example, SBA would be interested in comments concerning the methodology used to distribute costs to Lenders. However, SBA will rely on its own expertise in making final determinations for the final rule. V. Compliance With Executive Orders 12866, 12988, and 13132, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork Reduction Act (44 U.S.C., Ch. 35) Executive Order 12866 The Office of Management and Budget has determined that this rule constitutes a significant regulatory action under Executive Order 12866 thus requiring a Regulatory Impact Analysis, as set forth below. A. Regulatory Objective As the SBA moves to more streamlined lending processes and delegates more authority to its Lenders, the need for better and more comprehensive Lender oversight is essential. With the integration of L/LMS, the SBA has an early warning system that allows SBA to monitor its Lenders on a regular basis. Off-site reviews/monitoring and on-site examinations or reviews allow SBA to determine which Lenders pose the most risk to the SBA from both an exposure and credit risk perspective. By identifying Lenders with unacceptable levels of risk, the SBA can work with the Lenders to limit the risk. This proposed rule implements a recent amendment to the Small Business Act authorizing SBA to require 7(a) Lenders to pay fees to cover the costs of examinations or reviews and other Lender oversight activities. SBA believes that the methodology for charging fees to Lenders, which is based on direct costs of individual Lender examination or review expenses and the allocation of off-site review expenses by each Lender's share of the guaranteed dollars in the entire outstanding SBA portfolio, is equitable and reasonable. B. Baseline Costs SBA currently performs examinations and reviews for all 7(a) lenders. This proposal does not modify the current examination and review scope. Rather, it implements the recent amendment to the Small Business Act authorizing SBA to assess lenders fees to cover the costs of those examinations or reviews. Examination and review costs primarily consist of contractor charges for assistance with

(i)on-site examinations;

(ii)on-site reviews; and

(iii)off-site reviews/monitoring activities. SBA's contractors for on-site exams and reviews bill SBA separately for each examination/review as it is conducted. The total annual cost of contractor on-site examinations and reviews is $4,915,000. The contractor for off-site reviews/monitoring generally bills SBA one flat fee for the year to cover the reviews/monitoring of all Lenders. The total annual cost for off-site reviews/monitoring is approximately $2,604,000; the apportionment of these costs at the Lender level have been discussed above in the “Supplemental Information, Section II Proposal.” C. Potential Benefits and Costs The costs to Lenders associated with SBA's on-site and off-site reviews and monitoring are described elsewhere in this notice. The benefit for Lenders is that it allocates direct costs of on-site examinations or reviews to those Lenders for whom those costs are incurred. Indirect costs of off-site monitoring will be allocated according to each Lender's participation level as measured by SBA guaranteed dollars, so that the costs will be proportionate to the benefits Lenders derive from participating in the 7(a) program. In addition, Lenders with the highest amount of SBA guaranteed dollars represent the most risk to SBA and require the greatest level of off-site monitoring; therefore, apportioning the monitoring costs in relation to the amount of SBA guaranteed dollars is more equitable to smaller or new Lenders that represent proportionately less risk to SBA. The 92% of 7(a) Lenders with under $10 million in outstanding SBA guarantees benefit by the off-site review process. Most of these Lenders will be subject to off-site reviews instead of on-site reviews, which will eliminate space and staff costs associated with SBA's on-site review process. Payment of fees proposed in this rule will allow SBA to maintain the off-site review process for less active lenders while allocating the higher cost of on-site reviews and examinations to those active lenders that represent the most risk to SBA and for whom the expense is directly incurred. The SBA and lenders will incur additional administrative costs related to the billing, collection, and payment of the fees. These administrative costs are limited to accounting input for SBA's bill and receipt system and writing a check by the lender. They are deemed to be minimal. Besides allocating its review and monitoring costs to its Lenders, SBA will benefit through the relative ease of administering the assessment process. SBA's additional costs would only consist of new expenses incurred in collecting the fees. SBA anticipates that these new expenses would be minimal. D. Alternatives (Cost/Benefits Estimated) An alternative off-site review/monitoring cost allocation plan was considered, based on the number of loans outstanding for each respective Lender. A significant portion of the cost of analytics used in the L/LMS is that of obtaining credit scores on borrowers with outstanding SBA guaranteed loans to assess the credit risk of the Lender's 7(a) loan portfolio. The benefit of this scheme is that it charges each Lender based on the credit scores obtained for their SBA portfolio. We have determined that this methodology is contrary to the SBA's mission and would not be well related to risk. Our mission is to provide capital access to as many small business concerns as possible within the authorized funding level. Lending partners that reach out to very small businesses and startup businesses should not be charged the same off-site monitoring fee for their small loan as another Lender with a very large loan. The loan number based methodology also fails to consider varying guarantee percentages in SBA's loan programs (for example SBA Express at 50% versus regular 7(a) lending at 75%). Risk considered is the dollar risk of defaulted guaranteed balances. Therefore, a scheme that assesses fees directly proportionate to the guaranteed balances is the most equitable. Executive Order 12988 This proposed action meets applicable standards set forth in §§ 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. This rule would not have retroactive or pre-emptive effect. Executive Order 13132 This proposed rule would not have substantial direct effects on the States, on the relationship between the Federal government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, for the purposes of Executive Order 13132, SBA has determined that this proposed rule has no federalism implications warranting preparation of a federalism assessment. Regulatory Flexibility Act When an agency issues a rulemaking proposal, the Regulatory Flexibility Act (RF), 5 U.S.C. 601-612, requires the agency to “prepare and make available for public comment an initial regulatory flexibility analysis” which will “describe the impact of the proposed rule on small entities.” 5 U.S.C. 603(a). Section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the proposed rulemaking is not expected to have a significant economic impact on a substantial number of small entities. Although this rulemaking may affect a substantial number of small entities, for the reasons stated below, SBA does not believe that this proposal will have a significant economic impact on a substantial number of small entities. This proposed rule implements Small Business Act 5(b)(14), which authorizes SBA to require 7(a) Lenders to pay examination and review fees. These fees are to be available to fund the costs of examinations, reviews, and other Lender oversight activities. The proposed would apply to all 7(a) lenders with outstanding SBA guaranteed loan balances. Approximately 5,200 lenders are currently participating in the 7(a) program, of which 11 are active SBLC Lenders. SBA has determined that SBLCs are classified under the size standard for NAICS 522298. Three of the 11 active SBLCs are below the $6.5 million in average annual receipts and are deemed small business concerns. Nearly all of the remaining 7(a) Lenders are covered under NAICS 522110 for commercial banks and other depository financial institutions. About 3,000 of the Lenders in this classification have less than $165 million in assets and are deemed small business concerns. The proposed rule would not have a significant economic impact on a substantial number of the 3,000 Lenders covered under NAICS 522110. Most of these Lenders have very small SBA portfolios and would only be subject to fees for the off-site reviews/monitoring. The annual fee for 98% percent of these lenders would be less than $945, the cost of a one year subscription to the “American Banker” magazine. The estimated annual fee for 2,068 of these small Lenders would be less than $50. SBA may waive the fees when it is not cost-effective to bill and collect. SBA is in the process of determining at which dollar amount it would not be cost effective for SBA to bill and collect. That determination may be revised periodically to reflect changes in SBA's costs. Another 443 would be assessed annual fees of less than $100. For 469 Lenders, the annual fee would be between $100 and $1,000. The largest of the approximately 51 remaining Lenders classified as small business concerns has over $100 million in outstanding SBA guarantees. The estimated annualized fee for this Lender, which would cover the cost of the bi-annual on-site review plus annual off-site monitoring cost, would be $21,440. The estimated annualized fee of the on-site exam plus the annual off-site monitoring cost fee for the three SBLCs classified as small business concerns would range from $26,034 to $40,302. Moreover, since SBA would calculate and bill for the fee, there would be virtually no recordkeeping or other compliance requirements of the rule. There are also no relevant Federal rules governing fees for the 7(a) program which may duplicate, overlap or conflict with the Proposed Rule. Accordingly, the Administrator of SBA hereby certifies to the Chief Counsel of Advocacy that this proposed rule will not have a significant economic impact on a substantial number of small entities. Paperwork Reduction Act SBA has determined that this proposed rule does not impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. Chapter 35. List of Subjects in 13 CFR Part 120 Loan programs—business, Small businesses. For the reasons discussed in the preamble, SBA proposes to amend 13 CFR part 120 to read as follows: PART 120—BUSINESS LOANS 1. The authority citation for part 120 is revised to read as follows: Authority: 15 U.S.C. 634(b)(6), 634(b)(7), 634(b)(14), 633(b)(3), 636(a) and (h), 650, and 696(3) and 697(a)(2). 2. Revise § 120.454 to read as follows: § 120.454 PLP performance review. SBA may review the performance of a PLP Lender. 3. Add a new Subpart I to read as follows: Subpart I—Lender Oversight § 120.1070 Lender Oversight Fees. Lenders are required to pay to SBA fees to cover costs of examinations, reviews, and other Lender oversight activities.

(a)*Fee components:* The fees may cover the following:

(1)*On-Site Examinations.* The costs of conducting on-site safety and soundness examinations of an SBA-Supervised Lender, including any expenses that are incurred in relation to the examination. For the purposes of this paragraph, the term “SBA-Supervised Lender” means a Small Business Lending Company or a Non-Federally Regulated Lender.

(2)*On-Site Reviews.* The costs of conducting an on-site review of a Lender, including any expenses that are incurred in relation to the review.

(3)*Off-Site Reviews/Monitoring.* The costs of conducting off-site reviews/monitoring of a Lender, including any expenses that are incurred in relation to the review/monitoring activities. SBA will assess this charge based on each Lender's portion of the total dollar amount of SBA guarantees in SBA's portfolio.

(4)*Other Lender Oversight Activities.* The costs of additional expenses that SBA incurs in carrying out Lender oversight activities (for example, the salaries and travel expenses of SBA employees and equipment expenses that are directly related to carrying out Lender oversight activities). SBA will assess this charge based on each Lender's portion of the total dollar amount of SBA guarantees in SBA's portfolio.

(b)*Billing Process.* For the on-site examinations or reviews conducted under paragraphs (a)(1) and (a)(2) of this section, SBA will bill each Lender for the amount owed following completion of the examination or review. For the off-site reviews/monitoring conducted under paragraph (a)(3) of this section and the other Lender oversight expenses incurred under paragraph (a)(4) of this section, SBA will bill each Lender for the amount owed on an annual basis. SBA will state in the bill the date by which payment is due SBA and the approved payment method(s). The payment due date will be no less than 30 calendar days from the bill date.

(c)*Delinquent Payment and Late-Payment Charges.* Payments that are not received by the due date specified in the bill shall be considered delinquent. SBA will charge interest, and other applicable charges and penalties, on delinquent payments, as authorized by 31 U.S.C. 3717. SBA may waive or abate the collection of interest, charges and/or penalties if circumstances warrant. In addition, a Lender's failure to pay any of the fee components described in this section, or to pay interest, charges and penalties that have been charged, may result in a decision to suspend or revoke a participant's eligibility under § 120.415, or to limit a participant's delegated authority under other provisions of this part. Dated: August 24, 2006. Steven C. Preston, Administrator. [FR Doc. 06-7399 Filed 9-1-06; 8:45 am]

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U.S. Code