Q: Penalty 1 – Which violations of the Act can result in a mandatory civil money penalty?
A: A pattern or practice of violations of any of the following requirements of the Act and its implementing Regulation triggers a mandatory civil money penalty:
• Purchase of flood insurance where available (42 U.S.C. 4012a(b));
• Escrow of flood insurance premiums (42 U.S.C. 4012a(d));
• Failure to provide force placement notice or purchase force-placed flood insurance coverage, as appropriate (42 U.S.C. 4012a(e));
• Notice of special flood hazards and the availability of Federal disaster relief assistance (42 U.S.C. 4104a(a)); and
• Notice of servicer and any change of servicer (42 U.S.C. 4104a(b)).
The Act provides that any regulated lending institution found to have a pattern or practice of the violations “shall be assessed a civil penalty” by its Federal supervisory agency in an amount not to exceed $2,000 per violation (42 U.S.C. 4012a(f)(5)). There is no ceiling on the total penalty amount that a Federal supervisory agency can assess for a pattern or practice of violations. Each Agency adjusts the limit pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note). As required by the Act, the penalties must be paid into the National Flood Mitigation Fund.