Posts filed under ‘Legal Watch’

What Rights Does Your Pregnant Employee Have?

The way my father explained it to me, people have been getting pregnant for quite some time.  In addition, since 1978, federal law has banned discrimination in the workplace on the basis of pregnancy.  So you may find it odd that pregnancy is a hot topic in legal circles these days.  However, recent developments have brought the issue of pregnancy discrimination to the forefront of HR law.

First, the Supreme Court has decided to review a case next term, Young v. United Parcel Service, in which it will clarify what accommodations, if any, must be provided to a pregnant employee.  Not coincidentally, the EEOC recently released an updated guidance on this issue for the first time in more than two decades.

The issues involved are not as clear cut as you might think.  First, let’s start with the basics.  We all should know that you can’t discriminate against someone just because she is pregnant.  The Pregnancy Discrimination Act provides that pregnant women “shall be treated the same for all employment purposes. . .as other persons.”  It seems simple enough, but the case the Supreme Court is going to hear involved a driver whose job required her to lift up to 70 lbs.  The company’s policy excused drivers from this requirement if they were disabled or if they lost their license, but not if they were pregnant.  The company argued that it was required to treat her equally with all other employees and it would not be doing that if it excused her from the weight restrictions just because she was pregnant.

When I first read this decision I wondered why she couldn’t be treated as disabled under the ADA.  But the Fourth Circuit, which heard the case being decided by the Supreme Court, ruled that the ADA doesn’t apply to pregnant women.  As a result, the Fourth Circuit ruled that the company acted legally despite the fact that her request to lift lighter packages could have been easily accommodated.

Undoubtedly with an eye toward weighing in on the Supreme Court’s decision, the EEOC’s recently updated pregnancy guidance argues that there may be circumstances in which pregnant women are protected under the ADA.  As I like to say, this is one of those cases that are going to be worth keeping an eye on.  With my usual caveat that I am not an HR attorney but I like to play one occasionally writing this blog, this is one area where it seems a bit of common sense goes an awfully long way.  UPS has provided us a great case to consider, but had it not been so stubborn in adhering to its policy, an employee could easily have been accommodated and millions of dollars in legal fees could have been avoided.

July 22, 2014 at 8:31 am Leave a comment

UPDATED: Busy day in DC..sort of

July 16, 2014 at 8:55 am Leave a comment Edit

WARNING: The following blog is predicated on the assumption and\or delusion that Congress has both the ability and inclination to not just talk about the nation’s challenges but to do something about them

Good morning-Yesterday was a busy day in the public policy arena. Here is a quick review of some of the highlights

Credit Union Reg Relief TestimonyDouglas A Fecher, CEO of Wright-Patt Credit Union, delivered testimony on behalf of CUNA before a House Financial Services Sub Committee. The testimony highlighted an increasingly long list of needed reforms-ranging from putting the brakes on the Justice Department’s “Operation Choke Point” before it chokes off legitimate business activity, to forcing NCUA to scale back some of its proposed RBC asset weighting. CUNA estimates that, since 2008, credit unions have been subjected to 180 regulatory changes from 15 different agencies. The testimony is available here: http://financialservices.house.gov/uploadedfiles/hhrg-113-ba15-wstate-dfecher-20140715.pdf

Warren is must see T.V. Even though I disagree with about 90 percent of what she has to say, Elizabeth Warren, the Birth-Mother of the CFPB and the current Senator from Massachusetts is good for America if only because she is one of the few politicians willing to publicly say how little is being done to prevent Too-Big-To-Fail banks from failing again at taxpayer expense. In this increasingly exasperated exchange with Fed Chairman Yellen Warren points out that so called “living wills,” which are  intended to provide for blueprints for the  orderly liquidation of the Behemoth banks, aren’t worth the paper they are printed on if the Fed doesn’t force institutions to make the changes necessary to allow for orderly liquidation. Yellen suggests that the Fed role in the process is merely advisory.  http://www.huffingtonpost.com/2014/07/15/too-big-to-fail_n_5588558.html

The Feds Outlook Chairman Yellen’s written testimony before Congress didn’t break much new ground. She did indicate that it remains on track to stop the “twist” bond buying program. In addition, even though the economy is improving she still sees enough slack in it to keep from raising interest rates. The WSJ is reporting that she “hedged” on interest rates but every Chairman hedges on interest rates. http://www.federalreserve.gov/newsevents/testimony/yellen20140715a.htm

Senator George D. Maziarz Calls it quitsThe long serving Western New York Republican’s departure means that there are now  four open seats in the State Senate. Republicans have to protect these seats and gain three in order to keep Senate Democrats from taking control of the Senate now that the Independent Democratic Caucus is backing the democrats to lead the chamber. http://www.buffalonews.com/city-region/all-niagara-county/george-maziarz-on-federal-probe-i-have-nothing-to-hide-20140713

On Mortgage meltdowns and prayers NY is slated to receive $92,000,000.00 from the Justice Department’s 7 billion settlement with Citigroup over its shoddy underwriting practices for Mortgage Backed Securities but what really caught my eye was this quote from a Citi trader cited in the settlement papers : The trader stated that Citi should pray and explained that he“… would not be surprised if half of these loans went down. There are a lot of loans that have unreasonable incomes, values below the original appraisals (CLTV would be >100), etc. It’s amazing that some of these loans were closed at all.” http://www.justice.gov/iso/opa/resources/558201471413645397758.pdf

 

July 16, 2014 at 9:23 am Leave a comment

Busy day in DC..sort of

WARNING: The following blog is predicated on the assumption and\or delusion that Congress has both the ability and inclination to not just talk about the nation’s challenges but to do something about them

Good morning-Yesterday was a busy day in the public policy arena. Here is a quick review of some of the highlights

Credit Union Reg Relief TestimonyDouglas A Fecher, CEO of Wright-Patt Credit Union, delivered testimony on behalf of CUNA before a House Financial Services Sub Committee. The testimony highlighted an increasingly long list of needed reforms-ranging from putting the brakes on the Justice Department’s “Operation Choke Point” before it chokes off legitimate business activity, to forcing NCUA to scale back some of its proposed RBC asset weighting. CUNA estimates that, since 2008, credit unions have been subjected to 180 regulatory changes from 15 different agencies. The testimony is available here: http://financialservices.house.gov/uploadedfiles/hhrg-113-ba15-wstate-dfecher-20140715.pdf

Warren is must see T.V. Even though I disagree with about 90 percent of what she has to say, Elizabeth Warren, the Birth-Mother of the CFPB and the current Senator from Massachusetts is good for America if only because she is one of the few politicians willing to publicly say how little is being done to prevent Too-Big-To-Fail banks from failing again at taxpayer expense. In this increasingly exasperated exchange with Fed Chairman Yellen Warren points out that so called “living wills,” which are  intended to provide for blueprints for the  orderly liquidation of the Behemoth banks, aren’t worth the paper they are printed on if the Fed doesn’t force institutions to make the changes necessary to allow for orderly liquidation. Yellen suggests that the Fed role in the process is merely advisory.  http://www.huffingtonpost.com/2014/07/15/too-big-to-fail_n_5588558.html

The Feds Outlook Chairman Yellen’s written testimony before Congress didn’t break much new ground. She did indicate that it remains on track to stop the “twist” bond buying program. In addition, even though the economy is improving she still sees enough slack in it to keep from raising interest rates. The WSJ is reporting that she “hedged” on interest rates but every Chairman hedges on interest rates. http://www.federalreserve.gov/newsevents/testimony/yellen20140715a.htm

Senator George D. Maziarz Calls it quitsThe long serving Western New York Republican’s departure means that there are now  four open seats in the State Senate. Republicans have to protect these seats and gain three in order to keep Senate Democrats from taking control of the Senate now that the Independent Democratic Caucus is backing the democrats to lead the chamber. http://www.buffalonews.com/city-region/all-niagara-county/george-maziarz-on-federal-probe-i-have-nothing-to-hide-20140713

On Mortgage meltdowns and prayers NY is slated to receive $92,000,000.00 from the Justice Department’s 7 billion settlement with Citi Bank over its shoddy underwriting practices for Mortgage Backed Securities but what really caught my eye was this quote from a Citi trader cited in the settlement papers : The trader stated that Citi should pray and explained that he“… would not be surprised if half of these loans went down. There are a lot of loans that have unreasonable incomes, values below the original appraisals (CLTV would be >100), etc. It’s amazing that some of these loans were closed at all.” http://www.justice.gov/iso/opa/resources/558201471413645397758.pdf

 

July 16, 2014 at 8:55 am 1 comment

Court clarifies timeframe for unauthorized withdrawals

How much time do members have to inform you that they have spotted an unauthorized withdrawal from their account after receiving their statements?

The UCC gives consumers a year but that timeframe can be reduced by contract. Just how much that window can be closed has remained an open question in New York for decades until a narrow but an important ruling in New York’s Court of Appeals in May (Clemente Bros. Contracting Corp. v Hafner-Milazzo) held that business accounts opened by sophisticated large businesses could provide companies with as little as two weeks to report unauthorized withdrawals provided they receive adequate notice of account activity.

Clemente Brothers opened business accounts and a line of credit at NorthFork Bank which was subsequently gobbled up by CapitalOne; In order to open up the account it had to pass a corporate resolution specifying who could draw from the accounts and sign an account agreement that provided in pertinent part:

“That unless [Clemente Brothers] shall notify the Bank in writing within fourteen calendar days of the delivery or mailing of any statement of account and cancelled check, draft of any claimed errors in such statement, or that any such returned Instrument was forged…or that it was raised or otherwise altered … “ the account shall be considered correct for all purposes and said Bank shall not be liable for any payments made and charged to the account

All good unauthorized withdrawal cases seem to start with wayward employees and in this case a bookkeeper had been forging Clemente’s signature on certain CapitalOne Bank documents, including drawdown requests on the line of credit and checks paid from one of Clemente Brothers’ accounts. The company claimed she embezzled approximately $386,000 over the course of approximately two years, from January 2008 through December 2009. The withdrawals were discovered in 2010. They claimed that these were unauthorized withdrawals and that the Bank had to make them whole. You probably haven’t looked at the statute in a while. It provides that

1) When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its customer or otherwise in a reasonable manner makes the statement and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover his unauthorized signature or any alteration on an item and must notify the bank promptly after discovery thereof.

(2) If the bank establishes that the customer failed with respect to an item to comply with the duties imposed on the customer by subsection (1) the customer is precluded from asserting against the bank.

 N.Y. U.C.C. Law § 4-406 (McKinney)

 

The court bifurcated its ruling into two parts. The court did not dismiss the case in relation to the unauthorized draws against the line of credit. Even though the company was put on notice that money was being drawn on the line it wasn’t given copies of the actual drawdown requests. Therefore a trial court had to decide if the bank provided adequate notice to the company; chances are it did.

The more interesting question was whether or not the 14-day notice period could be enforced. The Court ruled that:

“Clemente Brothers had numerous employees, regularly moved hundreds of thousands of dollars in and out of its operating accounts, and had the resources to make an informed decision about opening accounts at CapitalOne. Critically, Clemente was fully aware of the terms of the agreements with CapitalOne because Clemente Brothers passed a corporate resolution acknowledging its obligation to notify CapitalOne of any irregularities within 14 days of each statement of account.”

Does this mean that all your account agreements should have a 14-day window? No. The court stressed that its ruling applied to a sophisticated large corporation. It might reach a different result if it was deciding a case involving an elderly account holder or a less sophisticated small business.

So what should you do? Don’t have the same window for members that you do for businesses and make sure you don’t rely on the UCC’s one-year language. The more sophisticated your business account members are, the shorter their notification window can be. No matter what number you decide on, make sure your policy is reflected in the account agreement and that your frontline staff gets the necessary paperwork as part of opening accounts.

Here is a link to the decision and an earlier blog I did on the case:

http://law.justia.com/cases/new-york/court-of-appeals/2014/64-0.html

http://newyorksstateofmind.wordpress.com/2013/07/09/when-does-your-responsibility-for-forged-checks-end/

July 15, 2014 at 9:21 am 1 comment

Beware of the Subpoena Dump!

It wasn’t all that long ago that debt collection law firms in New York would literally inundate credit unions with information subpoenas seeking to track down debtors without any regard for whether or not a credit union would realistically have such information. After all, chances are a single SEG credit union for telephone workers in Binghamton isn’t going to have an account for a debtor in Manhattan. These large scale fishing expeditions were just a cost of doing business to these firms, but to credit unions they were imposing huge operational burdens since every subpoena required a response.   Today, the law isn’t perfect but New York’s existing statute, improved by amendments resulting from credit union lobbying efforts, have reduced this huge operational burden.

Why the trip down memory lane? Recently, an information subpoena that was sent to a credit union demonstrated that the law must be working because debt collecting lawyers are trying to do end runs around it. Let’s make sure they don’t get away with it.

First, a refresher course, with apologies to those of you who handle these things on a regular basis. When used properly, information subpoenas are an important means of getting money from people who haven’t paid off a debt. They can be issued by attorneys acting in their legal capacity. But there are several conditions that must be met for a subpoena to be valid. First, unless both parties agree to accept subpoenas in electronic form, an information subpoena must be accompanied by a “copy and original of written questions and a prepaid, addressed return envelope. Service of an information subpoena may be made by registered or certified mail, return receipt requested. Answers shall be made in writing under oath by the person upon whom served.” (N.Y. C.P.L.R. 5224 (McKinney)).

Second, it has to include a signed certification from the issuing attorney that she has “A REASONABLE BELIEF THAT THE PARTY RECEIVING THIS SUBPOENA HAS IN THEIR POSSESSION INFORMATION ABOUT THE DEBTOR THAT WILL ASSIST THE CREDITOR IN COLLECTING THE JUDGMENT.”

Finally, attorneys who send out more than 50 subpoenas a month must maintain for five years records detailing the basis of their reasonable beliefs. Failure to do so can get them sued by the AG. If this is valid, then an attorney could circumvent virtually all the law’s requirements by bulk mailing subpoenas with an accompanying certification cover page.

Nice try fellas, but I don’t think this is kosher. First, there is no provision in the statute allowing the certification requirement to be waived except for authorizing subpoenas to be sent electronically with the consent of the party to be served. It’s quite a stretch to suggest that the certified mail requirement can be waived for any other reason.

In addition, since a party receiving a valid information subpoena is obligated to respond, suggesting that their signature waives the certification requirement is awfully close to making an offer that can’t be refused. (“Either your blood or your signature is going to be on this contract” but – with apologies to those of you who haven’t watched The Godfather – I digress).

So what should you do if you receive one of these subpoenas? If you get a subpoena with this waiver request, I would cross out the offending sentence, initial the change and answer the subpoena subject to your amendment. Otherwise, you may be paving the way for bulk mailings of uncertified mail. In addition, remember the subpoena has to include the attorney’s good faith assertion, otherwise place it in the garbage. Last, but not least, send a copy of questionable subpoenas to the Association. My boss, Mike  Lanotte, gets almost as fired up about protecting credit union advances in this area as he does about his Mets actually playing well, and if we see abuses taking place we will bring them to the attention of the right people.

Bond buying to end by October

Here are the minutes from the last Fed meeting. The big take away is that the bond buying program will be done by October.

See you Monday.

 

 

 

 

July 10, 2014 at 9:07 am Leave a comment

Guess Who Has The Most Stable Housing Market In America?

Buffalo, New York, has the most stable housing market in America. According to research conducted on behalf of Bloomberg.com, Buffalo is followed by Pittsburgh, Louisville, Nashville and Raleigh, NC.

Working with Zillow, Bloomberg analyzed housing prices since 1979 for the 50 largest housing markets using a five year rolling average to calculate changes in home prices. The result shows that you may not strike it rich buying that home in Buffalo, but you won’t lose your shirt either. The data shows that over the last 35 years, Buffalo homeowners had “virtually no chance” of losing money on their house. In contrast, the same can’t be said for Hartford, Connecticut at the bottom of the list.

Some of those areas on the least stable list are awfully nice places to live so what’s the difference? One agent pointed out that your typical Buffalo buyer is planning to stay in the area for the long-term. Buffalo isn’t where you go to invest in a second home or flip houses.

By the way, in commenting to NCUA many NY credit unions argued that NCUA’s proposed risk weightings for mortgage concentrations were too severe because they didn’t take into account a credit union’s track record in making well performing mortgages. This research provides one more piece of evidence that not all mortgage loans are equal. Hopefully, NCUA will take that into account in finalizing its RBC framework.

Court Says Localities Can Block Hydro-fracking

Remember when high powered hydro-fracking was a big issue, with New York’s Department of Environmental Conservation analyzing the potential impact of its widespread use in the Southern Tier? There hasn’t been much movement on the issue since the Department of Health was tasked with analyzing its health effects in 2012 and has yet to reach its conclusions. In the meantime, a statewide moratorium on the process remains in effect.

But yesterday, the NY Court of Appeals — our highest Court — ruled that localities could use local zoning laws to block hydro-fracking even if the state authorizes it.

This may be another setback for drillers or it might actually allow the state to lift the moratorium because only towns that want the drilling are going to get it. Remember, the issue is important to credit unions that should insure their interest in mortgaged property is adequately protected in the event that a member wants to lease out their property for oil drilling.

 

 

July 1, 2014 at 8:33 am Leave a comment

SC To Pres.: When The Senate Says It’s In Session It’s In Session

Yesterday, a unanimous Supreme Court ruled that President Obama exceeded his authority when he gave recess appointments to fill three vacancies on the five-member National Labor Relations Board in November 2012. The President argued that the appointments were made while the Senate was in recess. Not so, said the Court. The Court upheld the use of pro forma Senate sessions in which a single legislator gavels the Senate in and gavels out of session specifically to block the type of appointments made by the President. Let’s just say the Commander-in-Chief is having a bad week.

The ruling could have been much more significant for credit unions because Richard Cordray was also a recess appointment to head the CFPB, but since he was eventually confirmed by the Senate we don’t have to spend today figuring out which CFPB regulations are valid.

Still, the decision does mean that scores of decisions issued by the NLRB over the last two years are void and that’s still a pretty big deal when you consider how aggressively the Board has pushed to impose workplace conditions on private sector employers. If you think I’m exaggerating, go to the NLRB’s website where an entire webpage is dedicated to explaining to private sector employees what ”concerted activity” is and how their actions may be protected under federal law.

Even though all of the current board members have been confirmed by the Senate, The National Law Journal is reporting this morning that “By one estimate, more than 800 board decisions are viewed as ‘tainted’ by the participation of recess appointees, and more than 100 decisions have been invalidated by appeals courts because of the appointment problem. Hundreds more actions by regional directors appointed by the board may also be challenged.“

While many of my personal favorites are NLRB rulings that predate the recess appointments, anything that mucks up the Board’s machinery is OK in my book. Among the actions that still make me scratch my head are a Board ruling that a car dealership’s courtesy policy was too broad because it might be interpreted by employees as discouraging their use of concerted activity to address work place conditions and a recent decision to join in a lawsuit claiming that policies prohibiting the use of company smart phones and computers for non-business activities is outdated. Never mind that the Board was asking the court to reverse its own ruling.

Legislative Game Changer?

I would be remiss if I didn’t tell you a little about the decision of State Senator Jeff Klein and the other members of the State Senate’s Independent Democratic Caucus to end their coalition with Senate Republicans. This means that, barring Republican gains in November, the five Democratic Senators that comprise the caucus can sideline Senate Republicans from power and hand the reigns back to Senate Dems. Considering that Republicans have controlled the Senate for most of the last 50 years, this is another big deal.

It means that Senate Democrats will get a second chance at exercising real power in Albany after an abysmal performance the first time around, but this time with a stable majority. Depending on the outcome of the Senate elections, Democrats are positioned for one party rule in Albany since the Governor has a commanding lead in the polls, and the Assembly Democrats control almost two- thirds of that chamber’s seats. Add into the mix that NYC has the most unabashedly liberal politician in America in Mayor Bill De Blasio and next year’s legislative session could be the most interesting in years. Here is an interview in which the Senator explains why he decided to jettison the Republicans.

Matz Signals Big Changes to RBC Proposal

The Credit Union Times is reporting today that Chairman Matz used an appearance before credit union officials in Los Angeles yesterday to signal that you can expect big changes in the Risk-Based Capital Reform proposal before it is finalized.  Specifically, she singled out reduced ratings for CUSOs, member business loans, mortgages and corporate capital as likely.  She also said she is open to considering raising the $50 million threshold at which credit unions would be subject to a RBC framework. She’s still holding firm on the need for an RBC framework to emphasize concentration and interest-rate risk.  Stay tuned.

June 27, 2014 at 8:45 am Leave a comment

Supremes Throw NCUA A Curve Ball

On Monday, the Supreme Court handed a partial victory to 12 investment banks being sued by NCUA to recover losses to the Share Insurance Fund stemming from the demise of US Central and Western Corporate Credit Unions. How big a road block this places on NCUA’s litigation efforts remains to be seen. But, at the very least, don’t expect to see additional settlements with NCUA anytime soon.

NCUA has arguably been the regulator most aggressive in going after investment banks for their role in peddling faulty mortgage-backed securities. In Nomura Home Equity Loan, et. al. NCUA essentially argues that the investment banks that sold the securities to US Central and Western Corporate knowingly provided inaccurate or incomplete information about the risks of holding the securities. Considering that these securities blew-up with as much gusto as Sam Coburn, the California Chrome owner who lost the Belmont Stakes, this is an expensive allegation. Most of the securities were bought in 2006 and 2007. NCUA did not take over as conservator of these corporates until 2010 and didn’t start the lawsuits until 2011.

On the chance that you haven’t yet grabbed a second cup of coffee, I will refrain from providing you with a mind numbing explanation of the difference between a statute of limitations and a statute of repose. Suffice it to say that if you can’t sleep tonight just start reading this case. For our purposes, all you need to know is that if a statute of repose applies, then this lawsuit has to be dismissed because the time for bringing law suits expired three years after the securities were purchased. The fact that NCUA didn’t become conservator of these institutions until 2010 is irrelevant. In contrast, the Court of Appeals for the 10th Circuit ruled that federal law passed in the aftermath of the Savings and Loan crisis imposed a statute of limitations on NCUA that only began to run after the agency took over the corporates.

However, on Monday, the Supreme Court told the 10th Circuit to reconsider its decision in light of a case it decided in April. In CTS Corp. v. Waldburger, 13-339, 2014 WL 2560466 (U.S. June 9, 2014), the Supreme Court held that federal law did not preempt a statute of repose that bars North Carolina landowners from suing a company for alleged environmental pollution. That’s right, the amount of money your credit union ultimately has to chip in for the corporate cleanup may very well be impacted by an environmental lawsuit in North Carolina.

By the way, does anyone watch House of Cards?

The 10th Circuit could review the Court’s decision and decide that it is distinguishable from NCUA’s case or it could dismiss NCUA’s case entirely. Considering that NCUA has already wrested $1.75 billion from banks and settlements to help recoup corporate losses and that Nomura involves a dozen defendants, the outcome of this case is as important to credit unions as it is arcane.

 

 

 

 

 

 

 

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June 18, 2014 at 9:11 am Leave a comment

New York Atty. Gen. Scrutinizes Use of Applicant Screening Services

Yesterday afternoon, New York Attorney General Eric T. Schneiderman announced an agreement with Capital One Bank under which the bank has agreed to stop using ChexSystems to review the payment history of persons seeking to open an account.  Instead, the system will simply be used to assess fraud risk.
“No one – least of all struggling New Yorkers – should be forced to rely on high-cost alternatives to banks just because they bounced a check or were a victim of identity theft,” Attorney General Schneiderman said. “Equal access is the least we can do to ensure that all New Yorkers have access to widely used services such as our nation’s banking system. I commend Capital One for stepping up and working with us to help eliminate an unnecessary barrier to opening a checking or savings account. I would hope other banks will step up and join us to do the same.”
This is a very carefully worded announcement. Although the AG hopes that this agreement becomes a model for large banks and credit unions, many of which use ChexSystems or other similar services for applicant screening, Capital One is not accused of engaging in illegal conduct nor is there anything illegal about reviewing an individual’s paying history when opening an account. Clearly, however, the AG is concerned that such practices may have a disparate impact on low-income New Yorkers. At this point, I wouldn’t change any of my account opening practices, but if I used ChexSysems or similar services I might want to take a quick look at the criteria being used to screen out potential applicants and make sure it is necessary.

Keeping in mind that this is just one man’s opinion, while the millions of unbanked across the nation is a serious problem, I find it hard to believe that basic account due diligence is a major contributor to this dilemma. If the Attorney General had statistics showing otherwise, I would love to see them.

IMF Forecast Sluggish U.S. Growth As Far As The Eye Can See

For those of you into this kind of thing, the International Monetary Fund released its annual assessment of the U.S. economy and it predicts sluggish growth of 2% for the next several years. This means that the IMF doesn’t see much reason to expect interest rates to spike anytime soon. It would also like to see policymakers take steps to improve the nation’s infrastructure, education and tax systems.

On that cheery note, have a great day.

June 17, 2014 at 8:09 am 2 comments

Two Cases Worth Knowing About

I take a break from writing this blog for one week to go watch a few rounds of the US Open Golf Tournament and all Hell breaks loose. House Majority Leader Eric Cantor loses his job, Baghdad is on the verge of being overrun in a Civil War, the San Antonio Spurs overrun the Miami Heat, and the Rangers get beaten by the Kings.

As I did not make the cut in the Open, it’s time to get back to my day job before more mayhem breaks out. Here are some legal developments that happened the previous week that you may want to take a look at if you haven’t already done so.

Merchants, surcharges and cash discounts

Merchants filed a brief with the Court of Appeals for the Second Circuit responding to an appeal by the NYS Attorney General in a case involving credit card surcharges. ( Expressions Hair Design v. Schneiderman, – F. Supp. 2d -, 2013 WL 5477607, *1 (S.D.N.Y. Oct. 3, 2013)

The antitrust settlement eliminated language from merchant agreements prohibiting credit card surcharges but New York State is one of several states that has a law that bans surcharges on credit card purchases, so the contract change had no impact on New York merchants. Last Fall, a federal district court struck down the statute on First Amendment and vagueness grounds. Merchants claim that there is little practical difference between a cash discount, which is allowed under New York State law, and a surcharge, both of which end up costing a consumer the same amount of money. In its brief appealing the decision New Yorks State argues that the statute in question does not involve the First Amendment at all, but is an appropriate exercise of legislative discretion that benefits consumers.

Since the Association wrote an amicus brief in support of the State, I’ll withhold making editorial comments. Suffice it to say that this case is important not only in New York but as a precedent in the other states that have State level bans on credit card surcharges.  I will keep you updated as this case goes forward.

By the way, I was surprised how many merchants in North Carolina, including my brother-in-law who owns a mill providing high-end pine and my favorite restaurant for authentic pulled-pork sandwiches, choose not to accept credit cards. Is it possible that merchants accept credit cards because it is in their economic interest to do so and not because of alleged anti-trust violations?

Inherited IRA Exempt Asset in Bankruptcy?

A very interesting Supreme Court case decided last week clarified that inherited IRAs are not exempt assets in bankruptcy proceedings. BRANDON C. CLARK ET UX., PETITIONERS v. WILLIAM J. RAMEKER involved a couple who declared Chapter 7 bankruptcy and claimed that $300,000 in assets held in an IRA inherited from the wife’s mother were exempt from creditors. Not so, said the court, which unanimously held that whereas bankruptcy laws are intended to protect the retiree accessing her IRA, or the person saving for retirement, an individual who receives such funds as a result of inheritance is allowed unlimited access to all of the funds and cannot be said to be putting aside money for retirement purposes.

This decision will have its most direct benefit for creditors, including credit unions, seeking to recover funds from bankrupt members.   My guess is that we also will see challenges to New York’s law exempting retirement benefits from levy and restraints. Someone will make the argument that if inherited IRAs are not considered retirement benefits for bankruptcy purposes, then they should not be considered retirement benefits for levy and restraint purposes either. But, for now, the only immediate impact of the Supreme Court’s decision is on bankruptcy proceedings.

On that note, it is nice to be back. You can see I’m rusty with the late blog. I expect to see you all at the Association’s convention later in the week.

June 16, 2014 at 10:30 am Leave a comment

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Authored By:

Henry Meier, Esq., Associate General Counsel, Credit Union Association of New York

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