Posts filed under ‘New York State’

In What Order Do You Process Your Checks?

There are some issues that are hanging over the industry like a sword of Damocles.  This morning an article in the Wall Street Journal provides further evidence for those who feel that the CFPB should do more to regulate overdraft fees. 

According to a survey conducted by the paper, hundreds of small, regional banks, and credit unions are “clinging to the practice” of processing checks on a high to low basis.  The paper’s survey revealed that smaller depository institutions are continuing this practice even as larger institutions are backing away from it.

What exactly to do about overdraft fees has been debated for more than a decade now.  In 2010, the Federal Reserve promulgated regulations requiring that members opt in to bank payment on debit card overdrafts.  I was silly enough to think that this would put the issue to a close, but it hasn’t.  For example, in a statement accompanying a 2013 report on overdraft processing, CFPB warned that if “policies and practices do not protect consumers in accordance with consumer protection law, it will use it authorities to provide such protection.”  

The more I look at the issue, the more I feel that overdraft fees are the most misunderstood practices engaged in by depository institutions.  Do they represent an important source of income for many banks and credit unions?  Absolutely, but I bet if you asked your average consumer if they are willing to pay more to make sure that their mortgage or car payment doesn’t bounce, they’d agree.  In other words, overdraft fees are a product that some consumers want and need.

Regulatory Update

I’ve been AWOL for a couple of days and based the volume of work that regulators pumped out over the last week it’s obvious that many of our regulatory overlords intend on being AWOL for most of August. Here are a couple of regulatory proposals to review in preparation for Fall.

CFPB’s HMDA Proposal  Empowered by the Dodd-Frank Act , the Bureau that never sleeps is proposing revisions to the Home Mortgage Disclosure Act. It may not sound like a page turner, but for those credit unions that have to comply with it, properly reporting mortgage loan information can be one of the great compliance headaches. If the regulation goes forward as proposed the types of mortgages subject to reporting requirements will be expanded to include “all mortgage loans secured by a dwelling, regardless of the purpose of the loan” including HELOCS and commercial loans secured by a home.  Here is a link.

NYS moves to regulate Bitcoin New York State’s Department of Financial Services is rushing ahead of federal and state regulators by proposing licensing requirements and a comprehensive regulatory framework for institutions that buy, sell, transfer or store virtual currencies. Here’s a link to NYS’s proposal.

July 29, 2014 at 8:20 am Leave a comment

On “The Talk,” Fixed Assets, And Settlement Money

I have a potpourri of newsworthy tidbits to start your credit union day.

Viva Las Vegas – I would have gladly wagered money yesterday that NCUA Chairwoman Debbie Matz could get nothing more than polite applause out of the attendees of NAFCU’s annual convention, but that was before I knew that the Chairwoman would be using her appearance to outline some regulatory relief proposals that NCUA plans to propose at its July meeting. According to the Chairwoman, NCUA will propose “effectively eliminating” the fixed asset rule.  Currently, NCUA regulation caps at 5% of a credit union’s shares and returned earnings the amount that can be spent on fixed assets absent a waiver from NCUA.  As CUNA pointed out in a comment letter last year advocating for scrapping the cap “The rule restricts investments not only in real property, but also in technology and systems that are increasingly central to the success of all financial institutions. Overly restricting investments in these items—or subjecting the relevant decisions to a slow and unpredictable process — does not facilitate credit unions’ use of online and mobile banking technologies even though the utilization of such technologies is more important now than ever.”

Two other mandate relief proposals will deal with member business lending and updating appraisal provisions. The proposals aren’t out yet and the devil is in the details; but it’s nice to be able to compliment NCUA again. It wasn’t all that long ago that it was aggressively pushing mandate relief reforms such as the streamlining of low-income credit union designations. Maybe the Chairman should spend more time in Sin City.

Having “The Talk” – What’s the single most uncomfortable talk that parents have with their kids? It’s not about the Birds and the Bees, it’s about money. Great article in MarketWatch reporting that a recent survey indicates that “[p]arents in their 50s and 60s think they’ve done a bang-up job talking with their adult kids about their estate and retirement plans. Their kids think just the opposite. It’s the new Generation Gap. Specifically, nearly two-thirds of parents and adult kids (64%) disagree on the best time to start talking about things like wills, estate planning, eldercare and covering retirement expenses. Many credit unions do a great job providing financial education to their members and this might be one more area to highlight. Making sure everyone is on the same page when it comes to maximizing retirement assets can save a lot of heart ache down the road and is a great way of stretching those retirement savings. Besides, like the World’s Most Interesting Man, you really can give your father The Talk.

Just where does all that settlement money go anyway? Billion dollar settlements with major banks are becoming about as commonplace as low scoring baseball games. (Maybe they really are laying off the steroids after all). This morning’s article from Reuters paints a not too flattering picture of how at least some of the money – which is ostensibly sought for mortgage and foreclosure relief – is actually being spent by state and federal officials. Reuters reports that since May alone there has been $18.5 billion in settlements – $5 billion of which goes to New York. It suggests that the guidelines on how this money is to be allocated are so broad that at least some people are concerned that there are perverse incentives to drive up the size of settlements. Personally, any incentive Government has to crack down on blatantly illegal activity is OK with me.

July 24, 2014 at 8:26 am 1 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

New York Goes to Pot

Governor Cuomo made it official yesterday: he held a bill signing ceremony to mark approval of legislation (A.6357-e) making New York the latest state in the nation legalizing the medical use of marijuana. Its use will be ramped up over the next 18 months as the state promulgates the necessary regulations.

Despite what I have seen in the blogosphere, it is not time to stack up on the munchies. Unlike states such as Washington and Colorado, which have legalized marijuana possession, and other states, such as California, that have legalized the “medical” use of marijuana, the legislation is drafted in a way that medical use of marijuana will be limited to people with designated illnesses and only available in forms prescribed by doctors.

The use of medical marijuana in New York will be highly regulated.  According to the Governor’s memo, the law allows for five registered organizations that can each operate up to four dispensaries statewide. Registrations for organizations will be issued over the next 18 months unless DOH or the Superintendent of State Police certifies that the new program could not be implemented in accordance with public health and safety interests. Because it is so regulated, chances are your credit union won’t be asked to open up a business account for these organizations, and if it is the organizations are so highly regulated that much of your due diligence will be easily obtainable. This means that, at least in the short term, legalization of the drug won’t present financial institutions with the legal question of how to comply with federal laws banning the possession and sale of marijuana and bank secrecy act requirements mandating that credit unions and banks monitor their accounts for potentially illegal activity with state law declaring marijuana use to be legal.

This is not to say that your credit union won’t be impacted by this law.  Under the legislation a certified caregiver or patient can’t be subject to any civil or disciplinary action by a business or licensing board solely because of their lawful use of marijuana. In addition, eligible users are classified as disabled under New York’s human rights law.   At the very least, we now know that there are going to be employees legally entitled to be taking marijuana. So, if you have a policy of categorically prohibiting employee drug use, this is going to have to be modified.

Conversely, it doesn’t mean that an employee can come into work today and get stoned at lunch time. The state is going to have a registry of patients. The key is not to make changes tomorrow. If you heard the Governor speak yesterday, then you heard a person who is dead serious about making sure that this legislation truly is for medical purposes and not a backdoor means of legalizing pot smoking.  The regulatory process will be a serious one and given the number of issues that need to be addressed, I’m sure the concerns of employers will be taken into account. In the meantime, it appears that New York financial institutions have avoided the legal quagmire that comes from a more unregulated approach.

 

 

 

 

July 8, 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

Key Credit Union Bill Passes In Final Hours

Greetings from Saratoga Springs!  The frenzy that characterizes the final hours of New York’s Legislative Session lived up to expectations again this year.  In fact, the Senate is expected to reconvene this morning to pass some additional measures.  Here’s a look at some of the key legislation that may impact your credit union’s operation.  Remember that none of these bills have been signed by the Governor yet.

  • A9408/S7112 Field of Membership Bill:  This bill gives state chartered credit unions more flexibility in developing their fields of membership.  For example, an employee-based credit union would be able to apply for permission to extend membership to persons who live in the community in which it operates.  Similar legislation was vetoed last year by the Governor.  This year’s bill was amended to address the Governor’s concerns.  For example, any membership modifications are subject to the approval of the Department of Financial Services.  I’m sure I’ll be telling you more about this bill in the months ahead.
  • A9037-a/S6905-b Prize Linked Savings Program:  This bill passed both Houses earlier this session and allows credit unions and banks to offer lotteries as an incentive to open savings accounts.  The initiative has been successful in other states and, if it is approved by the Governor, may provide innovative ways of encouraging people to invest their lottery money rather than throw it away.
  • A8106-c/S5885-b Modifications to the Wage-Theft Prevention Act:  One of the most obnoxious mandates New York State has imposed on employers in recent years is the requirement that they provide employees with an annual written notice of their salary.  In the closing hours of the Senate, common sense prevailed and a bill was passed eliminating the annual notice requirements.  Great job by the Legislature for being willing to take a second look at one of its laws.
  • S7119/A9354 Pre-Foreclosure Settlement Conferences:  Since 2009, New York has mandated that lenders attend pre-foreclosure settlement conferences to work with members with delinquent mortgages before foreclosing on their property.  Theoretically this bill was passed in response to the mortgage crisis.  However, the legislature approved legislation extending the expiration of this requirement until 2019.  Suffice it to say that these conferences have become a permanent part of the New York lending landscape.
  • A6357-e/S7923 Medical Marijuana:  Yesterday afternoon, the Legislature and Governor came to an agreement permitting the use of medical marijuana under extremely controlled circumstances.  Most importantly, marijuana cannot be smoked but must be taken in a tablet or vapor form and can only be prescribed for certain illnesses.  I’ve done a couple of blogs this year about the legal issues confronting credit unions in Colorado and Washington State that open up accounts for pot-selling businesses.  At this point, it appears that New York’s legislation is so narrowly focused — only five businesses with up to four satellites each will be authorized to sell the pot — that it doesn’t seem to raise wide-spread compliance concerns for financial institutions.  However, I’m basing this on comments from yesterday’s press conference as the ink is hardly dry on the final bill.  The Senate is coming back to pass it this morning.
  • S7224/A9539 Subprime Loan Threshold:  This bill makes a highly technical and narrow exception to the way New York State determines if a loan is subprime.  The FHA now mandates that the cost to a consumer for an FHA-backed mortgage loan be amortized over the life of the loan.  This has the effect of raising the cost of the loan.  The Department of Financial Services has been passing temporary regulations exempting this increase from the calculation of subprime loans.  This legislation simply codifies that action.
  • A8955-a/S6682-b Permits Parents/Guardians To Impose Credit Freezes on Minor Accounts:  This bill clarifies that parents and guardians have the right to obtain credit report freezes on behalf of minor children.  The sponsor memo indicates that the identity theft of minor accounts is an increasing problem.

Hope to see you walking around today’s convention.  Have a great day.

June 20, 2014 at 8:24 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

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

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