Should Your Credit Union Take Your Member’s Temperature?  

As credit unions prepare to further reopen their facilities to their members, this has been one of the key questions that credit unions are pondering.  My unequivocal answer is absolutely not.

To be clear, I couldn’t find a law which unequivocally prohibits the practice and decisions such as these are all about context.  For instance, if I were writing a blog for the meat packing industry this morning I would give the exact opposite advice.  Furthermore, we don’t know what’s in store for the nation’s health six weeks from now let alone how quickly the virus will spread in your credit union community.  But with all those qualifications, any value your credit union perceives in taking a  member’s temperature is far outweighed by the very real legal and reputational risks to which your credit union would be exposed and the operational hurdles it would  be placing in front of your employees at a time when they already have more than enough to do.

My biggest concern has to do with fair lending laws.  As readers of this blog already know, it is illegal to adopt policies and procedures which have the purpose or effect of discriminating against someone on the basis of, among other things, race or age.  Many a financial institution has been sued over claims that anonymous testers were treated differently depending on their appearance.  These laws haven’t been suspended.  Do you really want to start implementing a program predicated on the assumption that all your members will have their temperature taken as they come in the door?  That is an awful lot of faith and responsibility to place on your employees.  I can easily dream up scenarios in which healthy looking members are given and wink and a nod while those who look like they might be more susceptible to the virus are tested.

And even if your staff implements the policy flawlessly, what steps are you taking to keep this information confidential?  These are just two examples of why the nominal benefits are not worth the legal risks.  After all, you can protect your employees and members by mandating compliance with social distancing rules, more aggressively monitoring compliance with stay at home policies and ultimately trusting your members to use common sense.

On that note, enjoy your weekend.

May 29, 2020 at 8:28 am Leave a comment

Are You Suffering From Writers Block When It Comes To Your Reopening Plan?

One of the first things I learned when I entered the land of Banking Regulation and Compliance is that the best plan in the world doesn’t count for anything in the eyes of your regulator if it isn’t written down.  I’m getting the sense that some credit unions are suffering from writers block when it comes to drafting their COVID-19 reopening policies.  At this point in the ballgame, my advice for those of you who are still suffering from this malady, is to keep it simple and get it down on paper.

New York State expects all businesses, including essential businesses such as your credit union, to have a reopening safety plan explaining the steps you are taking to prevent the spread of the virus.  New York State expects all businesses, including those deemed essential, to have one of these plans and to keep it filed.

The State has provided a generic template to help you get started.  The template isn’t perfect.  Most notably credit unions are very unique: not only are we a retail industry but we are a retail industry subject to strict regulations governing how we deal with our customers.   (I’m already anticipating a lawsuit alleging lending discrimination against a financial institution which insists on taking a loan applicant’s temperature). Over time you should certainly expand on your procedures but at least it gives you a starting point.  You are also free to develop your own plans, but as you do, keep in mind what the State expects businesses to strive to accomplish.  As it explained in this guidance, it wants businesses to develop plans that address:

  1. Protections For Employees And Customers
  2. Changes To The Physical Workspace
  3. Implementing Processes That Meet Our Changing Public Health Obligations

(Pg. 58 –  NY Forward: A Guide To Reopening New York & Building Back Better)

To be sure, each one of these areas could lead you down the proverbial rabbit’s hole particularly given the unique obligations of our industry.  Furthermore, what is euphemistically being called a “Reopening Plan” is realistically simply the first draft of what should become a comprehensive framework that will ultimately touch on issues ranging from the ADA to Fair Lending.  But for now, let’s keep it simple and just get started.

May 28, 2020 at 9:52 am Leave a comment

Legislature To Act On COVID-19 Package  

The State Legislature heralded the start to the holiday weekend by announcing that it would be going into virtual session today and tomorrow to act on a series of bills related to COVID-19.  Many of the proposals address the areas which have been subject to executive orders and have taken effect since emergency measures were adopted on March 7th.

The bill that will probably have the most direct impact on financial institutions is S8243-C Kavanagh/A 10351-B Rozic.  This bill provides for up to six months of forbearance for individuals impacted by COVID-19 and also addresses how the amount subject to forbearance will be repaid.  Specifically, it provides borrowers with the option to:

  1. have the arrears accumulated during the forbearance payable on a monthly basis for the remaining term of the loan (without any penalties or late fees due to the forbearance), or
  2. extend the term of the loan for the length of the forbearance (with interest waived for the term of the forbearance and any late fees due to the forbearance waived), or
  3. defer the arrears accumulated during the forbearance as a non-interest bearing balloon payment payable at the maturity of the loan or when the loan is satisfied (with any late fees accumulated as a result of the forbearance waived), subject to the safety and soundness of the lender.

Like the Governor’s previous executive orders on the subject.  It does not apply to mortgages sold to Government Sponsored Enterprises (GSEs).

Here is a link where you can find the entire agenda.

Governor Announces Small Business Loan Program

The Governor announced the creation of a $100 million private loan fund that will emphasize providing loans to small minority and women owned businesses impacted by COVID-19, called the New York Forward Loan Fund.  The funds for the program will be provided by a handful of large banks with CDFIs involved in determining which businesses will get funding.  As we find out more about the program, I will pass it on.

May 26, 2020 at 9:18 am 1 comment

Does My Credit Union Properly Explain Its Overdraft Policy?  What State Laws Are Preempted? And What The Heck Do These Two Questions Have To Do With Each Other?  

These are two of the most important questions with which credit unions have to grapple.  Preemption has come to the fore as federal credit unions weigh how to respond to state level laws and regulations on issues ranging from fee waivers to mortgage forbearance.  Meanwhile, one of the most common class action lawsuits over the last four years involves variations on the claim that credit unions and banks are not properly disclosing their overdraft practices.

As luck would have it, there is another recent decision  which gives me an opportunity to provide guidance on both of these issues.  As painful as it is to me to admit, you have better things to do than read my blog all day.  I will talk about the overdraft issue today and the preemption issue tomorrow.

As readers of this blog know, in order to charge overdraft fees on debit card transactions you must first get a member to affirmatively opt-in to receiving the service and properly disclose the conditions triggering an overdraft charge.  In a nutshell some credit unions determine whether an account is overdrawn based on the amount of money in the account at the time the transaction is authorized by the member while others determine whether an account is overdrawn at the time the transaction is settled.

Plaintiff attorneys have scrutinized account agreements and brought lawsuits claiming that financial institutions are either mischaracterizing how they determine when an account is overdrawn or engaging in unfair and deceptive practices because of these vaguely written disclosures.

In refusing to dismiss the most recent case, the court explained that a jury could conclude the credit union’s account agreement is too vague.  Specifically the court noted that:

The Contract does not use the terms “authorization” or “settlement” to help explain when an overdraft fee can be imposed, it does not link the concepts of authorization or settlement to the mechanics of when an overdraft fee is assessed, and it does not provide examples showing how a consumer could incur an overdraft fee at the time of settlement.

One of the few good things about all of this litigation is that we are now getting pretty good guidance as to what constitutes acceptable language.  Your assignment for today is to take a look at the decision of Chambers v. Nassau Federal Credit Union (U.S.D.C. September 21, 2016).  This is perhaps the leading example of how financial institutions should properly disclose their overdraft policies.  If your credit union’s policy does not comport to this language, give your attorney a call.

One more point which has nothing to do with this specific case…  I know everyone is looking to save money and cut costs, but many credit unions are too large not to use a third party to prepare, scrutinize and update your account agreements.  Your agreements are sophisticated contracts that deal with an increasingly sophisticated and varied range of laws and services.  Your members might be the nicest people in the world, but there are people out there who make a living out of spotting mistakes in your agreements and making your credit union pay the price.

May 21, 2020 at 11:13 am Leave a comment

Yaaay! We Reopened! Now What?  

Governor Cuomo announced yesterday that counties in the Capital Region can now start Phase 1 of the State’s reopening plan for non-essential businesses.  The Governor’s announcement comes as many credit unions, which as essential businesses have never completely closed, make plans for reopening lobbies and providing expanded services to the public.  As credit unions consider how best to reopen, here are some important points to keep in mind.

Most importantly, even as businesses begin to reopen, the Governor’s executive orders, many of which place restrictions on the type of interactions employees can have with each other and with customers, remain in effect.  For example, Executive Order 202.6 which was just updated yesterday stresses that

“Essential Businesses must continue to comply with the guidance and directives for maintaining a clean and safe work environment issued by the Department of Health (DOH) and every business, even if essential, is strongly urged to maintain social distancing measures to the extent possible.”

In other words, essential business or not, your credit union must be taking common sense steps such as re-configuring workplaces, minimizing unnecessary interactions between staff, providing PPE when needed and of course minimizing travel.

Although you won’t find this in any of the Governor’s Executive Orders, I also hope that you have taken the time to review your HR policies and procedures.  Among the issues that need to be considered are: how best to deal with employees nervous about going back to the office, parents who don’t want to send their kids to summer camp or day care centers and how to determine if an employee is too sick to be in the office.  This is, of course, a small sample of the issues that you and your Senior Staff should be considering as you prepare for the “new normal”.

If this blog is somewhat redundant it’s because my major concern is that we are all so anxious to get back to normal that we think of the pandemic as an unpleasant but ultimately temporary period of time as opposed to an event which has fundamentally altered the way things are done going forward.


May 20, 2020 at 10:37 am Leave a comment

FinCEN Issues COVID-19 Red Flag Alert

Yesterday evening the Financial Crimes Enforcement Network (FinCEN) issued the first in what it says will be a series of alerts highlighting red flags financial institutions should be on the lookout for during the pandemic.  The first guidance deals with medical scams.

The report highlights three categories of scams replete with examples of how compliance efforts help identify and prevent crimes.  The categories are:

  1. Fraudulent claims involving vaccines, medical tests and services
  2. Non-Delivery Fraud of Medical-Related Goods Scams; and
  3. Price Gouging and Hoarding of Medical-Related Items

Each category is accompanied by red flags for which your credit union should be on the lookout.  Many of these red flags involve making sure your credit union does extra due diligence when opening up an account for a new business specializing in medical services and supplies as well as keeping an eye out for sudden changes in a company’s business strategy.

Remember that under NCUA regulations, your credit union has the obligation to be aware of emerging fraudulent practices and to adjust its bank secrecy act protocols accordingly.

The guidance underscores just how important a role your compliance team plays for your credit union and law enforcement writ large.  When you combine millions of nervous citizens with trillions of dollars being distributed by the government with unprecedented speed, the question is not will fraud be committed but how much fraud will be committed?  The one thing all bad guys have in common is that they want to make money off their crimes.

That puts your compliance protocols to the test on a daily basis.  The department of justice recently announced that it was bringing the first criminal charges against two individuals posing as struggling restaurant owners in need of PPP funding.  They arrested the cons following a taped conversation in which the alleged owners were caught on tape lying to and FBI agent posing as a compliance officer.

May 19, 2020 at 9:05 am Leave a comment

Powell to Congress: Spend More Now for a Stronger Economy Later

There are two questions we will know the answer to in about six weeks that will profoundly impact your credit union and its members.  The first question is how quickly can the country reopen for business without sparking a surge in COVID-19 cases?  The second question is how much additional stimulus does the country need?

Over the last week Federal Reserve Chairman Jerome Powell has made his answer to the second question abundantly clear; while the Fed has taken extraordinary steps to provide loans to banks, businesses and even municipalities, only Congress can give the country the economic lifeline it needs to not only get through the pandemic, but to make sure it comes back stronger next year.

The focus of his presentation has not simply been to explain the short term steps the Fed has taken but to stress that only Congress can spend money.  In a speech last week, Powell scrapped the maddeningly opaque language for which the Fed is known.  His concern is that without additional spending the economy could be in for an extended period of “low productivity growth and stagnant incomes”.  He went on to explain that “additional fiscal support could be costly but worth it if it helps to avoid long term economic damage and leaves us with a stronger economy”.

Just to make sure we didn’t miss the point, he reiterated many of the these same points in a 60 Minutes interview last night.  It will be interesting to see how big of an impact this media blitz has on legislators reluctant to spend another trillion dollars before assessing the economic impact of the fiscal stimulus already provided by Congress.

And let’s not forget the first question I asked; if the summer months bring about a second wave of COVID-19 cases, particularly in states not prepared to cope with a surge of hospitalizations, then none of these steps will be good enough to prevent what could become a Depression.

SBA Releases Borrower Forgiveness Form

Speaking of steps that Congress has already taken, the SBA over the weekend released the form to be used by borrowers seeking to have their PPP loans forgiven.  Hopefully, additional guidance will be coming shortly.


May 18, 2020 at 9:15 am Leave a comment

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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