High Noon For Medallions?

It appears that High Noon is fast approaching for the NYC medallion industry.

An auction is scheduled for later today which will give us further insight into just how much value New York City yellow cab medallions still have; it follows an auction On January 11 in which six medallions foreclosed on by a New Jersey credit union sold for $185,000 apiece.

To put this in perspective, the latest auction information I found on the NYC Taxi and Limousine Commission website reported medallions selling at auction for over $2 million in March 2014 for a mini fleet of taxis. .  And remember, it was not that long ago that a medallion foreclosure was unheard of.

The rules for this afternoon’s auction also underscore just how far the industry has fallen. Financing of bids is not being allowed.  In addition, the credit union has the right to determine if the “best bid” is for a group of medallions or for each one individually.

With the pace of sales appears  quickening and more prices  publicly available,  individual  credit unions and the industry writ large should soon  have a solid idea of just how much the rise of Uber and Lyft will cost.  This could impact everything from how much money examiners expect credit unions holding medallion loans to put aside to your credit union’s contribution to the Share Insurance Fund. Stay tuned

January 16, 2018 at 9:17 am Leave a comment

Employers Given Feb. 15 Deadline To Update Tax Tables

Hello folks,

This morning I’ve decided that the most important thing I can tell you about is a change to the  tax table.   Take some coffee; here goes.

Moving at the speed of a midterm election, the Trump Administration yesterday unveiled new withholding tables to be used by employers no later than February 15 2018.  The tables reflect the rate changes made in the tax cut legislation passed by Congress in December. Many voters, I mean employees, wouldn’t otherwise see the direct benefit of the tax cuts until they file their tax returns next year.

The W-4 is the form you filled out when you started your job in which you indicated the federal income tax you wanted withheld from your paycheck. You might not have bothered looking at it since then and you should take this opportunity to review your withholdings and see if it is time to make some changes. In a reflection of just how quickly the Treasury Department wants people to see the impact of tax reform on their paychecks, the IRS is coming out with the withholding tables even as it has not completed an update to the W-4.

It’s not clear to me what would happen to employers who don’t update their withholding by the deadline. In a press release the IRS says that employers “should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.” But by publicizing these changes don’t be surprised to see a lot of employees giving their paychecks extra scrutiny in the coming weeks.

By the way, for those of you watching the football game on Saturday night don’t turn the game on late. It’s going to be over awfully quick.

 

 

January 12, 2018 at 9:09 am Leave a comment

CFPB Appointment Upheld

Yours truly is in a good mood this morning. There are rumors that it might get as high as 50° tomorrow. Why I might even break out the Speedo and sun tan lotion for work; don’t worry, I’m just joking about the lotion.

Another reason I am in a good mood this morning is because the right of the President to appoint the head of one of the most powerful agencies in the US government has been upheld: commonsense and the constitution have prevailed.

In his decision released late yesterday Judge Kelly of United States District Court in D.C. ruled that Deputy Director Leandra English, who was seeking to block Mick Mulvaney from being recognized as the acting director of the CFPB even though he was appointed by the President “is not likely to succeed on the merits of her claims, nor is she likely to suffer irreparable harm absent the injunctive relief sought. Moreover, the balance of the equities and the public interest also weigh against granting the relief. Therefore, English has not met the exacting standard to obtain a preliminary injunction.”

Now I hope that those of you who think that Mulvaney is staring in a remake of Paradise Lost at the CFPB are still with me.  Before you go apoplectic over this decision ask yourself if you would still support this lawsuit if Barack Obama was president and he was going to appoint Elizabeth Warren? Critics of the agency argue that it is unconstitutional and out-of-control. I think some of this is his overblown but the agency and its supporters aren’t helping themselves when they argue that the agency is so insulated from political accountability that the president of United States doesn’t get to choose an acting director when a vacancy occurs.

January 11, 2018 at 9:00 am Leave a comment

Why Aren’t More People Talking About This Tax Change?

Although the limits on state and local property taxes has gotten most of the attention, one of the amendments to the tax code will have a potentially large impact on credit unions has to do with loans taken out based on a home equity. Among the changes advanced by the “Stable Genius” running the country – his words not mine – and his acolytes, is one that does away with the deductibility of home equity loans.

I’m really surprised this hasn’t gotten more attention. It means that the member who has been planning to help pay for their kid’s education by taking out some of the equity on their home, or hopes to pay an unexpected medical bill is in for a rude awakening.

While Congress has completely done away with the deductibility of home equity interest, it has also reduced the amount that can be deducted for so-called “acquisition indebtedness.” As the conference report on the tax bill explains, “Acquisition indebtedness” generally means debt incurred in, or that results from the refinancing of debt incurred in, “acquiring, constructing, or substantially improving” a qualified residence. Id. § 163(h)(3)(B)(i). This means that there will still be at least limited interest on the part of some members who are doing a major construction or remodeling job. It also means that you will get members asking their front line staff if they feel the purpose of the loan will qualify for a tax break. Of course my advice is not to answer that question. I’m just here to tell you that your employees will be getting it.

Interestingly, the provision comes at a time when consumers are once again binging on consumer credit. According to today’s Wall Street Journal, “On average, US consumers are living beyond their means, as spending exceeds income.” What’s more according to the Journal, “A sizeable portion of this increase in consumer debt has been funded by credit unions, which made a big push into the sector after the recession.” I’m a big believer that where there is a demand there will be a product design to meet that demand. Remember that the growth of home equity lending is driven in part by Congress’ decision to end the deductibility of credit card debt in the mid 80’s. Creative lawyers and lenders will ultimately always stay one step ahead of the tax code.

Remember, that all this comes with the usual caveat that it is my father who was the family accountant and not me, so please run this by a tax professional.

 

January 9, 2018 at 8:58 am Leave a comment

ADA Gone Wild

Judging by the number of phone calls I’ve gotten on this subject in the last few days, I thought now would be a good time to answer some basic questions about the latest developments when it comes to ADA compliance and websites.

    1. Are other New York State credit unions getting threatened with lawsuits claiming that their websites violate the ADA? Yes they are. I don’t want anyone to think that something they tell me privately will end up in a blog. The reason I am writing this is because the issue has become generic enough that it’s impacting many credit unions.
    2. Are these lawsuits all being brought by the same people? No. We started hearing about ADA lawsuits about a year ago at the time the initial lawsuits were being brought at the urging of an organization representing blind and disabled individuals. But lawsuits are like viruses, left unchecked they mutate and it now appears that other lawyers and plaintiffs are jumping on the bandwagon.
    3. What are my legal responsibilities? That’s still an open question. Unlike so many other issues with which credit unions deal on a daily basis, regulations have never been promulgated addressing the question of whether the ADA applies to websites. At least one set of litigants who bring these lawsuits point to the Website Content Accessibility Guidelines as providing an ADA compliant standard. As I mentioned in this recent blog, one of the first cases in New York to address this issue and now at least one court has held that the ADA does apply to websites. But this is an issue that is still very much up for debate. Incidentally, this whole issue could be resolved if the Justice Department were to issue regulations answering this question once and for all or if Congress would amend the ADA to specifically exempt out websites.
    4. What are the legal issues? 42 U.S.C §12182 provides that no person shall be discriminated against on the basis of disability “in the full and equal employment of the goods, services, facilities…of any place of public accommodation by any person who…operates a place of public accommodation.” The question is, are websites places of public accommodation or was the statute designed specifically to ensure access to physical locations such as branches?
    5. What are the risks of non-compliance? The ADA is somewhat unique among Federal statutes in that there are no specific statutory damages for violations. Instead, plaintiffs can get an injunction forcing a violating party to get up to speed. But here’s a caveat: Successful plaintiffs are entitled to attorney fees.
    6. Why does that make a difference? Critics argue that this creates a somewhat perverse incentive. If parties negotiate in good faith to settle their disputes without officially starting a lawsuit, there isn’t much money to be made. In contrast, a winning party can move for attorney’s fees. In other words, a statute that was designed to facilitate discussions can instead be a means for law firms to make a quick buck. See Rodriguez v. Investco, L.L.C., 305 F. Supp. 2d 1278, 1281–82 (M.D. Fla. 2004)
    7. What should I do now? Each individual credit union should make its own decision of course, based on its own set of facts. One thing I would do is find out how close your website is to being ADA compliant. You may find that your website can rather cheaply and quickly comply with the ADA. I also would suggest however, that this is an issue you ultimately should seek legal advice on. Don’t assume that settling is automatically the best thing to do. Especially if you’re being threatened with damages to which the plaintiffs are not entitled.
    8. What does the future hold? The industry is aggressively pursuing a statutory fix that would address this issue once and for all. There is also increasing involvement with some of these lawsuits. The Association recently sent out an email communication on the issue and more will be forthcoming.    

 

January 8, 2018 at 9:06 am Leave a comment

Pot Banking Up In Smoke

Image result for pot bankingYesterday, Attorney General Jeff Sessions put an end to any straight-faced argument a credit union or bank had for extending banking services to marijuana businesses in states that have legalized marijuana possession and distribution. With a short statement, he retracted the Justice Department’s policy since 2013 that it would not prosecute marijuana crimes in states that legalized marijuana for recreational and medical purposes provided these businesses followed strict protocols. If credit unions and banks are going to be able to provide banking services to pot businesses then they must get Congress to act. It’s that simple.

Regardless of what you think of the policy implications arising from  Sessions’ announcement, his decision clears the legal haze surrounding this strange legal issue. By 2013, 20 states had legalized marijuana use in some form even as it remained illegal as a matter of Federal law. The Obama Administration’s Justice Department, responding to pleas from among others, the Colorado Banker’s Association, issued the so-called Cole Memorandum. This memo stipulated that while the possession and distribution of cannabis remained illegal the Justice Department would effectively adopt a willful ignorance policy. Federal prosecutors were instructed not to prosecute properly run marijuana businesses in legal states.

FinCEN followed suit with a memorandum outlining the conditions under which credit unions and banks could both provide banking services to cannabis businesses and comply with the Bank Secrecy Act. Many financial institutions remained hesitant to provide services and the state of Colorado ultimately chartered a state chartered credit union specifically to provide banking services for these businesses. But the Federal Reserve refused to provide this bank access to the system and the NCUA refused to provide share insurance. A resulting lawsuit has done nothing to clarify the confusion. An Appellate Court ruled that the Federal Reserve acted within its authority but that Colorado could try again to show how it could legally provide banking services.

Yesterday’s announcement makes all this history obsolete. The Cole Memorandum has no legal effect and without the Cole Memorandum, FinCEN’s memo can’t survive. In fact, I would shortly expect an announcement that the memo has been withdrawn.

If you are one of the estimated 400 banks and credit unions across the country that decided to provide services, then you have some awfully tough decisions to make. Simply put, you’re providing services to a business that could be prosecuted for violating Federal drug laws. This is a clear violation of your BSA obligations. Individual US attorneys could decide not to prosecute but this is no basis for maintaining a stable cost intensive lending program.

By the way, I’m not saying any of this because I’m against legalized marijuana. I actually have come to accept that there is a place for the industry at least in states like New York that are willing to permit it for legitimate medical reasons. But I’ve always felt that legalizing cannabis on a state-by-state basis ignores bedrock legal principles: states can’t pick and choose what Federal laws they have to follow. And the Justice Department shouldn’t be in the business of ignoring laws passed by Congress that it doesn’t agree with. Whether you feel that smoking pot is your right or a clearly illegal activity, the banking industry now has clear guidance. The next step has to be to get Congress to change Federal law and allow marijuana to be legal in states that choose to make it legal.

 

 

 

January 5, 2018 at 9:00 am Leave a comment

Are Auto Sales A CU Sore Spot?

If you look at the aggregate numbers for the credit union industry they remain solid. But that doesn’t keep me from living up to my reputation of having a glass half empty kind of guy.

I’ve been concerned for a while now that the industry is growing too dependent on auto loans and my concerns will be tested if current trends continue. Yesterday it was reported that auto sales fell for the first time in eight (8) years. If this is a blip reflecting an inevitable slow down after years of record growth, then it’s no big deal but if car sales declining becomes a trend then you will see an impact on the industry. I took a look at the latest NCUA statistics and currently loans for used cars grew 11.8% last year and 13% for new cars.

Cuomo: Fed Government Out For Blood

A fired up Governor Cuomo kicked off what promises to be one of the most challenging legislative sessions the state has experienced in years with a State of the State speech attacking the Federal government for attacking New York and promising to sue the Federal government for singling out the state in the recently approved tax plan which capped the deduction for state and local taxes. Here’s a sample of what the Governor had to say, “Washington has launched an all-out direct attack on New York state’s economic future by eliminating full deductibility of state and local taxes. What this is going to do, is this effectively raises middle class and working family’s property tax 20 to 25 percent all across the state. It raises their state income tax 20 to 25 percent all across the state. There is no conceivable justification. New York is already the number one donor state in the nation.”

He announced that he is not going to take this laying down. The state will be filing a lawsuit arguing that the tax plan unconstitutionally singles out New York for unequal treatment. I wouldn’t hold your breath. In the meantime, lawmakers have a deficit of several billion dollars to contend with which could grow if the Federal government follows through on plans to cut funding for entitlements such as Medicaid. Add to all this the fact that the Senate majority is up for grabs depending on the outcome of some upcoming special elections. And you have a recipe for a lot of tricky negotiations and gridlock.

ADA Lawsuits Alive and Well

This is just a friendly reminder that the wave of lawsuits against credit unions and other institutions for having websites which are not accessible to disabled users shows no sign of ebbing any time soon. On Wednesday for instance, a company that organizes marathons in the Miami area was sued over claims that its website violated the Americans With Disabilities Act. Keep in mind that under the ADA, the remedy is to fix the website. The plaintiffs can’t sue for damages.

The Incredible Shrinking Credit Union Industry

The long-term trend of credit union consolidation is continuing with gusto. I double checked this number after reading it in the CU Times this morning and sure enough another twenty-five (25) credit unions merged in November. Is this (a) A good trend (b) A bad trend Or (c) Nothing more or less than a reflection of the free market going about its creative destruction? My vote is (c) but that really is worthy of a blog in itself and I have run out of time for today. Peace out.

 

January 4, 2018 at 9:10 am Leave a comment

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Authored By:

Henry Meier, Esq., 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.

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