2014: The Year of the Litigator

January 3, 2014 at 9:32 am Leave a comment

Usually, my first blog of the new year is one of the easiest ones I do. But this year, I have been scratching my head for the last few days and that’s a good thing. The more and more I think about it, 2014 is analogous to the day after the storm has ended when you climb out of the shelter, survey the flotsam and begin the clean-up. You know there’s a lot of work to be done, but you have a pretty good idea about the extent of the damage.

For the last several years now, we have dealt with the Dodd-Frank, CFPB deluge of regulations that will have their greatest impact on mortgage lending and servicing practices. This is, of course, a big deal. The regulations officially kick in on January 10, but for your credit union, the policies, procedures and decisions you had to make to put these new requirements in place should already be settled. Frankly, if they are not, I have no sympathy for you.

With the key regulations already in place, this will be a year for the litigators. Specifically, you will begin to see the lawsuits in which the courts begin to analyze all those ability to repay policies and procedures and servicing requirements that credit unions and banks put in place to comply with Dodd-Frank. Will these lawsuits pose a potential risk to credit unions? Absolutely, and one of the responsibilities of Associations and credit unions alike will be to stay apprised of developments that mean your policy has to be tweaked. Is this a burden? Absolutely, but it is nothing when compared with having to implement thousands of pages of arcane, regulatory minutia.

This is going to be the year when we see how big an impact the courts will have on the bottom line of credit unions. On a national level, there is, of course, the pending appeal of Judge Leon’s decision striking down the Durbin Amendment regulations. It’s impossible to know what the precise impact will be if the Judge’s decision is upheld, particularly since credit unions have so far survived the worst case scenarios envisioned by the industry when caps were first imposed on larger institutions. At the very least, if his ruling calling on regulators to go back to the drawing board and impose a tighter interchange fee cap is upheld, credit unions will face more uncertainty and continued fear that interchange fees will drop for all issuing institutions.

Another important case that is unique to New York but has national implications deals with an appeal of a federal court decision ruling that New York State’s ban on credit card surcharges is illegal. New York is one of several states that impose such bans and if the merchants are successful in validating New York State’s statute, you can bet that the days of these other statutes are numbered.

Finally, I have joked in a previous blog that this is the year that all banking attorneys should be boning up on the federal Administrative Procedure Act. The Volcker rule has no direct impact on credit unions. However, we are going to see litigation centered around not only the specifics of that regulation, but, more generally, the flexibility regulators have in promulgating regulations mandated by Congressional legislation. This might not sound like the most exciting stuff in the world, but the extent to which the federal courts decide to trim the power of regulators will have a profound impact on the regulations to which your credit union is subject for years to come.

Well, I’m off to start the snow blower and scratch my head as I ask myself why exactly I live in the great northeast. By the way, my can’t miss Superbowl pick: San Diego/Seattle with Seattle winning easily.

Entry filed under: General, Legal Watch, New York State, Regulatory. Tags: , , , , , .

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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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