Can You Trust Your Tellers?

June 8, 2015 at 8:56 am Leave a comment

That is the implicit question raised by NY”s Attorney General  Eric T. Schneiderman.  The WSJ is reporting this morning that the man who holds the position known for  its unofficial title,” Aspiring Governor”, sent a  letter to large banks on Friday  warning them that their customers are at  risk from insider identity theft and urging them to be more alert to  employee conduct.. (http://www.wsj.com/articles/bank-tellers-draw-scrutiny-1433720000).

The AG’s letter is the latest in a series of steps taken  by his office highlighting the access tellers have to personal information.  For example, earlier this year his office secured a guilty plea from  a teller at a JP Morgan Chase branch in White Plains.  According to a press release,   she would target customers with common names and over $50,000 in their accounts. She would copy this customer data and smuggle it out to  co-conspirators who used it to create fraudulent checks and identification documents. These fake documents were then used to impersonate account holders and to withdraw money at bank branches in Westchester County, New York City and Long Island, as well as Connecticut and Massachusetts.

The AG’s letter is a reminder that, even as the financial industry gets swamped by increasingly sophisticated and well-funded cyber  thieves,  the core of your data security still must be based on knowledgeable employees who not only know the rules but are willing to follow them.

SC Rules on Underwater Mortgages

Last week was a surprisingly fertile one for blog topics and one of my more astute readers pointed out that I haven’t yet mentioned an important bankruptcy case decided by the last Monday.

The case to which he was referring is Bank of America. V Caulkett in which the Supremes upheld the   rights of creditors holding junior mortgages. ( http://www.supremecourt.gov/opinions/14pdf/13-1421_p8k0.pdf).

Section 11 USC506 (d) of the Bankruptcy Code provides that  “ To the extent that a lien secures a claim against the debtor that is not an allowed se­cured claim, such lien is void.”  In Caulkett, the court had to decide how to apply this provision in the case of underwater junior lien mortgages. The houses securing the mortgages in question  had fallen so much in value that if they were sold immediately the second mortgages were worthless.

Two lower courts voided the liens, concluding that an underwater mortgages were  not “secured” claims.  The Supreme Court reached a different result.  It defined  a secured claim under Section 506  “ to mean a claim supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim.”

Given the length of time that can pass in NY between when a homeowner becomes delinquent, files for bankruptcy, his  house is foreclosed on and eventually sold this case is  important in a narrow  set of increasingly common circumstances.  The case affirms existing practice in New York.

The case  is also  a good example of why you should never just read a statute when you have an important question to answer.  This is the third time I’ve read  this case and every time I read the statute I’m more convinced the debtors have a pretty good argument.  But the Supreme Court is bond not only by the words of a statute but how it has been previously interpreted.

Besides, the Supreme Court gets the final word and  as former Justice Jackson once quipped “We are not final because we are infallible, but we are infallible only because we are final.”
 

Entry filed under: Legal Watch, New York State. 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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