NY Budget Proposal Includes Major Financial Abuse Reform

February 3, 2017 at 9:15 am Leave a comment

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New York State’s budget typically does not have a major impact on credit unions. This year is an exception. Among the Governor’s proposals is one authorizing financial institutions to impose transaction holds when they believe that individuals are being victimized by financial exploitation? The bill would have major operational implications for credit unions by giving them substantial new power and responsibility when dealing with suspected financial abuse.

Under the proposal financial institutions would be empowered to impose a transaction hold based on a good faith belief that exploitation of a vulnerable adult; may have occurred, may have been attempted or is being attempted. Interestingly the transaction holds can be placed not only on the vulnerable adults account, but also to accounts of which such person is a beneficiary, including trust and guardian accounts. Within a day of placing a transaction hold, institutions would have to report the transaction hold to Adult Protective Services and to “a law enforcement agency.” A vulnerable adult means an individual who, because of mental and/or physical impairment is potentially unable to manage his or her own resources or protect himself from financial exploitation. The Department of Financial Services would be authorized to develop a certification program, but it does not appear that training would be mandatory.

One of the key questions that I always have when analyzing a proposal like this one is how much protection financial institutions will have? After all a poorly drafted statute, no matter how well intended, could make a credit union subject to litigation for every bad financial decision made by an elderly or disabled individual. The only opinion I will offer about the draft proposal so far is that the liability protections should be strengthened.

The good news is the governor is proposing to shield institutions that impose transaction holds from criminal, civil and administrative liability for all good faith actions, including determinations not to apply a transaction hold on an account. The bad news is this protection only applies where there is a reasonable basis for such a determination. It also does not apply where an employee or financial institution acts recklessly or engages in intentional misconduct in making the determination, or the determination results from a conflict of interest.

As I have explained in previous blogs, the most unequivocal protection from liability that I have seen for credit unions is for the filing of suspicious activity reports. Comparing these protections to what NYS is proposing shows why more work has to be done if the ultimate goal is to create an environment in which institutions are confident that they can protect their vulnerable members without exposing themselves to liability.

This year’s Super Bowl pick

My Bet the Mortgage, Super Bowl pick, which is already recognized as acceptable supplemental capital for complex credit unions is…. Falcons 31 – New England 24. The Falcons use a ball control offense to keep the ball out of Brady’s hands and ultimately score a couple of late touchdowns.

There will be no blog on Monday as I am a celebrant of the new DASB, Day After Super Bowl holiday!

Peace out!!!

Entry filed under: General, New York State, Political. 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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