What Legal Risks Does The Pandemic Really Pose To Your Credit Union?

May 5, 2020 at 9:51 am Leave a comment

Governor Cuomo’s announcement yesterday of a regionally based and phased-in reopening of New York State came the same day that Senate Republicans returned to Washington D.C. and emphasized yet again that any additional Federal Aid will be tied to liability protection for businesses fearful of being sued when employees and customers contract the COVID-19 virus.

Not surprisingly, many credit unions are debating the scope of their liability. I’m afraid this discussion is too narrowly focused. The potential risks of your members and employees contracting the virus is just one of several issues your credit union should be considering as it ramps up services in a world that has been fundamentally reshaped by recent events and has dramatically changed the potential compliance and legal risks confronting your credit union. Most credit unions aren’t going to be confronted with class action lawsuits, but almost all of them are going to have to deal with nervous and sometimes disgruntled employees and customers, financially struggling borrowers, over aggressive regulators tasked with interpreting hastily promulgated mandates and financial strains. All of these pose unique legal and compliance challenges.

Your credit union’s response should be shaped by the size of your credit union and the type of products it offers. What all credit unions, and all businesses for that matter, have in common is the need to take a deep breath, pull back the lens and address those areas where potential legal deficiencies have been exposed or exacerbated by the pandemic.

How should you go about accomplishing this? Credit unions are already used to regulatory mandates requiring that they assess the risks of a broad range of issues ranging from a new member’s business activities to a new product’s vulnerability to identity theft. I would suggest taking the same approach to identifying those areas most in need of improvement as a result of COVID-19.

For example, what is the greater threat to your credit union: a class action lawsuit brought by members or employees who come down with the virus or being sued by an individual employee after not accommodating a request to work from home? For many of you HR issues pose a much greater threat to your financial health than does the direct threat of the pandemic.

Then of course there are the hastily promulgated regulations enacting the PPP and mandating forbearances be granted for homeowners whose finances have been impacted by the pandemic. These are just two examples of regulations which both disgruntled members and curious regulators will be taking a look at in the coming months.

The bottom line is that as your credit union reopens lobbies, expands hours, and calls more employees back to work, it should do so within a new framework which recognizes the various ways both big and small that the pandemic has had and will have on almost every aspect of your credit union’s risk profile. You should recognize the areas of greatest risk and prioritize those areas which most need to be improved. Time to call a virtual meeting and by all means include your outside counsel.

Entry filed under: COVID-19, General, HR, Legal Watch, Mortgage Lending, Regulatory. Tags: , , , .

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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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