State Enacts New Restrictions on State Charter Inactivity Fees

November 12, 2020 at 9:17 am 2 comments

Governor Cuomo has approved legislation requiring state chartered credit unions to provide additional notices to account holders prior to imposing inactivity fees. S.4188 (Kennedy) / A.9140 (Abinanti) takes effect in 90 days.

Under the bill, financial institutions will have to provide 30 days written notice before fees can be imposed, and the notice will have to include full contact information, including a phone number, for the account holder to use in reaching a representative from the financial institution. 

Although this is a legal determination that you should confirm with counsel, the bill does not apply to federally chartered institutions. First, the new law only applies to financial institutions subject to this chapter. This generally limits its jurisdiction to state licensed and chartered financial institutions, but there are some exceptions. Secondly, even if the state was to attempt to apply this provision to federally chartered credit unions, NCUA has repeatedly and clearly opined that inactivity fees are preempted as applied to federal credit unions. The bottom line is that the state has imposed another meddlesome mandate which makes the state charter less attractive, even though there are relatively few state chartered institutions left to regulate.

Here We Go Again?

New York State appears to be edging closer to reinstituting lockdowns. Reacting to a dramatic and uncontrolled spike in COVID-19 cases, the Governor yesterday released new restrictions on when restaurants, gyms and bars have to close by, as well as limits on the number of people permitted to meet at once. Look on the bright side: you know there are people you’d rather not spend Thanksgiving with, and this year you have the perfect excuse to disinvite them. This is a great solution for avoiding the inevitable political debate which will accomplish nothing besides ruining the day. 

New York Adviser Named to Biden Transition Team 

Even as Donald Trump refuses to concede that he lost the election, President-elect Joe Biden is moving ahead with his transition team. The ever-informative Washington Credit Union Daily gave me a heads up this morning that Leandra English has been named to the Biden Administration’s CFPB Review team, which will help set priorities for the Bureau under the new President. Nationally, English is best known as the Deputy Director under Richard Cordray, who argued that she could not be replaced as the Bureau’s acting director following Cordray’s departure. Locally, English has served as an adviser to New York State’s Department of Financial Services. If the past is prologue, this means the rest of the country should quickly expect a heavy emphasis on servicers offering forbearance options for individuals facing economic hardship as a result of the pandemic. 

Entry filed under: Compliance, COVID-19, General, New York State, Regulatory. Tags: , , , , , .

BOA Gets Approval for Low Interest Small Loans For Medallion Loans Things Just Get Worse and Worse

2 Comments Add your own

  • 1. Anonymous  |  November 12, 2020 at 12:08 pm

    UGH! More unnecessary control…………

    Reply
  • 2. Linda Hoff  |  November 13, 2020 at 10:20 am

    Hi Henry:

    Will any guidance (i.e. final rule) be put out on this piece of legislation regarding inactivity fees.

    Thank you.

    Linda Hoff, NCCO, CAMS
    Compliance Officer
    AmeriCU Credit Union
    lindaho@americu.org
    Phone: 315-356-3409
    Fax: 315-336-4546

    Reply

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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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