Posts filed under ‘Advocacy’
The long reach of the Telephone Consumer Protection Act of 1991 was highlighted last week by two Congressional hearings and a joint letter issued by our trade Associations and the bankers strongly opposing a petition to make this onerous law even more difficult to comply with. Believe it or not, this may be the single biggest compliance issue your credit union should be monitoring. If you don’t think your credit union is impacted by the TCPA, you’re likely wrong.
The TCPA and its regulations prohibit any call to a land line or cell phone that uses an automatic dialing system, artificial or pre-recorded voice that is made without the prior express consent of the called party. According to the FCC, which administers the law, this prohibition now applies to texts. The key to understanding the TCPA’s reach is to understand that it applies to calls made by your employees with equipment with the capacity “to store or produce telephone numbers to be called using a random sequential number generator” and the ability to dial such numbers. Arguably, the only phone that doesn’t meet this definition is that roto dialer wasting away in the back of your garage. The fact that you don’t autodial your members or bombard them with prerecorded messages is irrelevant.
Traditionally, businesses such as banks and creditors could demonstrate that a member implied consent to receive calls by, for example, including their phone number on a credit application. (See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 23 F.C.C. Rcd. 559, 559 (2008)). Remember that the implied consent standard does not apply to advertisements or telemarketing.
Why has this statute become such a big issue? Combine this level of nuanced compliance requirements with restrictions on text messages sent to an ever growing number of smart phones and you have a classic legal speed trap. There were a mere 14 TCPA lawsuits in 2008. This increased to more than 1,900 in 2014 followed by a 32% increase of such lawsuits to a total of 4,860, including 30 with settlements of over a million dollars. No wonder then, as pointed out in the joint letter, the expansive definition of auto dialer has even led credit unions and other financial institutions to stop texting messages to members who previously received them.
While some of this may ultimately be an overreaction, the issue gets even more complicated now that a petition has been filed with the FCC, which would have the effect of making it more difficult to prove that a member has consented to receive TCPA communications. Specifically, petitioners are requesting that the FCC issue a rule requiring that all calls subject to the TCPA only be authorized with express consent from the receiving party. The fact that a member has previously put his number on that credit application would no longer constitute consent.
This proposal would be great for trial lawyers, but lousy for consumers for whom the cell phone has become an electronic appendage, and financial institutions which, as pointed out in the joint comment letter, often have to make live contact with members to comply with federal law. By the way, the implied consent standards just apply to informational, as opposed to marketing, phone calls.
The good news is that the FCC is poised to take a decisive shift away from many of its more onerous interpretations, now that the Trump Administration can appoint the head of the commission. Still, this is yet another example of how regulations have over taken the statutes that they are intended to implement. It is time for Congress to revisit the TCPA. The problem is that a statute was written when there was an estimated 8 million Americans using cell phones. Today the number of cell phones exceeds the US population, with many adults having more than one cell phone.
I am in D.C. this week and this town feels very strange. In fact, it’s kind of a cross between a jilted lover blindsided by a breakup he didn’t see coming and a Harry Potter novel in which Voldemort succeeded in killing Harry and taking over Hogwarts. You walk onto K Street and still see high-on-the-hog lobbyists and eager young people anxious to get their hands on power. But, look a little closer and you see that almost everyone is out of sorts. After all, you come to D.C. to talk politics, but for the first time in my life, people are timidly broaching the subject unsure on which side of the Great Divide their acquaintances stand. Why, last night, I found myself apologizing to someone from Iowa for talking politics at the bar!
Into this void comes the credit union industry and in many ways, it is both the best of times and the worst of times. It’s the best of times because as we talk to those anxious to scale back government, we have an agenda that does just that. Scores of credit unions have gone out of existence since 2008 and if Washington doesn’t do something soon, only the largest credit unions will be able to absorb the cost of well-intended mandates that miss the mark.
It’s the worst of times because whereas Washington is filled with a lot of well-intentioned idealistic individuals who believe in government, Trumpism is not simply a “throw the bums out” movement. It is a spasm of populist hatred for almost everything Washington stands for.
Many of the members you will be talking to on the Hill today and tomorrow are people genuinely fearful of what they see happening to their country. As a result, credit unions have to temper their message of mandate relief with the reassurance that what we are seeking is not to destroy government, but to make it better.
On that note, I’ll see some of you in a few minutes. Enjoy your day.
The FTC has begun investigating the use of GPS tracking devices and kill switches by two auto lenders, according to both Bloomberg News and the New York Times. Perhaps this news will spark a much needed and overdue debate about GPS technology and car loans.
In 2014-Time flies when you’re having fun-I blogged about a Louisiana credit union and a growing group of other lenders that used GPS technology to locate and repossess vehicles with delinquent loans. The technology not only allows lenders to track vehicles but it also can be used to freeze a car in place. I predicted that this would become a big issue. Consumers would voice concern for their privacy and litigators would be anxious to prove that the technology had the effect of discriminating against low- income minority borrowers.
Like my prediction that the Falcons would beat the Patriots,I was wrong, at least so far. But now comes word that the FTC is generally looking at whether lenders using the devices are violating laws regulating collection practices. The FTC generally has the authority to ban unfair and deceptive practices. Presumably, it couldn’t use this power to ban the use of GPS technology, but it could punish lenders for inadequately disclosing the use of GPS to car borrowers.
It’s in the interest of both lenders and consumers for state legislatures to start hashing out the rules of the road with regard to the use of GPS by auto lenders. As the law stands right now the use of GPS is legal but as the FTC’s investigation demonstrates, its legality will increasingly be called into question. Anytime you combine a red hot lending market, which has many of the attributes of the sub-prime mortgage craze prior to 2008, with technology that will ultimately be disproportionately used against low-income borrowers, you have a lawsuit waiting to happen.
In contrast, legislatures could clearly delineate the boundaries for the acceptable use of GPS technology. Keeping in mind that the opinions I express are mine and mine alone, any measures to regulate the use of GPS in the lending process should include strict prohibitions against the storing and use of data by lenders; prominent consumer disclosure requirements and a ban on the use of kill switches. I can think of too many scenarios in which people end up hurt or humiliated after their vehicle stops in the middle of a busy intersection.
I have one good thing to say about hackers. They have provided us with fresh evidence of why state and federal lawmakers need to impose commonsense requirements on merchants and businesses that don’t adequately protect card information from data breaches, and also don’t bother informing consumers of their mistakes.
Three things happened yesterday that are worth telling your congressman and senators about if you are going to be at CUNA’s Governmental Affairs Conference at the end of the month. First, a Pennsylvania federal magistrate has ruled that a class action lawsuit brought by a group of credit unions and CUNA seeking damages in relation to debit and credit cards compromised by a point of sale data breach at Wendy’s franchises can go forward, First Choice Federal Credit Union, et al v.Wendy’s Co., (U.S. Western District PA). The arguments advanced by Wendy’s in this case underscore precisely why we need clear-cut legal standards making merchants responsible for protecting customer data once and for all. Wendy’s alleges that it has no duty to safeguard sensitive customer information or to provide adequate notification of a data breach.
Fortunately the courts are growing increasingly impatient with arguments such as these. But the fact still remains that, without specific laws in place, merchants will continue to deny that they are in any way responsible for the cost related to data breaches.
Also yesterday I was sitting in on CUNA’s weekly regulatory update call.(for the record I realized after the fact that I was THAT GUY, who chats away not realizing his phone was off mute: sorry about that) During the call, CUNA discussed news of yet another fast food data breach. This one has occurred at Arby’s restaurants. If you are a New York credit union and you think you may have been victimized give me a call as we would like to get a sense of the scope of the possible theft.
Last but not least, it appears that Yahoo’s data breach maybe even worse than reported. When Yahoo finally got around to disclosing that its data had been compromised, it asserted that no debit or credit card information was stolen. A merchant in Texas has recently started a class action lawsuit alleging that his card information was in fact compromised, by the breach of the embattled tech icon.
Yellen’s testimony indicates interest rate rise coming soon
In the first day of her semi- annual testimony before congress Federal Reserve chairwoman Janet Yellen, warned that waiting too long to remove interest rate accommodation would be “unwise.” The likelihood that the Federal Reserve will once again raise interest rates, perhaps as early as March, is more good news for the banks and credit unions that have struggled with narrow profit margins.
On that note, let’s be careful out there and enjoy your day.
In yesterday’s blog, I provided an overview of NCUA’s Supplemental Capital ANPR addressing a potential Supplemental Capital framework. I know requests for feedback are white noise to many of you, who actually have more immediate concerns to worry about, like running a credit union. But there are some big issues tied in with this proposal that affect the industry as a whole and you should take the time to weigh in.
Just how big are the issues? Well, this is the first ANPR I have ever seen that raises the prospect of credit unions putting their tax exempt status at risk. The ANPR notes that “With respect to federal credit unions, the Board is aware that part of the basis for the credit union tax exemption was that Congress recognized most credit unions could not access the capital markets to raise Capital.” It further points out in a footnote that Mutual Savings Banks and Savings and Loan Associations were stripped of their tax exempt status in part because they “had evolved from mutual organizations to ones that operated in a similar matter to banks.”
To me, the core issue is how much credit unions with $100 million or more in assets need Supplemental Capital both to comply with their enhanced risk based capital obligations and continue to grow to meet member needs. The simple truth is that the Basel iii framework, for which NCUA’s Risk Based Capital was the inspiration, was designed with large banks in mind. These institutions can satisfy capital requirements by issuing stock. Credit Unions have no such option. Supplemental Capital would give them greater flexibility to meet these new demands.
And let’s not forget that the credit unions that are most likely to directly benefit from Supplemental Capital are the same ones large enough to bring down the entire industry. Supplemental Capital could provide an added buffer against future financial meltdowns.
Ultimately, I believe that the industry needs to have Broad Based Supplemental Capital as an option available for all credit unions that choose to use it. But seeing legislation like this pass any time soon is about as likely as seeing President Trump’s spokesman, Sean Spicer leading the Washington Press Corp. in a yoga class. (That man really has to take a chill pill.) Supplemental Capital regulations could show Congress how additional capital flexibility helps credit unions grow to meet member needs and enhances the safety and soundness of the industry.
On that note, Namaste
NCUA Details Extended Exam Cycle
In case you missed it, recently NCUA released a letter to credit unions detailing changes to its examination cycle for both federal and federally insured credit unions.
There hasn’t been much good news for state charters recently, let me tell you some. Unless your credit union meets any one of the following criteria you will receive an NCUA evaluation not less than every five years.
- Assets greater than $1 billion;
- Composite NCUA CAMEL code 4 or 5 with assets greater than $50 million; or
- Composite NCUA CAMEL code 3 with assets greater than $250 million
In addition, a working group is being formed to consider ways to further improve the examination process as it relates to state chartered credit unions. Any steps designed to decrease NCUA’s oversight of state charters are welcomed. As readers of this blog will know, yours truly has complained that NCUA has moved so aggressively to oversee the activities of these institutions that it has diminished the value of a state charter.
As for federal credit unions, they will be eligible for extended exam cycles that begin 14 to -20 months after the prior exam completion date. To be eligible for the extended cycle, a federal credit union must have:
- Assets less than $1 billion;
- CAMEL code 1 or 2, in both the composite rating and the management component rating;
- “Well capitalized” under prompt corrective action (PCA) regulations;
- No outstanding documents of resolution (DOR) items related to significant recordkeeping deficiencies; and
- Not operating under a formal or informal enforcement or administrative order, such as a cease and desist order (C&D), letter of understanding and agreement (LUA), preliminary warning letter (PWL), or a PCA directive
New Banking Chairs named
A new session triggers a game of political musical chairs as members jockey to take the helm of key committees. This year is no exception. There are two new faces that credit unions in New York State will be working with more closely over the next two years..
Senator Jessie Hamilton, the newest member of the IDC, representing the 20th Senate District in NYC, has taken the helm of the Senate Banks Committee. He replaces fellow IDC member, Senator Diane Savino, who is moving on be Vice-Chair of the powerful Senate Finance and Code Committees. Savino has been a good friend to credit unions and we wish her the best in her new assignments.
Over on the assembly side, Kenneth P. Zebrowski, was named Chair of the Banks Committee, replacing retired Assemblywomen, Annette Robinson. Zembrowski becomes the first Chairman of the Assembly Banks Committee from outside of the five boroughs in at least twenty years.
Senator Sessions: I’ll enforce Pot Laws
At his senate confirmation to be the US Attorney General, Alabama Senator Jeff Sessions strongly suggested that he would take a stronger stand against states with legal marijuana businesses then has the current justice department. According to this article , when Sessions was asked if he would continue the Obama Administration’s “don’t ask, don’t tell” policy (my characterization) on illegal drugs, the Senator responded “It’s not so much the attorney general’s job to decide what laws to enforce. We should do our job and enforce laws as effectively as we’re able,” said Sessions, adding that “Congress was entitled to change federal law if it so desired.”
Enjoy your day!
The Supreme Court has decided to hear an appeal of a case challenging NY’s ban on credit card surcharges on the grounds that it violates the First Amendment. The Association submitted an amicus in the case in support of the surcharge ban when it was before the Second Circuit, pointing out that in Australia a decision to authorize credit card surcharges simply resulted in higher consumer costs.
New York General Business Law §518 bans merchants from surcharging credit card purchases but allows merchants to offer cash discounts. The law hasn’t gotten that much attention over the years because surcharging was also banned under credit card network rules. When the network ban was eliminated as part of a deal settling antitrust claims, attention turned to the ten states, including NY, that impose surcharge bans.
In Expressions Hair Design v. Schneiderman, 808 F.3d 118 (2d Cir. 2015), five retailers argued that the law prevented them from accurately explaining their pricing policies to their members. The Second Circuit upheld the ban, reversing a lower court ruling that it violated the First Amendment rights of the merchants.
In their appeal the merchants asked the Court to decide “whether these state no-surcharge laws unconstitutionally restrict speech conveying price information (as the Eleventh Circuit has held), or do they regulate economic conduct (as the Second and Fifth Circuits have held)?”
We will know the answer to this question by the end of this term. If the Court were to split 4-4, the Second Circuit’s ruling is upheld.
Red Sox Awakening
Congratulations to the Red Sox and their fans for backing into the American League playoffs despite losing to the Yankees on a walk off grand slam Wednesday night. Wait till next year.
Life was a lot more fun when you knew the Red sox were going to fall just short. It was a real life version of the football being pulled away from Charlie Brown with the added benefit of always being able to win any argument against Boston fans just by motioning the Red Sox.
By the way, as much as I don’t like the Red Sox how great would a Cubs Red Sox series be? It would be like watching Theo Epstein, the former GM of the Sox and current GM of the Cubs playing himself in Fantasy baseball but with live players.