The Good The Bad and The Ugly of NYs Legislative Session, Part 2

No one is ever going to accuse the NY Legislature of being hesitant to legislate.  Here is the second part of my end of session recap.    

The New York Privacy Act:  S6701-B Thomas

One of the issues I blog about frequently is data portability legislation such has already been passed in Virginia, Colorado and California.  Once again, the legislature gave consideration to S6701 which would impose a California style data privacy framework on New York businesses.  We continue to work on getting important changes to this bill including insuring that it does not create a duplicative regulatory framework.  Most importantly, the Legislature should follow the lead of Virginia and not impose these requirements on institutions that already have to protect member data pursuant to the Gramm-Leach-Bliley Act.

Overdraft Regulations: S7202-A Sanders / A9659  Fahy

The Legislature passed a bill requiring state-chartered institutions to provide members with overdraft payment information once every six months.  Specifically, the bill would require members to receive written notification of the dates and amounts of overdraft fees, the total amount charged, information on the customer’s ability to negotiate fees; and a telephone number and full contact information for a representative of the financial institution responsible for resolving any matter relating to such fee.

We opposed this bill since federal law already mandates that members be notified of their overdraft charges.  In addition, this is just one more mandate that would be imposed on institutions that choose to be chartered by New York state, as opposed to NCUA.

BDD Program Extended: S9152 Sanders / A9804  Jean-Pierre

The Legislature extended until 2029 the Banking Development District Program bill which allows financial institutions, including state and federal credit unions to receive public funds in return for opening branches in financially underserved areas.  I’ve talked to credit unions that are seriously examining the program and the Associations can help facilitate discussions with institutions that might want to consider this option.  The bill has not yet been sent to the Governor.

Power Of Attorney Clarification: S9209 Hoylman / A10234  Rules (Weinstein)

I haven’t done an official tally, but I would bet that the most frequent questions the Association receives on its Compliance Hotline have to do with the validity of Power of Attorney documents.  The issue was made even trickier because effective June 13, 2021 major new changes to New York’s POA took effect.  This bill stipulates that any Power of Attorney that was validly executed at the time it was made remains valid even if it is signed by the agent after June 13, 2021.  This bill has not yet been signed by the Governor.

Salary Ranges Made Publicly Available: S9427-A Ramos / A10477  Rules (Joyner)

The most important new HR legislation approved in the closing days of the session would mandate that any employer with four or more employees publish a job description and salary range any time it is posting for a job, promotion or transfer opportunity.  If the Governor signs this bill, the Department of Labor would be responsible for developing regulations.  This would apply to federally chartered credit unions. 

Grace Period For Credit Card Points Extended: S9121  Mayer / A10490  Rules (Rozic)

Last year the Legislature passed and the Governor signed into law a bill requiring consumers to be given at least 90 days to use reward points on credit card accounts that are being shut down.  The legislature passed a bill, supported by credit unions, which extends the effective date of this requirement until December 10, 2023.

New York Court Invalidates Congressional and Legislative Districts

In a decision which could have a direct and substantial impact on the political environment in which credit unions operate, not only in New York State but around the country, New York’s highest court invalidated a Congressional map which would have favored Democrats to pick up at least three seats, and a state Senate map which was the first drawn by Senate Democrats since the modern redistricting process started in the 1960s and would have helped them maintain their super-majority. 

In the decision, the Court of Appeals not only invalidated the new maps but put a special master in charge of developing an alternative.  The Court concluded that there was insufficient time to allow the Legislature to redress the situation.  To put it nicely, the decision scrambles the political timeline.  Currently, primaries are scheduled to take place on June 28^th, but with members not knowing precisely what districts they will be running in, it looks like New York is headed for a frenzy of political activity over the summer. 

This was the first redistricting cycle following amendments to the state constitution in which a bi-partisan Independent Redistricting Commission (IRC) was charged with drawing a map to be submitted to the legislature for its approval.  Under the process outlined in the Constitution, the IRC was supposed to make at least two attempts at coming up with a single plan for submission to the legislature.  The IRC deadlocked however, and its only submission to the Legislature was a set of competing maps.  State law now also mandates that maps not be politically gerrymandered. 

The Court of Appeals ruled that the maps approved by the Legislature failed both tests.  “Through the 2014 amendments, the People of this state adopted substantial redistricting reforms aimed at ensuring that the starting point for redistricting legislation would be district lines proffered by a bipartisan commission following significant public participation, thereby ensuring each political party and all interested persons a voice in the composition of those lines. We decline to render the constitutional IRC process inconsequential…”.

While this is a big deal, remember that we won’t know its precise impact until Election Day and New York is still a state with an overwhelming Democratic enrollment edge. 

Getting Ready For The Legislature’s Stretch Run

Yours truly is back from his Carolina vacation and has caught up with enough e-mail to finally post again.  While there is a lot I want to get off my chest – there is only so much my wife wants to hear about the banking industry during an eight-hour car ride – I think I will start with a description of some of the key legislative and regulatory issues that will be impacting New York state credit unions in the coming weeks. 

Not only is this an election year, but it is an election year following the redrawing of the election map, meaning that the legislature will want to get out of town as quickly as possible, especially with primaries scheduled for June. 

One of the most important issues we are dealing with is a bill that would retroactively impose strict new requirements on lenders foreclosing on property (S5473D Sanders).  As many of our members have already explained to their representatives during our state GAC, as currently drafted, the retroactive application of this bill and the ambiguity regarding the right of lenders and borrowers to negotiate modifications without running out of time to foreclose on property will actually make it more difficult to work with delinquent borrowers.

We are also continuing to advocate for changes to a proposed data portability and privacy bill which does not currently exempt financial institutions (S6701A Thomas / A680B Rosenthal) as well as continuing to express a strong opposition to state level anti-trust legislation (S933A Gianaris) which could negatively impact the ability of credit unions to help provide communities banking services, particularly in underserved areas. 

All this is taking place as New York’s highest court hears an appeal of a case challenging the legality of New York’s redrawn Congressional map which could allow Democrats to pick up four additional seats as they struggle to keep their majority.  Expect a decision to come down shortly.

As for the federal level, there is an interesting article in today’s WSJ reporting that privacy legislation may finally be getting traction in Congress.  This is potentially good news, provided the legislation does not impose additional requirements on credit unions and the legislation preempts state law.  But I still remain skeptical that Congress will be able to get legislation done this year.  Hopefully, I am wrong.

On the regulatory front, we are still waiting to see what will come out of the CFPB’s initiative against so-called “junk fees”.  The president of the American Bankers Association has already taken to publicly accusing the Bureau of going rouge.  My bet is that we are going to be hearing a lot about overdraft fees in the coming months. 

Last, but not least, let’s hope that the NCUA is going to be following up on its reach-out to credit unions by providing additional guidance as credit unions begin to explore the banking issues raised by distributed-ledger technologies and cyber currencies.  On May 11^th yours truly will be discussing the state of regulation in this area and how it is going to impact your credit union as part of the Southern Tier’s Spring Chapter Event in Binghamton.  I noticed it’s at an Irish pub, so let’s share a half-and-half as we ruminate on how technology is once again upending the way banking is done.

Full disclosure, my wife and kids won’t be attending.  They already heard enough about how the NCUA needs to move more quickly and provide additional guidance in this area.  It was one of my favorite topics as we drove around North Carolina.

Do Vacation Policies Help Prevent Fraud?

In 1996 New York’s Banking Department issued a guidance strongly encouraging financial institutions to mandate two weeks of consecutive vacation for employees holding sensitive positions.  Its rationale was that two weeks would provide adequate time to uncover malfeasance on the part of employees who would not be able to cover up their mismanagement away from the office. 

It seems that about for as long as the policy has been in existence, state chartered credit unions and banks have argued that the guidance is an outdated relic of a bygone era which needlessly burdens financial institutions and does little to accomplish its laudable goal of detecting insider abuse. 

So yours truly was pleased to see that on January 4^th DFS issued this request for information seeking feedback from financial institutions about potential changes to this guidance.  The Association has already talked to some of our state charters and will certainly be commenting to the DFS as it considers changes. 

Just rereading the guidance demonstrates how outdated it truly is.  For example, it explains that mandatory vacation policies should apply to “… those officers and employees involved or engaged in transactional business or having the ability to change the official records of the institution. This policy should also cover all other staffers who are capable of influencing or causing such activities to occur.”

Suffice it to say that a lot has changed since 1996.  Many of us still did not know what the internet was, let alone conceived of online banking.  It was 11 years before Steve Jobs introduced the iPhone!  And today, average consumers can electronically deposit checks and expect almost immediate access to their funds.  As a result, virtually every employee can, on some level, be considered a key employee who holds a sensitive position and a fraudster can do in a matter of minutes what used to take two weeks. 

The NCUA manages to address the same issues that New York addresses without adopting a stringent two week requirement.  It’s time DFS follows suit.  The existing guidance hinders both big and small institutions. 

New York’s Highest Court To Rule On Medallion Controversy

New York’s Court Of Appeals, the State’s highest court, has decided to wade into the taxi medallion controversy.

The court will consider a case in which a group of individuals who purchased yellow taxi cab medallions in three auctions held in 2013 and 2014 are seeking to sue New York City and the Taxi and Limousine Commission alleging that they engaged in bad faith and deceptive practices by auctioning the medallions while at the same time authorizing ride sharing companies such as Uber to offer services designed to undercut the value of a medallion. The case is Singh v City of New York, No. 2021-549, 2021 N.Y. Slip Op. 72950, 2021 WL 4735808 (N.Y., Oct. 12, 2021).

As credit unions are painfully aware, taxi medallions were being auctioned for as high as one million dollars before their value crashed as a result of the ride sharing explosion. In this case, medallion buyers are seeking to get their money back. At the very least, the ongoing litigation is likely to leave unresolved the question of precisely how much a medallion is worth.

Account Transaction Proposal Is “Screwed Up”

That is the blunt assessment of West Virginia Senator Joe Manchin who was asked about the likelihood of the proposal being included in the multi trillion dollar spending bill being negotiated by Senate Democrats. Our friends at CUNA are quick to remind us that the Senator’s comments do not mean that we are out of the woods yet. Furthermore, I for one never want to be accused of doing the legislative equivalent of the 1986 California Angels, who began celebrating winning the ‘86 Pennant that they ultimately lost to the Boston Red Sox. Still, the Senator strikes me as a man who means what he says and says what he means. The industry is awfully close to a big victory on this one. You can hear the Senator’s comments starting at the 28th minute of this interview.

Three Things You Should Know To Start Your Credit Union Day

Municipal Deposit legislation, A8289, gained a key sponsor yesterday when the new Chairwoman of the Assembly Banks Committee became the prime sponsor of the legislation in that chamber.

Assemblymember Pat Fahy is the new chairperson of the Banks Committee. She replaces former Bronx Assemblymember Victor Pichardo who resigned from the Legislature this past summer. Pichardo’s departure means that the legislation will have to be reconsidered by the Banks Committee. Last year the legislation advanced to the Assembly Ways and Means Committee.

Assemblymember Fahy is a familiar face in the Capital Region who represents parts of Albany and Bethlehem. In September, the Association met with her office to discuss credit union priorities.

Court Clarifies Foreclosure Notice Requirements

When it comes to foreclosing in New York, minute mistakes can make a huge difference. Most readers of this blog know that state law requires mortgage holders to mail a 90 day pre-foreclosure notice to delinquent homeowners before commencing foreclosure (RPAPL 1304). When there are multiple borrowers, how is this requirement satisfied? In this recent decision a New York Appellate Court addressed this issue for the first time. It ruled that lenders must mail a separate 90 day notice to each borrower in separate envelopes.

Is this arcane? You bet it is. But if this procedure isn’t followed, a foreclosure will be dismissed, at least in Long Island, Westchester, Brooklyn, Queens and Staten Island over which this court exercises its jurisdiction. Wells Fargo Bank, N.A. v Yapkowitz, 2021 N.Y. Slip Op. 05139, 2021 WL 4448061

Yellen Continues To Push For Transaction Monitoring

Treasury Secretary Janet Yellen continues to insist that requiring banks and credit unions to report almost every account transaction by their members is no big deal. Ironically, she is making this argument even as America wakes up to the danger of Facebook controlling so much of our personal information. People don’t trust the IRS any more than they trust Mark Zuckerberg, although it might be close at this point. 

Yellen’s continued advocacy underscores that we have to continue to tell anyone that will listen that intrusive transaction reporting is a bad idea.

I will be back on Tuesday.  Enjoy your long weekend. This year’s World Series prediction, which has been certified as acceptable Secondary Capital by the NCUA, is the Milwaukee Brewers against the Houston Astros, with the Brewers winning in a seven game classic.

Are You Ready to Spy on Your Members?

Depending on what happens in the next two weeks, the federal government could impose the most direct mandates on credit unions than it has in more than a decade.   

Most importantly, House Democrats are still working on a proposal that would effectively mandate that credit unions spy on their members.  Bloomberg news is reporting that a proposal is now being floated which would mandate financial institutions report account flows of $800 or more.  The original proposal would have triggered the reporting requirement at $600. 

Any threshold amount after which financial institutions would have to report to the IRS should be opposed.  While the Supreme Court has generally not extended bank privacy as a matter of constitutional law, a panoply of federal laws has prescribed very specific triggers for reporting bank activity to the government.  This proposal would give the government access to our member information every time they do nothing more than engage in normal banking activity such as paying the mortgage or buying a new car. 

This is not the only action by the federal government of which your credit union needs to be aware.  On Friday, guidance was issued providing more detail to President Biden’s Executive Order mandating, among other things, that federal contractors require their employees get vaccinated against COVID-19 by December 8^th.  While the guidance includes an extremely broad definition of “government contractor”, we still need additional clarification before we can be certain that this mandate applies to credit unions.  That being said, this FAQ interpreting a previous Executive Order clearly indicates that the U.S. Department of Labor considers financial institutions contractors for purposes of account insurance. 

Fortunately, you can stay updated on these and other issues by attending the Associations annual Legal and Compliance Conference, which starts tomorrow.  It’s going to be virtual for one more year.  So ends the shameless plug portion of my blog.

The Good, The Bad, and The Ugly as Albany’s Session Comes To A Close

Early this morning, the NYS Legislature came to its unofficial end as the Assembly passed the last measures of an extremely active session. Here is a first look at some of the key legislation that will impact CUs if it is approved by the Governor.

In a major legislative accomplishment, credit unions successfully lobbied for legislation which will allow them to participate in the Excelsior Linked Deposit program. The program gives lenders access to state deposits in return for making qualifying small business loans of up to two million dollars. Just how long have credit unions been seeking to participate in the program? Well, one of our volunteer board members lobbied for passage of the bill by showing legislators a letter he wrote in support of credit union participation to the Governor… Governor Pataki.

Credit Unions came up short on legislation which would allow municipalities to place their funds in credit unions but for the first time in at least 15 years, legislation has been voted out of the Senate and Assembly Banks committees. This means that the finance committees will be hearing from plenty of credit unions over the next year.

Finally, credit unions successfully lobbied for passage of legislation which will help bring banking into the 21st century by authorizing the use of remote online notarization. This bill is a win for consumers in general and the elderly and disabled, in particular, who will now be able to more easily get their documents notarized without having to go to a branch. The legislation would also make it easier to sell mortgages on the secondary market.

Now for the bad news. The legislature passed a measure to cap the interest that can be charged on judgements related to consumer debts at 2%. As drafted, the new interest rate would apply to judgements which have been filed but not yet executed prior to the bill becoming effective. If you think that is a recipe for a confusing mess, you’re correct.

Earlier this year, New York’s Court of Appeals wrote a series of decisions restoring a level of common sense to New York’s foreclosure process. The legislature passed a series of measures which chip away at these rulings. For example, Assembly 2502A imposes additional pleading requirements on lenders seeking to foreclose that could otherwise be waived by a homeowner.

Another bill passed by the legislature would extend CRA requirements to licensed mortgage bankers. Crucially, this bill would not apply to credit unions. It would apply to mortgage CUSOs.

Looking ahead, the table has been set for a debate over legislation to impose a California-style data protection framework on NYS. Legislation has been introduced and the Association is seeking to exempt GLB compliant institutions. Get your talking points ready for the trip to Albany next winter.

Albany Moves On CU Priorities

Yesterday saw some important movement on legislation impacting credit unions.

First, legislation that would permit municipalities to deposit money in credit unions has been placed on the Senate Banking agenda which meets this Tuesday, May 18^th. S670 sponsored by Banking Committee Chairman Sanders is of course a key priority for the industry.

Currently, municipalities, including school districts and local towns throughout the state, are prohibited from placing their money in credit unions even when it could help New York’s taxpayers by generating more interest on public funds and providing much needed competition in an area where banks currently hold a monopoly. We will be coming out with a Call To Action later today.

Secondly, yesterday the Governor signed legislation to exempt from levy and restraint COVID-19 stimulus payments. More specifically, the bill exempts from collection any payment to individuals under the Federal Family First Coronavirus Response Act exemption for emergency relief funds. Any payments to individuals, including tax refunds, recovery rebates, refundable tax credits, and any advances of any tax credits, under the Federal Families First Coronavirus Response Act (FFCRA), Coronavirus Aid, Relief, and Economic Security Act of 2020  (CARES Act), Consolidated Appropriations Act of 2021, and the American Rescue Plan Act Of 2021 (ARPA). The exemption does not apply to child and family support payments. In addition, the bill prohibits financial institutions from exercising a right-of-set-off on these funds. 

The Association joined with CUNA in advocating for stimulus payments to be exempt from levy and restraint.  Congress did not exempt the latest round of stimulus payments from levy and restraint apparently because doing so would have violated budget reconciliation rules which allowed the measure to be passed in the Senate by a simple majority.

Gov Approves HERO’s Act

Good morning folks, with a special shout out to those of you who work in the great state of New York.

The Governor has approved the HERO Act, legislation which mandates that all businesses in NYS implement policies addressing a wide range of issues related to airborne illnesses, such as COVID. For those of you with ten or more employees, you also must give your employees the option of creating committees to address work place health related issues on an ongoing basis.

The bill is phased-in over a six month period with the first requirements taking effect in 30 days. Adopting an approach similar to what we saw when the state passed sexual harassment legislation, the state will be providing sample policies that your credit union can adopt.

One other piece of good news is a reminder that this law applies to both federal- and state-chartered credit unions.

Stay tuned, the Association will be hosting a webinar next Wednesday to take a first look at this important new mandate.

Remote Notarization Hearing Today

At 10 o’clock today, the Assembly will be holding a virtual hearing to analyze issues related to authorizing remote notarization on a permanent basis in New York. Remote notarization refers to the ability of a notary to verify the authenticity of a signature without the signer being physically present. Lisa Morris from Hudson Valley Credit Union will be testifying for the Association.

He’s Back!

The former Benign Dictator of Consumer Finance is back. Ricard Cordray has been given a high profile job at the U.S. Department of Education from which he will oversee issues related to the federal student loan program.  Not coincidentally, his portfolio gives him a high-level platform to address one of the key issues the Biden administration is being pressured to address — whether to forgive or not to forgive all of those student loans — while not being so high as to require Senate confirmation.

California Chimes In

California joined  Illinois’s  financial regulator in prohibiting lending platform Chime from implying in its advertisements and websites that it was a bank as opposed to a lending platform that passes through loans. The state’s actions come as federal and state regulators continue to grapple with the issue of when FinTechs should be classified as banks with the accompanying regulatory requirements that this classification would impose.

Earlier this week the Federal Reserve board issued proposed guidance for the Federal Reserve banks to consider when deciding whether or not FinTechs should be given access to the Federal Reserve System. Don’t underestimate this power: remember it was a Federal Reserve Bank which blocked Colorado from starting a state-level bank to provide marijuana banking services.

Captain obvious here: this is an issue that Congress needs to address sooner rather than later.

On that note, enjoy your weekend. If all goes according to plan, yours truly will be gathering with a group of vaccinated middle age men to play his first round of in-person poker in more than a year.