Posts filed under ‘Economy’

How to maximize your TNC protection

As readers of this blog know, the Legislature authorized Transportation Network Companies such as Uber and Lyft to start operating in New York State locales beyond NYC as part of the recently approved budget. Thanks in no small part to the efforts of the Association, the legislation includes some important protections for credit unions. However, there are still additional steps that I would take to maximize your credit union’s collateral protection, particularly as ridesharing is taking hold at the same time that the 72 month car loan has become common place.  Remember this is just one person’s advice and not a substitute for running this by your own counsel.

Ever since plans were laid for TNC networks to come to New York, insurance has always been a big issue. Remember that your typical car insurance policy contains a livery exception, meaning that a driver isn’t insured for accidents that happen while logged into the network to pick up passengers. The legislation addresses this issue by mandating that TNC drivers applying to join a network be informed of the need for additional insurance and mandating that the TNC’s make sure that these drivers are, in fact, properly insured.

While these are important protections, in talking to credit unions I am suggesting that there are still additional steps they should consider taking. Most importantly, I would amend your car loan language with a provision informing the borrower that the use of a vehicle being financed in a TNC without the insurance mandated under NYS Law shall constitute a breach of the lending agreement and may result in the entire amount of the loan being due immediately.

What does this accomplish that New York State’s Law cannot? For one thing it is more expansive than the protections afforded by the law since its prohibitions would apply even to members who are not currently logged in to a TNC Network but who are TNC drivers.This is important because if you have reason to believe that a member is operating as a TNC driver you can call the loan without waiting for an accident. It also provides an additional notice to your members that special TNC insurance is required. Finally, it provides you some level of protection in the event that your member somehow gets to join a network without getting adequate insurance. But under this later scenario I would consider going after the TNC Company for your losses. New York’s TNC legislation takes effect in approximately three months.

By the way, since we are on the subject of TNC’s, I had the pleasure of dropping off my two daughters at Kennedy Airport Monday morning for a flight down to North Carolina. For those of you, who haven’t had the “pleasure” of going to Kennedy, think of those chaotic scenes in third world capitals where a mass of humanity ignores all laws. The one thing noticeably absent from this scene was anything more than a handful of traditional yellow cabs. If I had taken this trip just 5 years ago they would have been everywhere. With the caveat that I have always been accused of being a skeptic when it comes to the future of the medallion industry, all you have to do is go to NYC to realize that the medallion industry as we know it is destined to become an exhibit in the Smithsonian. I am also happy to report that my two kids didn’t witness paying passengers being dragged off the plane and assaulted.

On that upbeat note enjoy your day!

 

 

April 20, 2017 at 9:21 am Leave a comment

Why SC Ruling Will Make Your Debt More Attractive

Expect “debt collectors” to have more interest in buying your delinquent loans as opposed to simply contracting for a percentage of collection recoveries if, as expected, the Supreme Court rules in favor of Santander Consumer USA, Inc.

Oral arguments were heard on the case yesterday, in an important collections case, and we can expect a ruling sometime in June. You can also expect states like New York to take a renewed interest in strengthening state level restriction on debt collection practices.

The FDCPA was passed by congress to deter abusive debt collection practices. It was intended to crack down on third-party collectors which is why it does not apply to banks and credit unions which are collecting on their own loans. The question is who exactly is a debt collector under 15 U.S.C.A. § 1692a (West). Under the statute, a debt collector is any person….”who regularly collects or attempts to collect, directly or indirectly debts owed or due or asserted to be owed or due another.” Santander purchased billions in car loans and set about collecting on those that were delinquent. Borrowers alleged that their aggressive collection practices violated the FDCPA, but when they tried to sue Santander for violations it successfully argued before the Court Of Appeals for the Fourth Circuit. Their argument was that since it was collecting on debt it owned, the statute didn’t apply to its activities.

According to press reports, justices weren’t buying the argument of the borrowers yesterday, who argued that Santander was taking advantage of a loop hole that is inconsistent with congress’s intent when it passed the FDCPA.

No matter how the Federal Law is interpreted, New York is one of several states that has a state level DCPA modeled after the federal law. In a brief submitted to the Supreme Court, New York joined several such states in arguing that existing state level prohibitions aren’t adequate. The brief noted for example, that New York’s debt collection statute (NY General Business Law § 600 et. seq.) has traditionally been interpreted in reference to the federal law and that it does not permit consumers to bring a lawsuit.

Stay tuned – this provides another classic example of how a change in direction in the federal level is often met with push back on the state level.

April 19, 2017 at 9:43 am Leave a comment

Wells Fargo In The News for All The Wrong Reasons- Again

Wells Fargo continues to be the gift that keeps on giving, for consumer advocates anxious to argue why we are all better off with the CFPB.

Yesterday, The Occupational Safety and Health Administration (OSHA) ordered the bank to pay $5.4 million in back wages to an employee they fired in 2010, after reporting suspected incidents of mail and wire fraud by “bankers” under his supervision.

Although a written decision didn’t accompany this news there is wide-spread speculation that the whistle blower was disciplined for reporting instances related to the opening of phony accounts without customer permission. Remember, the CFPB was the regulator that discovered and fined Wells Fargo for this misconduct.

Incidentally, if you’re wondering why OSHA is fining Wells Fargo, it’s because it was given the authority to enforce Sarbanes-Oxley’s whistle blower protections provisions. Go figure.

The Sarbanes-Oxley Act makes it illegal for a publically traded company to discharge, suspend, threaten, harass, or discriminate against any employee who provides information to assist in the investigation of a violation of certain Federal Laws (18 USC 1514A). The bank has the option of appealing OSHA’s fine. It should quit while it’s behind; but somehow I don’t think that is going to happen.

Of course, the fact that Wells Fargo has engaged in misconduct discovered by the CFPB doesn’t make the CFPB’s structure anymore constitutional or prudent. But try telling that to the Elizabeth Warren’s of the world.

 

New York Extends Budget till May 31

In what is new ground for the Cuomo Administration the legislature and the Governor have agreed to a temporary budget extending until May 31, while they continue to work on a budget plan for the 2017-2018 fiscal year. This sure does have a back to the future feel to it.

April 4, 2017 at 9:24 am Leave a comment

The Most Important Question Of The Week

You are forgiven if you have mistaken the media’s coverage of the upcoming meeting of the Federal Reserve’s Open Market Committee on Tuesday and Wednesday for the plot line to a Lifetime movie; “Will they or won’t they?  Can they and should they?”   But there is no mistaking the importance of the decision of whether or not to nudge interest rates higher or the impact it may ultimately have on your credit union. If the Fed gets it right, it will, at the very least , enable you to get a bit more of a return on  your loans and investments.  If the Fed gets it wrong, it will hasten the onset of another recession.

What makes the decision so perplexing is that the economic signals being sent are so contradictory. For example, last Tuesday the Census Bureau reported  the most positive economic news that anyone has heard in  years.  Real median income increased by 5.2% for American households between 2014 and 2015 to $56,516, an increase in real terms of 5.2%. This is the first  increase  since 2007, the year before the onset of the Great Recession. In addition, the report indicates that all income brackets and regions in the country experienced increases.  Combine this news  with a falling unemployment rate  and you can easily conclude that  the Fed may have waited too long to raise rates and could easily lose control of inflation  if it doesn’t act fast.  In fact, a report released on Friday by the Department of Labor indicates that, depending on what inflation measure you use inflation is on the rise. The Core Consumer Price Index, which excludes volatile items such as gas, has risen 2.3% in the past year,  well above the Fed’s 2% inflation target.

So raising interest rates is a no brainer, right? Not really. Take,  for instance, the falling unemployment rate.  Even as the job market is tightening there are signs that employers are still uneasy about taking on new job seekers. According to the WSJ “about 300,000 fewer people are being hired each month compared with the pace reached in February.”  There are a lot of jobs that are going unfilled.

And if economic growth is reaching into households then why is almost half of the American public contemplating voting for Donald  Trump? His doom-and-gloom portrait of an America in decline wouldn’t have any traction if people felt confident about their economic well-being.

And the spike in the household income only partially masks  larger trends that are continuing to dampen enthusiasm for consumer spending.  For example, the same census Bureau also reported that a growing  number of Americans  have health insurance; but does anyone really believe that healthcare trends are headed in the right direction with so many major insurers pulling out of the healthcare exchanges and costs continuing to rise?

Finally income and equality is continuing unabated. The Bureau reports that since 1993 it has increased 5.5% and was unchanged by the household income gains.

What all this means is that there are many crucial questions to which we won’t have answers until  we are still enjoying the fruits of economic growth or tiptoeing towards  recession.

On that note enjoy your Monday.

September 19, 2016 at 9:28 am Leave a comment

UPDATED Three Things All The Cool Kids Should Know

Another Day, Another Merchant Data Breach

In case you missed it, on Thursday, outdoor clothing retailer Eddie Bauer announced it was a victim of a data breach involving point-of-sale credit and debit card transactions between January 2 and July 17, 2016.  And here you outdoor types thought your biggest worry was the Zika virus.  Here’s the good news.

The general public has clearly caught on to the fact that merchants and not financial institutions are often the parties responsible for the data breach. Why else would Eddie Bauer explain that the security of customer information is a “top priority” and that they have been working closely with the FBI and cyber security experts to resolve the issue?

It wasn’t too many years ago when the merchant playbook was to barely acknowledge that a breach occurred let alone suggest that it bore some responsibility for mitigating its effects. I’m in an optimistic mood this morning.  Now that the public understands that merchants share in the responsibility to protect data breaches it should be easier to convince legislators that merchants should pay their fair share when it comes to the costs imposed on card issuers every time a store is breached.

Get off of my cloud.  I’m dreaming?

Uber Class Action Settlement Rejected

With apologies to those of you who hate football metaphors, the various pending lawsuits against Uber are the legal equivalent of a hurl into the end zone with time expiring. That being said, those of you hoping to derail ride sharing, or at least put it on equal footing with the traditional taxi industry, received at least a temporary stay of execution last week when a federal judge threw out a proposed settlement of a class action lawsuit alleging that ride sharing services were violating the labor law by treating drivers as independent contractors as opposed to traditional employees.

According to the Washington Post, U.S. District Judge Edward Chen concluded that the proposed $100 million settlement was only 10% of what lawyers for the drivers estimate that Uber could owe them and provided only $1 million towards state penalties that could add up to more than one billion dollars.

This lawsuit against Uber is absolutely critical.  If a precedent is established imposing traditional labor obligations on Uber then the ride sharing model crumbles quicker than a Ryan Lochte robbery allegation.  By the way, the proposed settlement is yet another great example of the class action system disproportionately benefitting lawyers, precisely when the CFPB is on the verge of institutionalizing such litigation.

Where Has U.S. Productivity Gone?

It is an article of faith among politicians, along with truth, justice and the American Way, that America has the most productive workforce in the world. This may still be true, but Federal Reserve Vice Chairman Stanley Fisher used a speech on Sunday to highlight worrying signs that something is going wrong with productivity.  For example, business productivity has declined for the last three quarters, its worst performance since 1979.  Furthermore, output per hour increased only 1-1/4 percent per year between 2006 and 2015 as opposed to gains over 2 1/2% per year between 1949 and 2005.

Why does this matter? For one thin we won’t see the economy really takeoff as long as productivity is sluggish and  your members won’t be seeing meaningful  wage.  Furthermore, a long-term decline in productivity translates into greater wage inequality.  The Vice Chairman would like to see Congress do more to stimulate the economy.  I would like to see the Yankees make the playoffs.  Both events are theoretically possible, but highly unlikely.

August 22, 2016 at 8:51 am Leave a comment

Three things All The Cool Kids Should Know To Start Their Week

Another Day, Another Merchant Data Breach

In case you missed it, on Thursday, outdoor clothing retailer Eddie Bauer announced it was a victim of a data breach involving point-of-sale credit and debit card transactions between January 2 and July 17, 2016.  And here you outdoor types thought your biggest worry was the Zika virus.  Here’s the good news.

The general public has clearly caught on to the fact that merchants and not financial institutions are often the parties responsible for the data breach. Why else would Eddie Bauer explain that the security of customer information is a “top priority” and that they have been working closely with the FBI and cyber security experts to resolve the issue?

It wasn’t too many years ago when the merchant playbook was to barely acknowledge that a breach occurred let alone suggest that it bore some responsibility for mitigating its effects. I’m in an optimistic mood this morning.  Now that the public understands that merchants share in the responsibility to protect data breaches it should be easier to convince legislators that merchants should pay their fair share when it comes to the costs imposed on card issuers every time a store is breached.

Get off of my cloud.  I’m dreaming?

Uber Class Action Settlement Rejected

With apologies to those of you who hate football metaphors, the various pending lawsuits against Uber are the legal equivalent of a hurl into the end zone with time expiring. That being said, those of you hoping to derail ride sharing, or at least put it on equal footing with the traditional taxi industry, received at least a temporary stay of execution last week when a federal judge threw out a proposed settlement of a class action lawsuit alleging that ride sharing services were violating the labor law by treating drivers as independent contractors as opposed to traditional employees.

According to the Washington Post, U.S. District Judge Edward Chen concluded that the proposed $100 million settlement was only 10% of what lawyers for the drivers estimate that Uber could owe them and provided only $1 million towards state penalties that could add up to more than one billion dollars.

This lawsuit against Uber is absolutely critical.  If a precedent is established imposing traditional labor obligations on Uber then the ride sharing model crumbles quicker than a Ryan Lochte robbery allegation.  By the way, the proposed settlement is yet another great example of the class action system disproportionately benefitting lawyers, precisely when the CFPB is on the verge of institutionalizing such litigation.

Where Has U.S. Productivity Gone?

It is an article of faith among politicians, along with truth, justice and the American Way, that America has the most productive workforce in the world. This may still be true, but Federal Reserve Vice Chairman Stanley Fisher used a speech on Sunday to highlight worrying signs that something is going wrong with productivity.  For example, business productivity has declined for the last three quarters, its worst performance since 1979.  Furthermore, output per hour increased only 1-1/4 percent per year between 2006 and 2015 as opposed to gains over 2 1/2% per year between 1949 and 2005.

Why does this matter? For one thin we won’t see the economy really takeoff as long as productivity is sluggish and  your members won’t be seeing meaningful  wage.  Furthermore, a long-term decline in productivity translates into greater wage inequality.  The Vice Chairman would like to see Congress do more to stimulate the economy.  I would like to see the Yankees make the playoffs.  Both events are theoretically possible, but highly unlikely.

 

August 22, 2016 at 8:38 am Leave a comment

Federal Government: Pot Still Illegal

I’ve written extensively about the hazy state of pot regulation in this country and how it has virtually paralyzed credit unions and banks that might otherwise be willing to provide services to pot businesses.  So I think it is worth noting that sometime today, the DEA will reportedly be rejecting a high-profile petition seeking to remove Cannabis from the Government’s most restrictive drug classification.

New York is one of approximately half the states in the Nation and the District of Columbia that has voted to legalize marijuana to one extent or another.  But banks and credit unions have been justifiably reluctant to provide financial services to pot businesses.  This is because marijuana remains unequivocally illegal under the federal Controlled Substances Act.  In fact, pursuant to the Act, the DEA classifies marijuana as a Schedule I drug, its most restrictive classification.  Critics have argued for decades that this restriction makes it almost impossible to perform the type of scientific research that would determine what medical benefit, if any, pot has.

As explained in this analysis by the Brookings Institute, rescheduling would “not suddenly legalize marijuana” or “solve the policy disjunction that exists between states and the federal government on the question of marijuana legality.”  Those same researchers noted, however, that a successful rescheduling petition would have effects on drug policy since it would be interpreted as recognition by the federal government of accepted medical uses for marijuana.  This is why advocates ranging from U.S. Senators to the National Conference of State Legislatures have endorsed rescheduling.

On a practical level, such a shift may have allayed the fears of regulators who are reluctant to allow financial institutions to enable pot businesses to access the Federal Reserve Banking system.  The decision leaves the status quo intact.  The next big event in the pot wars will come when the Court of Appeals 10th Circuit rules on an appeal from a state-chartered credit union in Colorado that was denied access to the Federal Reserve System and Share Insurance by the NCUA.

America’s Uneven Housing Recovery

Another issue which I have obsessed about in this blog is the state of America’s housing market and the causes that may lie behind its relatively sluggish rebound during this so-called recovery.  Lest you think these are just the concerns of a curmudgeonly blogger with a glass half-empty perspective, you should read the lead story in today’s Wall Street Journal, which explains that the recovery that began in 2012 has “left behind a broad swath of the middle class, threatening to create a generation of permanent renters and sowing economic anxiety and frustration for millions of Americans.”  This is not an op-ed penned by Bernie Sanders, but a front page article that is worth a read.

Hanging with the kids tomorrow.  See you Monday.

August 11, 2016 at 8:53 am 4 comments

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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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