Posts filed under ‘Economy’

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 2 comments

TRID Clarifications Proposed

The Bureau That Never Sleeps is at it again!  On Friday, the Bureau released proposed amendments to its “know before you owe” TRID regulation, which took effect in October of 2015.  I’m going to dub these proposed changes Death Wish classics because some of the amendments are so technical that the only way I am going to get through them is to drink Death Wish coffee, which for the uninitiated, makes Starbucks taste like your mother’s Chock full o’ Nuts.

At first glance, it doesn’t seem like there are any major changes.  But there are several proposed amendments and clarifications including extending TRID’s coverage to all co-op units; clarifying the applicability of tolerances in early disclosures; and clarifying information that can be shared with third parties without violating a consumer’s privacy.  According to this morning’s American Banker, this last one was put in at the urging of the National Association of Realtors.  This is one to have your mortgage person take a look at.

Economic Growth Declines

Those of us of the opinion that the economic glass is half empty received further support for our negativity with the release of news on Friday from the Commerce Department that the U.S. economy grew at a seasonally adjusted annual rate of 1.2% in the second quarter.  According to the WSJ, this means that economic growth is now at its weakest level since 2011.

The thing that really perplexes me is that business investment declined for the third straight quarter.  American corporations are sitting on a record pile of cash.  For years, optimists have been waiting for businesses to start spending some of this cushion and really jump start the economy.  Wouldn’t it be something if business sits out an entire period of economic growth without making any sizable investments other than to buy back their shares?

On that note, grab your coffee and get to work.

August 1, 2016 at 8:36 am Leave a comment

Younger Americans Spurring Economic Growth

wsjAs I scoured this morning’s clips for news you could use to start your credit union day I settled on an article that reminded me of one of my favorite movie quotes courtesy of Prince   Faisal: “virtues of war are the virtues of young men – courage and hope for the future. Then old men make the peace, and the vices of peace are the vices of old men – mistrust and caution.”

A bit overstated for a credit union blog? You bet but an analysis in this morning’s WSJ  pinpoints yet another reason why the economy continues to underwhelm even as the jobs market continues to grow:  Young people are a heck of a lot more optimistic about the economy than Baby Boomers.  According to the WSJ: Americans 55 of years of age and older have  pulled back on their spending over the last year while younger Americans have been spending more. As a result  “All the growth is being driven by young people, and in fact the older people are dragging down growth,”

According to the paper, this divide, “helps explain why consumer spending decelerated in 2015 and early this year despite low-interest rates, cheap gasoline and falling unemployment.”

It seems to me that this is yet another great reason why your credit union should be trying extra hard to attract younger people into the fold.

Remember that about 70% of the economy is driven by consumer spending so a growing divide in economic perception could have a big impact on the economy. It’s great that not everyone is hording their cash  but these  young optimists   simply don’t have the spending that the Baby Boomers do.  Millennials are carrying record amounts of student debt,  for example  and this might be one reason why they are holding off from buying that first house.

Is it Time to Make More Private Student Loans?

Since we are on the subject of debt and young people, did you know that n the first quarter of this year the percentage of private student loans that were at least 30 days past due dropped  to its lowest level since the Great Recession  but that,  lending growth  remains flat according to the American Banker? Here is another factoid: Lenders have learned some lessons and are taking more precautions.  During the 2015-2016 academic year, 89.7% of private student loans were co-signed, usually by a family member. During the 2008-2009 school year, only 74.6% of private student loans were co-signed.

July 11, 2016 at 9:22 am Leave a comment

The House Takes The Right Approach To Spotting Elder Financial Abuse

I haven’t had many positive things to say about federal legislation over the last five years so I’m sure the sponsors of the   “Senior Safe Act of 2016” will be overjoyed and relieved to that I actually think their proposal is a good one.

The legislation is a federal attempt to address elder financial abuse.  Most states  have already mandated reporting requirements in this area.   New York’s DFS has issued a guidance on the issue. NY law  protects any person who  reports suspected financial abuse to the Department of the Aging, a local Social services department or a law enforcement agency   based on a   good faith belief  that “appropriate action” will be taken. N.Y. Soc. Serv. Law § 473-b (McKinney).  This protection isn’t quite as expansive as what would be protected under the House bill.

I’ve always been uneasy about legislation in this area because poorly drafted legislation could make credit unions liable for not recognizing financial abuse; SAR’s can already be used to report suspected  criminal activity involving financial exploitation; and  the issues raised are best handled by  family and friends. But if there is going to be legislation in this area than the House bill provides a good framework.

The bill, which passed with overwhelming support  on  Tuesday, would authorize supervisors,   compliance  and BSA officers to report possible financial exploitation of   a person 65 years of age or older to law  enforcement  and government  agencies.  The institutions and individuals making these reports would get legal immunity  for doing so if  they train employees  on identifying and reporting elder financial abuse and they take “reasonable care” to avoid unnecessary disclosures.

There are three things I really like about this bill: First, it just authorizes a supervisor, a compliance officer  and BSA officers to report suspected elder abuse but enables any employee to spot it.  One of my concerns has always been that elder abuse is difficult to define and even though frontline employees are best positioned to spot elder abuse  the ultimate call on reporting should be made by senior personnel.

Second it places no affirmative obligation on financial institutions to report suspected abuse.  it simply protects them if they choose to do so provided they have appropriate training.

Finally, it provides a baseline of immunity for institutions that report suspected abuse.

A Most interesting Jobs Report

Any minute now  we should be getting the jobs report for June.  It’s more important than usual because May’s jobs report witnessed paltry growth of 38,000 jobs. In addition with fallout from the Brexit vote continuing,  the report will either further the narrative of an economy slowing down or be used as proof that growth is still alive and well.

 

 

July 8, 2016 at 8:50 am Leave a comment

Send in the Clowns

Some divorces are, of course, for the best.  But others leave the divorcees in a temporary state of relief only to realize over time that the grass is not as green as they thought. 

The remarkable decision by the citizens of the United Kingdom to file for divorce with the European Union may very well end up like this.  Britain is the world’s fifth largest economy and by some measures the Capitol of International Finance.  It’s hard to see how breaking away from a free trade zone with which it does a good chunk of its trading is in its long term best interest or that of its citizens. 

Unfortunately for us, Britain’s decision is another in a series of body blows inflicted on the world economy, which help explain why economic growth in this country remains lackluster.  In her prepared testimony before Congress earlier this week, Janet Yellen explained that “One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A U.K. vote to exit the European Union could have significant economic repercussions. For all of these reasons, the Committee is closely monitoring global economic and financial developments and their implications for domestic economic activity, labor markets, and inflation.”

Governor Signs Abandoned Property Measure

On June 23, Governor Cuomo signed S.8159, the abandoned property bill that I have been talking about in this week’s blog posts.  The Governor’s action means that the law, imposing requirements on mortgage lenders to maintain abandoned property, takes effect in 180 days. 

I’ve also already mentioned the trigger for the threshold for determining whether or not these new requirements apply to your credit union.  You should also be aware that the bill applies prospectively for most impacted credit unions.  Specifically, the bill providers that “for any state or federally chartered banks, savings banks, savings and loan associations, or credit unions which originate, own, service and maintain between three-tenths of one percent and five-tenths of one percent of the total loans in the state which they either originate, own, service, or maintain for the calendar year ending December thirty-first of the calendar year ending two years prior to the current calendar year, the application of this section shall be prospective only.”

The DFS has rule making authority under this law and the sooner it starts explaining what financial institutions are impacted by this bill and to what extent, the better. 

On that note, have a good weekend.  God save the Queen.

 

June 24, 2016 at 8:36 am Leave a comment

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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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